FHA Streamline Guidelines On Credit And Non-Credit Streamline

This ARTICLE On FHA Streamline Guidelines On Credit And Non-Credit Streamline Was PUBLISHED On March 9th, 2020

FHA Streamline Guidelines
Gustan Cho Associates

Mortgage rates are plummeting like never before in history due to the financial market uncertainty because of the coronavirus scare.

  • Last week, the financial markets started the biggest market selloff in history
  • The Dow Jones Industrials plummeted over 3,500 points driving the market into correction territory
  • A drop of 10% or more in the stock markets means the market is entering into correction territory
  • Many nervous investors are worried that we will enter a Bear Market
  • Bear Markets is when the financial markets drop by 20% or more
  • Fear of recession and economic uncertainty is making the market very volatile
  • Federal Reserve Board Chairman had a press announcement this morning at 11 AM EST about the reason why the Central Bank cut interest rates by 50 basis points this morning
  • Fear of the impact of the coronavirus is sending fear in the marketplace
  • The Dow was all over the map this morning
  • However, bad news comes the good news
  • In general, when the stock market plummets as it has been, it plummets mortgage rates
  • 2020 housing market forecast remains strong despite the coronavirus scare and volatile financial markets
  • This is good news for homeowners with high mortgage rates
  • HUD, the parent of FHA, has a fast-track streamline refinance loan program for homeowners with a current FHA loan
  • Per FHA Streamline Guidelines, there are credit and non-credit qualifying streamline
  • FHA streamlines are a great home mortgage program for borrowers with a current FHA loan

In this article, we will discuss and cover FHA Streamline Guidelines On Credit And Non-Credit Streamline.

FHA Streamline Guidelines On Net Tangible Benefits

Government and conventional loans are regulated.

  • There are a lot of regulations when it comes to FHA, VA, USDA, and Conventional loans
  • FHA Streamline Guidelines require lenders cannot originate and fund FHA streamline mortgages unless the borrower meets the net tangible benefit test
  • This law was created and implemented to benefit borrowers
  • Lenders cannot just trigger an FHA streamline refinance if the borrowers do not gain net tangible benefits by refinancing

One of the following three conditions need to be met for borrowers to be able to do an FHA streamline refinance:

  • Combined rate reduction to benefit borrowers
  • A reduction in the term that benefits borrowers
  • Changing from an adjustable-rate to a fixed-rate mortgage

FHA Streamline Guidelines On Combined Rate Reduction

One of the net tangible benefits homeowners obtain when refinancing their home mortgages is getting a lower mortgage interest rate. Refinancing into a lower mortgage rate than the existing rate lowers the borrower’s monthly payment. Furthermore, borrowers can save tens of thousands of dollars over the course of the mortgage loan.

According to Alex Carlucci of Gustan Cho Associates, he said the following:

If you currently have a fixed rate, the combined rate must be at least 0.5 percentage points lower than the new fixed rate. This includes both your Mortgage Insurance Premium (MIP) and interest rate.

Borrowers who plan on keeping their homes for a while can obtain net tangible benefits by refinancing an adjustable-rate mortgage to a fixed-rate mortgage. Borrowers can also refinance an adjustable-rate mortgage to another ARM but need to have a rate that is 1.0% to 2.0% lower.

Alex Carlucci said the following:

If you want to switch from a fixed rate to an ARM, the rate must be at least 2 percentage points lower than the combined rate.

FHA Streamline Guidelines On Changing from An Adjustable Rate To A Fixed Rate Mortgage

Many homeowners with an adjustable-rate mortgage can refinance their ARM to a fixed-rate mortgage.

  • This is very common when the homeowner plans on keeping their home long term and not refinance
  • With volatile financial markets volatile, many homeowners are opting for this option
  • Going from an adjustable-rate mortgage to a higher fixed-rate mortgage is allowed

However, the fixed-rate mortgage cannot be higher than 2.0% to meet the net tangible benefits guidelines.

FHA Streamline Guidelines On Reduction In Term

Borrowers will get a net tangible benefit if the term of the new mortgage is shortened by six or more months without their new housing payment being increased by more than $50 dollars. The combined P.I.T.I. and FHA MIP must be the following:

  • From a fixed rate, must decrease the new fixed-rate, or
  • Not increase more than 2 percentage points going from an ARM to a fixed rate

FHA Streamline Guidelines On Credit And Payment History

Under the eyes of HUD, which is the parent of FHA, the borrower with a current FHA loan with automatically qualify for a new FHA streamline refinance loan as long as they have been current with their FHA loan for the past 12 months. There is no appraisal required. There is no income documentation required.

For credit and/or non-qualifying credit streamlines, the mortgage payment must be:

  • Current through closing
  • No lates in the past 6 months from assigning an FHA case #
  • No more than 1×30 late from months 7 through 12 from the case # assignment

There is no minimum credit score requirement on FHA Non-Credit Qualifying Streamline Refinances.

Benefits Of FHA Streamline Refinance Mortgages

What are the benefits of improving FHA refinancing mortgages?

The following are the benefits of an FHA streamline refinances:

  • Borrowers get a refund of the current escrow account
  • Streamline refinances will generally lower the borrower’s monthly mortgage payments
  • Borrowers can defer up to two mortgage payments
  • In cases of an escrow shortage, a new escrow account will be set up with the correct amount for taxes and insurance
  • No income required on the non-credit qualifying streamline
  • No appraisal required
  • No minimum credit score

All candidates must make sure the borrower meets the net tangible benefit on FHA streamline refinances.

The Only Timely Payment Required On Streamlines Is Timely Mortgage Payments In The Past 12 Months

Borrowers can be late in any monthly payments with the exception of their current FHA mortgage payments.

  • FHA already insures the home loan
  • Under the eyes of HUD, as long as FHA is insuring the current mortgage and the borrower has been timely for the past 12 months, why not approve a new FHA loan with lower interest rates
  • The home already has an FHA appraisal
  • The borrower already has proven themselves in making their FHA loan payments

Here are the housing payment history requirements:

  • The current FHA loan needs to be current
  • The borrower needs to have been paying their current FHA loan on time
  • Or at least six months of satisfactory mortgage payment history
  • No more than one thirty-day late for the previous six months for all mortgages from the case number assignment date
  • No minimum credit score requirement
  • Can use a mortgage history with no score for a non-credit qualifying streamline

HUD allows incidental cashback on the new streamlines up to $500. Any amount greater and/or additional lender credit will be applied towards a principal reduction.

FHA Streamline Guidelines On Seasoning

To be eligible to do a streamline refinance, the borrower needs to have made at least six mortgage payments on their first FHA loan.

  • Must have passed 210 days from the date of their home closing to be eligible
  • Borrowers can streamline refinance during the Chapter 13 bankruptcy repayment plan
  • Need to obtain Chapter 13 Trustee approval
  • Any FHA mortgages during Chapter 13 Repayment Plans are manual underwriting

There are no seasoning requirements after the discharge date of bankruptcy.

Non-Credit Qualifying FHA Streamline Guidelines

Which means improving the FHA guidelines for non-credit qualifications

Below are the non-credit FHA Streamline Guidelines:

  • Borrowers can add a borrower and/or borrowers to the loan without income, but cannot remove a borrower
  • It does not require income
  • Only a Verbal Verification of Employment is required to make sure that the borrower is just employed with no income verification
  • Streamlines do not require full credit report and analysis
  • No home appraisal is required

Upfront Mortgage Insurance Premium (UFMIP)

Upfront Mortgage Insurance Premiums are currently 1.75% of the base loan amount. Generally, the upfront FHA MIP is financed and rolled into the FHA loan balance.

Here are the FHA MIP Mortgage Guidelines:

  • For loan-to-values under 95% LTV with a term greater than 15 years: 0.80% of the total loan amount with a duration of 11 years
  • Loan-to-value greater than 95% greater than 15 years: 0.85% of the total amount for the life of the loan
  • For a term with 15 years or less with at least 90% loan-to-value, 0.45% with 11 years duration
  • Loan-to-values greater than 90% for 15 years or less, 0.70% for the life of the loan

Alex Carlucci of Gustan Cho Associates said the following about FHA MIP:

If you have not refinanced since May, 31st, 2009, your Upfront Mortgage Insurance Premium would only be 0.01% and the mortgage insurance factor is 0.55%.

FHA Streamline Guidelines On Upfront Mortgage Insurance Premium Refund

Any borrower who has an FHA loan and is refinancing to another FHA mortgage within the first three years from the closing date will get a refund credit. The FHA MIP refund will be credited to the new FHA loan.

 Maria Windham of Gustan Cho Associates is an FHA and VA streamline refinance expert. Maria Windham said the following about the calculation of FHA MIP refunds and escrow refunds:

The calculation is simple and will range from 80% to 10% depending on how long since your first payment. Your first payment starts at 80% and reduced by 2% for every month that passes.

Look at the chart below:

Costs And Fees On Streamlines

There is no cost to the borrower with FHA streamlines. All closing costs on FHA streamline refinances are covered by the lender through a lender credit. Borrowers can often skip one to two payments on streamlines. Limited documentation required. There is no verification of employment, income docs, tax returns, and other docs on streamlines. Most FHA streamlines at Gustan Cho Associates close in 21 days or less. The borrower does not have to go to the title company. Borrowers can close in the comfort in their homes. The title agent will travel to your place of residence and/or work. For more information about streamlining your current FHA loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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