FHA Streamline Training: Broker Edition. January 22, 2014

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Ezra Gaines
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1 FHA Streamline Training: Broker Edition January 22,

2 Jeff Walsh President of LDWholesale 2

3 What Is It? FHA Streamline refinance provides existing FHA borrower s an opportunity to lower monthly payments without the fully documented requirements of a typical refinance. The Purpose: A borrower current on the existing FHA loan can take advantage of lower market rates putting them in an even better situation financially (a win/win for the borrower/fha). 3 3

4 Facts from The White House This reduction in premiums will produce an average savings of $900 annually for all new FHA borrowers More than 800,000 FHA borrowers are projected to take advantage of these lower rates in the first year Lowered premiums will create opportunities for 250,000 new homeowners to purchase a home over the next three years 4 4

5 What s New? FHA has substantially lowered MIP FOR THOSE WITH EXISTING FHA LOANS ENDORSED AFTER May 31 st, This makes the program more beneficial to existing FHA borrowers. LDW (and competitors) will be marketing heavily to promote these benefits, and we expect an increase in volume. 5 5

6 Important Dates for MIP New lower MIP for CASE # s obtained AFTER 1/25/2015 DO NOT REQUEST A CASE # UNTIL AFTER 1/25/2015 (Refer to existing Case Cancelation Policy Slide 7) The lower rates are ONLY offered after 1/25/2015 AND are only available to existing FHA loans ENDORSED after 5/31/

7 Case Cancellation To allow mortgagees to obtain the reduced annual MIP rates contained in ML and for loan loans in process with active case numbers, FHA will temporarily approve cancellation requests for active FHA case numbers within 30 days of the effective date of ML , New Case numbers cannot be requested until after

8 Endorsement Date for MIP The FHA Endorsement date for the existing loan is part of the UFMIP/MIP equation. Loan must be endorsed AFTER 5/31/2009 to be eligible. Consumers who obtained loans in early 2009 might assume they qualify for the PRE-JUNE 2009 reduced UFMIP/MIP. The consumer will not know when the loan was actually FHA Endorsed. 8 8

9 Benefits of FHA Streamline No Appraisal Required limited equity OK No DU CERT required No Ratios/Credit Findings No Credit Qualifying W/ Min. 580 FICO for primary and 680 FICO for 2 nd home/investment When a borrower is removed, the remaining borrower must be fully credit qualified (See matrix for Credit Qualifying Details) Borrower(s) can be added provided the existing borrower(s) is retained No Verification of Wage Income Verbal VOE ONLY Passive Income (SS, Pension, Rental) just need proof of receipt Reduce Payments and/or move from ARM to Fixed 9 9

10 Basic Requirements The mortgage to be refinanced must already be FHA insured Must be FHA ENDORSED after 5/31/2009 for reduced MIP The mortgage to be refinanced must be current (not delinquent) No 30-day-lates in the last 90 days, 1x30 last 12 months. CLTV >97.75 and subordinate financing exists = 0x30 last 12 months Seasoning of Current Home - Minimum of 6 on-time payments into current loan and minimum of 210 days in current loan (since closing date) The refinance must provide a Net Tangible Benefit (NTB) Max cash out = $500 The mortgage amount cannot exceed the principal and interest portion of the payoff + UFMIP (Principal Payoff* UFMIP refund if any + 30 days interest) + (new UFMIP) = New Loan Amount 10 10

11 Basic Requirements Owner Occupied/2 nd Home/Investment Eligible Properties: SFR PUD attached or detached Condos Condos not on FHA approved list are eligible but must be packaged as Streamline without appraisal FHA approved condos are eligible with or without appraisal option Condos without HO6 are acceptable 11 11

12 FHA Streamline Reference Guide 12 12

13 FHA Streamline Net Tangible Benefits 13

14 Scenario 1 (Fixed to Fixed) Borrower currently has a 30 Year 5.5% that was: FHA Endorsed in May 2009 The current P&I is $ The MIP is $93.48* The payoff is $225,000 with closing costs of $3700; a rebate of 1 Point and NEW UFMIP of $22 The new P&I payment = $ The MIP is $102.37* What is the MAX new loan amount? How much cash to close will the borrower be required to bring? Is there Tangible Benefit to move forward? * NOTE: MIP has changed multiple times over the past few years. Borrowers PRE- June 2009, in some cases, had MIP factors similar to the NEW LOWER MIP rates available to them after June With lower rates today, they should find great benefit. The MIP being close to equal rather than using the recent higher MIP maintains the benefit

15 Answer for Scenario 1 (Fixed to Fixed) New Max Loan Amount $225,000 + $22 = $225,022 (there will be no UFMIP refund after 3 years) New PI/MIP Payment $1, $ = $ (+taxes/insurance) Cash to Close $ $2250 rebate = $1450 (can post date check for Escrows, if necessary) Tangible Benefit Current P&I and MIP: $ $93.48 = $ % of $ = $68.55 (New) $ (Old) $ = (Savings) $128.49/month (Savings) $ > (5%) $68.55 = TANGIBLE BENEFIT 15 15

16 Scenario 2 (ARM to Fixed) Borrower currently has a 5/1 5.25% that is 2 years old with a UFMIP refund of $1681 The current P&I is $ The current MIP is $62 The payoff included in the Max Loan is $242, with no closing costs and new UFMIP of $2438 The new P&I payment is $ The new MIP is $89 What is the new loan amount? What is the new payment? How much cash to close will the borrower be required to bring? Is there Tangible Benefit to move forward? 16 16

17 Answer for Scenario 2 (ARM to Fixed) New Max Loan Amount $242,760 $1681 (UFMIP refund) + $4218 (UFMIP new*) = $245,297 New PI/MIP Payment $ $170.76** = $ Cash to Close ~ Post Dated Check for Escrows (if they need to do that) Tangible Benefit Current P&I and MIP: $ $62 = $ % of $ = $72.13 (New) $ (Old) $ = +$28.87 $28.87 < $72.13 No Tangible Benefit*** *NOTE: UFMIP on this is 1.75% (not.01 for FHA endorsed prior to June 2009) because the loan being refinanced is only 2 years old. ** NOTE: MIP on this is.85% (not 1.35 for FHA endorsed after June 2009) ***NOTE: Going from ARM to FIXED during the initial 5/1 Fixed Period requires a 5% savings. If it had been longer than 5 years and the existing loan was no longer fixed, then there would be benefit even at a rate up to 2% higher

18 UFMIP Refund If the borrower is refinancing a current FHA loan to another FHA loan within 3 years, a refund credit can be applied to reduce the amount of the UFMIP paid on the new loan. 1. The UFMIP Refund credit is applied to the base loan amount before the new UFMIP amount is determined. 2. At closing, the UFMIP refund is shown on the HUD1 as a credit in the 200 Section, while the total new UFMIP is a charge (line 902). 3. The UFMIP refund cannot exceed the new UFMIP amount

19 UFMIP Refund Manual Calculation The amount of UFMIP refund can be calculated using the following table (The refund, however, cannot exceed the NEW UFMIP amount): 19 19

20 Refinance Authorization 20 20

21 Income Document for Passive Income Streamline 1003 Tips: No Income Calc No Income on 1003 Ratios 0%/0% Wage & S/E Income Earners 21 21

22 Questions? 22

FHA STREAMLINE GUIDELINES

FHA STREAMLINE GUIDELINES Table of Contents LTV MATRIX... 4 PROGRAM OVERVIEW... 4 APPRAISALS & AVM... 4 AVM or 2055 Exterior... 4 Streamline with an Appraisal (1004 full FHA Appraisal)... 5 ASSETS... 5 Sourcing of Deposits... 5