White House Announces FHA Refinance Program Changes

Mar 8, 2012

CAI’s Government & Public Affairs office made the following announcement today:

President Obama has announced changes to the Federal Housing Administration’s streamline refinance program to help more borrowers take advantage of historically low mortgage interest rates. FHA’s streamline refinance program allows existing FHA borrowers to forgo strict loan underwriting requirements when refinancing to another FHA-insured mortgage.

FHA charges all borrowers an upfront mortgage premium as well as an annual mortgage premium. The fee for the upfront premium is 1 percent of the loan balance (due at closing) and an annual premium (paid monthly) that is equal to 1.15 percent of the loan balance. FHA has announced that for new purchase mortgages, these insurance premiums will increase April 1.

To protect borrowers refinancing FHA-insured mortgages from these higher fees, the President is substantially lowering premiums in the FHA streamline refinance program. To ensure the changes target borrowers who will receive the greatest benefit from refinancing to lower interest rates, the lower premiums are only available for FHA loans originated prior to June 1, 2009.

The new premium structure for qualifying FHA streamline refinance mortgages will be: Upfront mortgage insurance premium of 0.01 percent (10 basis points) Annual mortgage insurance premium of .55 percent (55 basis points)

The Obama Administration estimates that up to 3 million FHA borrowers are eligible to refinance existing mortgages and qualify for the new, lower FHA premiums. The combination of lower interest rates and lower mortgage insurance premiums could mean that qualifying FHA borrowers will save as much as $1,000 annually over their current mortgage payment.

To qualify for FHA’s streamline refinance program: Borrowers must have made at least 6 mortgage payments (minimum 7 months from closing) Borrowers must be current on their mortgage (limited exception for one late payment in prior 12 months) Borrowers must receive a net tangible benefit (i.e. refinance from an adjustable rate mortgage to a fixed rate mortgage, new total mortgage payment at least 5 percent lower, or a reduced mortgage term) Borrowers must demonstrate employment and income sufficient to make new mortgage payment Borrowers in a condominium that is no longer FHA certified are eligible for FHA’s non-appraisal streamline refinance program (FHA non-appraisal streamline refinance transactions are limited to only the outstanding balance of the existing loan)

To read the White House announcement on changes to the FHA streamline refinance program, click here.

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