Underwater FHA homeowners have clear path to refinance
By Ilyce Glink and Samuel J. Tamkin,
You mentioned on one of your radio shows that there would be a refinancing program coming available for FHA homeowners who have paid on time but are underwater. Do you have any more information as to when this will happen and who to contact to refinance? Also, do you know what costs will be involved? Thank you.
A: FHA has been offering a streamline refinance program for some time. You can contact your lender for details and pricing. Here is the information from the HUD.gov Web site:
FHA has permitted streamline refinances on insured mortgages since the early 1980s. “Streamline refinance” refers only to the amount of documentation and underwriting that the lender must perform, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:
●The mortgage to be refinanced must already be FHA-insured.
●The mortgage to be refinanced should be current (not delinquent).
●The refinance results in a lowering of the borrower’s monthly principal and interest payments, or, under certain circumstances, the conversion of an adjustable rate mortgage (ARM) to a fixed-rate mortgage.
●No cash may be taken out on mortgages refinanced using the streamline refinance process.
Lenders may offer streamline refinances in several ways. Some lenders offer “no cost” refinances (actually, no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash.
From this premium, the lender pays any closing costs that are incurred on the transaction. FHA does not allow lenders to include closing costs in the new mortgage amount of a streamline refinance. Investment properties (properties which the borrower does not occupy as his or her principal residence) may only be refinanced without an appraisal.
Contact your lender to get started. But remember, if you have an FHA loan, you are not required to refinance with your current lender, and you can shop around. You may find that other lenders will offer you a better deal than your current lender.
Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is “Buy, Close, Move In!” Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write to Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through thinkglink.com.