FHA 'streamline refi' is a breeze for homeowners who qualify

refinancings of FHA mortgages is likely to help large numbers of homeowners — even

those who are deeply underwater — cut their monthly costs by switching to a loan

with a rate below 4%.

Here's a quick overview of the "streamline refi" program and what it will take for

you to qualify.

First, the baseline criteria: Your current home loan must be FHA-insured and must

have been put on the Federal Housing Administration's books no later than May 31,

2009. If you have a mortgage owned or backed by Fannie Mae, Freddie Mac, the

Department of Veterans Affairs or private investors, you're out. nike air max pas cher The May 31, 2009, date is crucial. Your lender can tell you precisely when the FHA

"endorsed" your loan for insurance. This is different from the dates you applied

for your loan or closed on your house. If it turns out to be any time later than

May 31, 2009, you miss the cut.

You also need to have an unblemished record of on-time mortgage payments for the

last 12 months. Maybe you were late occasionally a couple of years back. That's OK.

But the last 12 months need to be pristine.

On top of that, if your refinancing does not provide you a net savings of at least

5% in your monthly principal, interest and mortgage insurance payments, you won't

be eligible either. The program won't take effect until June 11.

Those are the main hurdles. But they are substantial enough to exclude hundreds of

thousands of FHA borrowers who might otherwise want to refinance. According to an

FHA spokesman, Brian Sullivan, the agency has roughly 500,000 active loans in its

portfolio that are eliminated from participation solely on the basis of the May 31,

2009, cutoff date. Of those, an estimated 145,000 have mortgage interest rates

higher than 5% — making them prime candidates for a refi if it weren't for the

cutoff date.

Now for the good stuff: Under the Obama plan, if you qualify on the criteria above,

you get to breeze through the paperwork maze and underwriting hassles that come

with any refinancing. The FHA streamline refi requires:

•No new verifications of your income or employment status. If you've been paying on

time for a year, the presumption is that you've got the needed income.

•No new credit evaluation, credit reports or FICO scores.

•No new physical appraisal. The program generally accepts the appraised value of

your home at the time you closed on your current FHA loan as good enough — even if

you're now in serious negative equity territory.

Along with the stripped-down underwriting, the new program also comes with valuable

financial concessions. To sweeten the deal, the FHA has slashed its regular

insurance premium charges for qualified streamline applicants.

Take this hypothetical example provided by Paul Skeens, president of Colonial

Mortgage Co. in Waldorf, Md. Say you now have a $180,000 FHA loan at 5.25% that

dates to March 2009. Your monthly principal and interest payment is $993.93. With

the addition of FHA's mortgage insurance premium of $82.50, your total monthly

outlay is $1,076.43. nike air max pas cher If you qualify for the new streamlined plan, you could lower your interest rate to

3.875% and your monthly principal, interest and mortgage insurance to $928.92 — an

immediate savings of $147.51 a month or $1,770.12 a year. Over the next 60 months,

you'll save $8,850.60. But why the May 31, 2009, cutoff? What about the thousands of responsible borrowers

who happened to have taken out their FHA loans a little more recently, have paid on

time and have rates higher than 5%? Why exclude them?

Sullivan said it's all about the traditional three-year "seasoning" period for

mortgages during which the bulk of insurance claims — delinquencies and

foreclosures — normally occur. He denied industry rumors that the 2009 date had

anything to do with the FHA's policy of making partial refunds of upfront insurance

premiums to borrowers who refinance during the first 36 months, which might cost

the agency millions of dollars if more recent borrowers could qualify for the new

program.

"How cynical," he said in response to a question on the refunds. "This is about

easing the pressure on [borrowers] in a responsible way." Saving money by cutting

out more recent FHA borrowers "was never a consideration." click here

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