Streamline Refinance

FHA | TITLE II PROGRAMS

Streamline Renance

Helps existing FHA borrowers renance to a more affordable mortgage

BACKGROUND AND PURPOSE

The Streamline Renance program allows FHA-

approved lenders to renance current FHA-insured

loans to a lower interest rate or to a different type of

mortgage (xed- or adjustable-rate mortgage).

Streamline Renance refers only to the amount of

documentation and underwriting that the lender must

perform; it does not mean that there are no costs

involved in the transaction. Borrowers may elect not to

provide income and credit documentation in exchange

for a smaller discount on their interest rate. The time

and cost savings mostly come from the fact that a

new appraisal is not required. No cash may be taken

out on mortgages renanced using the Streamline

Renance program. In order to offer the program, lend-

ers must be FHA-approved supervised lenders and be

approved by FHA as a direct endorsement (DE) lender.

The ability to renance existing FHA loans without

regard to the loan-to-value (LTV) ratio, credit score, or

other factors originally used to qualify the borrower

lowers FHA’s risk because borrowers are less likely to

default on their mortgages if their payments are more

affordable. Therefore, FHA’s requirements are very

minimal. While lenders may set their own qualifying

requirements, FHA has exempted these transactions

from inclusion in “compare ratios,” a measure of the

lender’s default rate compared to other FHA lenders in

the area, in an attempt to encourage lenders to per-

form these transactions for borrowers who might not

otherwise qualify based on their circumstances.

PROGRAM NAME

Streamline Renance

AGENCY

Federal Housing Administration

EXPIRATION DATE

Not Applicable

APPLICATIONS

Lenders may access FHA’s Lender Requirements and the online lender application at:

https://www.hud.gov/program_ofces/housing/sfh/lender/lendappr

WEB LINK

http://portal.hud.gov/hudportal/HUD?src=/program_ofces/housing/sfh/ins/streamline

CONTACT

INFORMATION

APPLICATION PERIOD

Continuous

GEOGRAPHIC SCOPE

National

Telephone: (800) CALL-FHA (225-5342) Email: [email protected]. Lenders that want to apply for

FHA approval should include the words “New Applicant” in the email subject line and include a

contact person and phone number in the email body so that a Lender Approval representative

may contact you.

27 | FDIC | Affordable Mortgage Lending Guide

BORROWER CRITERIA

Income limits: This program has no income limits.

Credit: There are two types of Streamline Renances: credit qualifying,

where the borrower provides income and credit documentation and

the lender performs a credit check; and non-credit qualifying, where no

credit check is performed. Credit qualifying procedures must be fol-

lowed in cases where the renance removes a borrower. In both cases,

the lender must verify that the mortgage payment history meets FHA

guidelines. Lenders may also impose overlays and require some form of

credit and/or income review beyond those required by FHA.

Occupancy and ownership of other properties: Owners of one- to

four-unit primary residences, HUD-approved secondary residences, and

non-owner occupied properties (i.e., investment properties) with existing

FHA-insured mortgages can all use the program.

Payment history/mortgage seasoning requirement: Borrowers must

have made at least six payments on the FHA-insured mortgage that is

being renanced, at least six months must have passed since the rst

payment due date of the FHA-insured mortgage that is being re-

nanced, and at least 210 days must have passed from the closing date

of the FHA-insured mortgage that is being renanced. If the borrower

assumed the mortgage that is being renanced, they must have made

six payments since the time of assumption. The borrower must have

made all mortgage payments for all mortgages on the property within

the month due for the six months prior to case number assignment and

have no more than one 30-day late payment for the previous six months

for all mortgages on the property.

LOAN CRITERIA

Loan limits: Streamline renances are not subject to the FHA mortgage

limits but are subject to maximum mortgage amounts that are based

upon the outstanding balance of the existing mortgage.

Loan-to-value limits: Property appraisals are not required. There are

no LTV or combined LTV limits. The maximum allowable mortgage

amount is based on the principal balance of the FHA-insured loan

being renanced.

Adjustable-rate mortgages: An ARM may be renanced to another ARM

only if the property is a primary residence and the requirements of the

net tangible benet test have been met. A xed-rate mortgage may

be renanced to a one-year ARM as long as the new interest rate is at

least 2 percentage points below the current interest rate of the xed-

rate mortgage.

Homeownership counseling: Not required.

Mortgage insurance: The mortgage insurance premiums follow the

same requirements as Section 203(b) mortgages except Streamline

POTENTIAL BENEFITS

FHA Streamline Refinance trans

actions are exempt from a bank’s

compare ratios. This means that

a bank can make loans without

regard to typical risk factors

such as credit score because

the performance of the loans

will not influence the bank’s

performance record. Streamline

Refinance can also remove

at-risk loans from the bank’s

regular FHA performance record.

The reduced underwriting

requirements and waiver of

appraisal cuts down significantly

on the amount of time it takes to

refinance the loan.

POTENTIAL CHALLENGES

Lenders must be FHA-approved

and must be approved for

direct endorsement.

A limited pool of borrowers is

eligible for this program because

only existing FHA mortgage

holders who are current on their

mortgage are eligible, and those

who are not struggling to make

payments may have more com

petitive refinancing options.

Findings under FHA’s Technology

Open to Approved Lenders

(TOTAL) mortgage scoring

system are invalid. Any under

writing that may be necessary

under a credit-qualifying trans

action must be done manually.

FDIC | Affordable Mortgage Lending Guide | 28

Renance of mortgages that were endorsed on or

before May 31, 2009 where the UFMIP is 1 basis point

or 0.01 percent of the loan value, and the annual

mortgage insurance premium (MIP) is 55 bps or 0.55

percent of the loan value. Since Streamline Renances

do not obtain appraisals, they utilize the value of the

property from the previous FHA loan to determine the

LTV for purpose of applying MIPs.

Debt-to-income ratio: The program does not require

lenders to compute the DTI ratio for non-credit

qualifying Streamline Renances. For credit-qualifying

renances, the lender must calculate the borrower’s

DTI. However, there is no hard and fast DTI cutoff

because a borrower can always convert to a non-credit

qualifying transaction. In the event the borrower has

student loan debt, regardless of the payment status,

FHA’s policy is to include either the actual documented

payment, provided the payment will fully amortize the

loan over its term or the greater of 1 percent of the

total student loan balance or the monthly payment

reported on the borrower’s credit report in the debt-

to-income calculation.

Net tangible benets requirement: The transac-

tion must result in a tangible benet to the borrower

through either a rate and/or term reduction. The

level of rate reduction varies based upon the xed-

or adjustable-rate characteristics of both loans. See

Handbook 4000.1 II.A.8.d.vi for details of the Net

Tangible Benet requirements.

Potential Benets

• FHA Streamline Renance transactions are exempt

from a bank’s compare ratios. This means that a

bank can make loans without regard to typical risk

factors such as credit score because the perfor-

mance of the loans will not inuence the bank’s

performance record. Streamline Renance can also

remove at-risk loans from the bank’s regular FHA

performance record.

• The reduced underwriting requirements and

waiver of appraisal cuts down signicantly on the

amount of time it takes to renance the loan.

• The insurance provided through this program pro-

tects community banks from credit risk.

• This program allows community banks to offer a

product to existing FHA borrowers who would not

qualify for other mortgage renance products and

may reduce their monthly payments.

• Loans originated through this program may receive

favorable consideration under the CRA, depending

on the geography or income of the participat-

ing borrowers.

Potential Challenges

• Lenders must be FHA-approved and must be

approved for direct endorsement.

• A limited pool of borrowers is eligible for this pro-

gram because only existing FHA mortgage holders

who are current on their mortgage are eligible, and

those who are not struggling to make payments

may have more competitive renancing options.

• Findings under FHA’s Technology Open to

Approved Lenders (TOTAL) mortgage scoring

system are invalid. Any underwriting that may be

necessary under a credit-qualifying transaction

must be done manually.

SIMILAR PROGRAMS

• Fannie Mae Re Plus™

• Freddie Mac Relief Renance

29 | FDIC | Affordable Mortgage Lending Guide

RESOURCES

Direct access to the following web links can be found at https://www.fdic.gov/mortgagelending.

General information

http://portal.hud.gov/hudportal/HUD?src=/program_ofces/housing/sfh/ins/streamline

HUD Handbook 4000.1

http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

• Refer to section II.A.5.a. for manual underwriting guidelines

• Refer to section II.A.5.d. for DTI requirements

• Refer to section II.A.8.d. for program requirements

• Refer to Appendix 1.0 for mortgage insurance premium requirements

Applications

http://portal.hud.gov/hudportal/HUD?src=/program_ofces/housing/sfh/lender/lendappr

FDIC | Affordable Mortgage Lending Guide | 30