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Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation isa summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers orother third-parties. Information is accurate as of the date shown below and is subject to change without notice. 08/14/2012
FHA Streamline Refinance
Training
Offered through
First Mortgage Corporation
Agenda
� Purpose of Training
� FHA Streamline Refinance Program� Purpose of the Program
� Program Guidelines
� Origination Process Flow
� Pricing
� Resources
� FMC Support
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
Program Highlights
Purpose of the FHA Streamline
What is FHA Streamline Refinance?
� FHA Streamline Refinances are FHA-to-FHA rate & term refinances designed to reduce the borrower’s principal and interest payment.
� FHA offers the following types of processing:
� Streamline with an appraisal
� Streamline withOUT an appraisal
� Credit qualifying Streamline
� NO credit qualifying Streamline
� The FHA Streamline refinance option is only available to FHA customers, who have demonstrated the ability to repay their mortgage, and have verified their income and assets as part of their original loan.� As a result, these borrowers may qualify to refinance without re-verifying their:
o Income (Verbal VOE only)
o Assets (only enough for funds to close if necessary)
o Credit Rating (Unless doing full credit qualify)
Purpose & General Requirements
Purpose To lower the monthly P&I on a current FHA-insured mortgage.
Basic
Guidelines
� The mortgage must already be a 203(b) FHA-insured mortgage
� At time of application, the borrower must have made at least 6 payments on the
FHA-insured mortgage being refinanced
� Borrower’s must be current on the loan being refinanced for the month due
PRIOR to the closing month
� For mortgage histories < 12 months, all payments must be made within the
month due
� For mortgage histories > 12 months, no more than 1x30 late in the preceding 12
months; 0x30 in the previous 3 months from date of application
� Cash back to the borrower is not allowed
� Exception – minor adjustments at closing and may not exceed $500
� Occupancy of Former Investment Property < 12 months prior to loan
application date is NOT ALLOWED as a Streamline Refinance; must be done as
R&T to max 85% LTV
Net Tangible Benefit
Topic Description
Net Tangible
Benefit –
Streamline
Refinances
Calculation of Net Tangible Benefit is based on the Principal and
Interest (P&I) and Mortgage Insurance Premium (MIP)
� No longer includes Taxes and Insurance
Net tangible benefit to the borrower is defined as:
� A 5% reduction to the P&I of the mortgage payment PLUS the
Annual MIP
OR
� Refinance from an ARM to a fixed mortgage
Note: � Reducing term of the loan in itself is NOT a tangible benefit.
� When refinancing to a HYBRID ARM, it may be considered a fixed rate
mortgage
*** See table on next page for clarification ***
Net Tangible Benefit
Net Tangible Benefit cont’d…
Topic Description
Certifications &
Verifications –
Streamline
Refinances
� FHA allows the use of the abbreviated version of the URLA on
NON-CREDIT QUALIFYING refinances ONLY� Sections VI, V, VI, VIII(a) – VIII(k) are left blank
� Assets – Must complete assets section ONLY if assets are needed
to close� List on 1003 and provide verification of seasoned assets
� Additional changes:� Borrower must be current on mortgage being refinanced
� 12 month mortgage history required with NO 30-day late
� NO fico score required; if provided, must be entered into FHA
Connection and/or may result in counter to full credit qualify
� Up to 60 days of interest can be included in the payoff at closing
Net Tangible Benefit cont’d…
Topic Description
Certifications &
Verifications –
Streamline
Refinances
FMC OVERLAYS
� For FMC serviced loans, we will allow the use of the abbreviated
version as stated above.
� For non-FMC serviced loans, we require Form 12122L 06/2011
which is a Certification of Employment addendum just to verify
borrower is employed. � This is done by an FMC employee Prior to Docs
� Borrower employment information is required on 1003
� AVM’s are NO LONGER REQUIRED – effective April 1, 2012
� Property Inspections still required for occupancy• Provide utility bills on ALL Streamline Refinance transactions
� Property must be occupied; vacant properties are not allowed
Additional Guidelines
Topic Description
Additional
Guidelines• In instances where there is a subordinate lien, the entire secondary
lien amount must be included for the calculation of the CLTV.
o For closed end seconds the balance is used
o For HELOCs, the full line amount must be considered for maximum
financing.
• FHA has implemented other changes to non-credit qualifying
streamline refinance transactions such as a 6 month seasoning
requirement to offset additional risk.
o At least six payments must have been made by the due date as well as
210 days passed from the closing date of the mortgage to meet the
minimum non-qualifying streamline refinance requirements.
• Note that an appraisal may no longer be obtained in order to finance
additional costs incurred with a non-credit qualifying streamline
refinance.
o The current loan balance may only be increased by the new MIP.
o Both an appraisal and full credit qualifying will be required to increase
the loan balance to include closing costs or prepaid items.
Additional Guidelines
Topic Description
Use of TOTAL
Scorecard –
Streamline
Refinances
� DO NOT use TOTAL Scorecard or DU on Streamline Refinances
� If you do, DO NOT enter “ZFHA” as the underwriter in FHA Connection
� Use DE underwriter designation; FMC DE underwriter must use
his/her CHUMS identification number
Maximum
insurable
amount – Non-
Credit
Qualifying
Streamline
Refinances
� An Appraisal may no longer be obtained to finance additional
costs into the new loan, beyond the sum of the outstanding
principal balance plus new Up-Front MIP.� Current loan may only be increased by the new MIP
� No Credit Qualifying Streamlines� Cannot add closing costs, discount items, prepaid items, or other
financing costs to the new loan balance
� Full Credit Qualifying Streamlines� Can increase insurable amount beyond outstanding principal balance
plus new UFMIP
SUMMARY
Basic UW Guidelines
Minimum
Credit Score
� Program 07: None – follow 4155.1 Chapter 6 Section C & ML 2009-32
� Program FM: Minimum 640 – A credit report must be pulled and used only to
validate the credit score on FHA non-credit qualifying Streamline transactions
Credit Score � FMC does not require a credit report, except for credit qualifying streamlines
� If a credit report was pulled, available credit scores must be entered in FHA
Connection. If more than one score is available, you must enter all available
credit scores
Total
Scorecard
� It is recommended NOT to use TOTAL on Streamline refinance transactions.
� If TOTAL Scorecard is used, the loan must be underwritten and closed as a rate
& term (no cash out) refinance transaction
Max CLTV � If subordinate financing is to remain in place, the maximum CLTV allowed is
125%
� For Streamline refinance transactions WITHOUT an appraisal:
� CLTV is based on the original appraised value of the property.
� For Streamline refinance transactions WITH an appraisal:
� CLTV is based on the new appraised value
Basic UW Guidelines
Chapter 13 � Streamline transactions are not permissible while in a Chapter 13
Modifications � Loans with partial claims such or a Mortgage Modification is NOT ELIGIBLE
for an FHA Streamline refinance
Ineligible Transactions
Ineligible for Streamline Refinance
� Reducing the term of the mortgage
� Transactions that include a reduction in the mortgage term must be underwritten and closed as a rate & term refinance, and NOT as a Streamline refinance.
� Delinquent mortgages
� Delinquent mortgages are NOT eligible for Streamline refinancing until the loan is brought current.
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
NO Credit Qualifying Credit Qualifying
‘NO Credit Qualifying’ Streamlines
� A borrower is eligible for a Streamline Refinance without credit qualifying if:
• He/She has owned the property for at least 6 months, and,
• The previous borrower(s) received a release of liability at the time of the assumption
• Applies to mortgages that do not contain restrictions limiting assumptions only to creditworthy borrowers.
� A Mortgage/Credit only supplement is acceptable to document mortgage history.
� A full tri-merge credit report is not required and should not be in the file.
� These transactions must be manually underwritten.
� Submission through an AU system (LSC/DU/LP) is prohibited and will result in “Full Credit Qualify” or ineligible with some investors.
� Program Codes:
� Use program ending with …07
� Program ….FM: A minimum 640 credit score applies and may use a credit supplement to document the credit score only.
‘Credit Qualifying’ Streamlines
� Credit qualifying must be considered when:
1. A change in the mortgage term will result in an increase in the mortgage payment by more than 20%
2. When deletion of a borrower(s) will trigger the due-on-sale clause
3. Following the assumption of a mortgage that
� Occurred less than 6 months previously, and
� Does not contain restrictions (i.e. the due-on-sale clause) limiting assumptions only to a creditworthy borrower(s)
4. Following an assumption of a mortgage that
� Occurred less than 6 months previously, and
� Did not trigger the transferability restriction (the due-on-sale clause) such as in a property transfer resulting from a divorce decree, or by devise or descent
Note: The use of a credit qualifying streamline refinance for situations in which the change in mortgage term will result in an increase in the mortgage payment is only permissible for:
• Owner Occupied primary residences
• 2nd home meeting HUD 4155.1 4.B.3, and
• Investment properties owned by government agencies and eligible nonprofit organizations
‘Credit Qualifying’ Streamlines Cont’d…
� The following documentation is needed to determine the borrower is an acceptable risk:
� Verify the borrower’s income and credit report
� Verify stable monthly income
� Provide a full/tri-merged credit report on all borrowers
� Compute the debt-to-income ratios
� Determine that the remaining borrower(s) will continue to make the mortgage payments
� Additional documentation may be needed as required by the DE underwriter
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
Appraisals
With / Without
FHA Streamline Refinance
WITHOUT an Appraisal
Streamline refinance WITHOUT appraisal
• Maximum insurable mortgage amount cannot exceed:
• The outstanding principal balance
• minus the applicable refund of UFMIP
• plus the new UFMIP that will be charged on the refinance
• Calculation above applies only to owner occupied properties.
• Non-owner occupant properties regardless of how it was originally acquired may only be refinanced for the outstanding principal balance.
FHA Streamline Refinance
WITHOUT an Appraisal
Maximum CLTV (4155.1 3.C.2.f)
� If there is an existing subordinate lien on the property, such as a HELOC, the entire lien must be subordinated at refinance.
� For the calculation of the CLTV ratio, use the maximum accessible credit limit of the existing subordinate lien.
� If subordinate financing remains in place, the� Maximum CLTV is 125%, based on the original appraised value of the
property per ML 2009-32
Mortgage Term (4155.1 3.C.2.b)
� Mortgage term is the lesser of• 30 years, or• The remaining term of the mortgage plus 12 years
Appraisal
� At the time the case number is assigned, the “original value” must be obtained from FHA Connection or ECHO systems for a Streamline Refinance without an appraisal. If FHA does not provide the “original value” then the LTV ratio must be considered to be less than 90% for the purpose of determining the term of the annual premium.
2nd Homes & NOO Properties (4155.1 3.C.2.e)
� 2nd Homes and NOO properties may only be refinanced without an appraisal.
FHA Streamline Refinance
WITH an Appraisal
Streamline refinance WITH appraisal (FULL Credit Qualifying ONLY)
This program is used when the borrower has built up equity through an increase in theappraised value and needs to roll in closing costs and prepaids.
• Maximum loan amount is the lesser of (ML 2009-32):
• The existing principal balance• may include interest charged by the servicing lender when the payoff is not
received on the 1st day of the month, but• may not include delinquent interest, late charges or escrow shortages
• minus the applicable refund of UFMIP
• plus closing costs, prepaid items to establish the escrow account and the new UFMIP that will be charge on the refinance
OR
• 97.75% of the appraised value of the property
• plus the new UFMIP that will be charged on the refinance
FHA Streamline Refinance
WITH an Appraisal
� Closing costs and prepaids can be rolled into the loan amount (FULL Credit qualifying only)
� Prepaid expenses may include� Per diem interest to the end of the month on the new loan� Hazard insurance premium deposits� Monthly mortgage insurance premiums, and� Any real estate tax deposits needed to establish the escrow
account
� Discount points may not be included in the new mortgage. If the borrower has agreed to pay discount points, verify the borrower has the assets to pay them along with any other financing costs not included in the new mortgage amount)
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
Maximum Insurable Loan Amount
Payoff Calculation
Sample Calculator
Maximum Insurable Amount
Streamline Refinance Without an Appraisal (Full Credit or No Credit qualify), AND
With an appraisal (full credit qualify only to roll in closing costs)
NEW - Payoff Calculation
Items that can be included in a Streamline Refinance are:
� The existing unpaid principal balance
� Interest charged by the servicing lender when the payoff is not received on the 1st day of the month
Items that cannot be included in a Streamline Refinance are:
o Delinquent Interest
o Late Charges
o Escrow shortages
o Fax fees or other miscellaneous fees shown on the payoff
o Any other debt including seasoned subordinate liens or money due an ex-spouse (these should be processed through a regular refinance)
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
Cash Back
Adding Deleting Borrowers
Manufactured Homes
Ineligible Transactions
Other Important Things to Remember
Cash Back
� The borrower can not receive more than $500 cash back on any type of Streamline Refinance
� The borrower can receive cash back above $500 if the exact amount of the coverage is a refund of the mortgage fee paid in advance of closing such as an appraisal fee; documentation is needed to support the borrower paid the fee from his/her own funds
Adding or Deleting Borrowers
Individuals may be ADDED to title without
� A credit worthiness review, AND� Triggering the due-on-sale clause
Individuals may be DELETED from title, only
� When deletion of a borrower(s) will trigger the due-on-sale clause
� When…� An assumption of a mortgage not containing a due-on-sale clause occurred more
than 6 months previously, and� The assumptor can document that he/she has made the mortgage payments during
this interim period, OR
� Following an assumption of a mortgage in which…� The transferability restriction (due-on-sale clause) was not triggered, such as in a
property transfer resulting from a divorce decree, by devise or descent� The assumption or quit-claim of interest occurred more than 6 months previously,
and� The remaining owner-occupant can demonstrate that he/she has made the
mortgage payments during this time
Adding / Deleting Borrowers cont’d…
Adding / Deleting Borrowers cont’d…
� Must always be same borrowers as original FHA loan
� Only exceptions are in cases of death or divorce
� Divorce
� Remaining spouse must have been on title by themselves for at least 6 months
� Provide a copy of the final Divorce Decree
� Provide 6 months cancelled checks proving they’ve been making the payments on their own
� Death
� We must have an original death certificate at doc signing.
� In a case where Mom and Dad were co-borrowers with son or daughter and now want off the loan, a few rules must be observed.
� Son or Daughter must income and credit qualify. A fully completed, standard1003/URLA will be required for this scenario, along with applicable incomedocumentation (pay stubs, 2 years W2’s, etc.)
Manufactured Homes
FHA Streamlines – Manufactured Homes
� No appraisal required with one year seasoning and satisfactory payments for the 12 months prior.
� An appraisal is required if less than one year seasoning to a max 90% Maximum LTV/CLTV
� Maximum 5 acres
� No flood zones
� Non-occupying co-borrower not allowed
� Credit supplement with most recent 12 months paid as agreed
� No late pays
Other Information
No Cost Refinances� No cost refinances, in which the lender charges a premium interest rate to
defray borrower’s closing costs and/or prepaid items, are permitted
Withdrawn Condominium Approvals� If approval of a condominium project has been withdrawn, FHA will insure only
Streamline refinances WITHOUT appraisals for that condominium project
Seven Unit Exemptions� An eligible investor that has a financial interest in more than seven rental units
may only refinance WITHOUT appraisals
203(k) Loans� All 203(k) funds must have been disbursed
Buy-down Loans� All funds must be used or applied to principal balance at time of pay-off
Sample steps…
The following steps ARE required for streamline refinances
� A copy of the original note should be obtained to verify the new loan will have the same borrowers
� LDP/GSA lists must be checked to verify all parties associated with the transaction are not listed. A CAIVRS is not required.
� A streamline authorization number must be obtained from FHA Connection (if credit scores are available, they must be entered in FHA Connection)
� Verify that the loan is current at time of closing
� Obtain a 12 month mortgage payment history� Mortgages < 12 month history, the borrower must have made all the mortgage
payments within the month due; the credit report must reflect 0x30 for all payments
� Mortgages 12 month history or greater, the borrower must have 0x30x12 and made all mortgage payments within the month due for the 3 months prior to the date of application
� The URLA and HUD addendum to the URLA should be signed by the borrower as part of the application.
Additional Information
� We require that the current month’s payment be made prior to funding, and not brought to escrow
� Any large deposits on bank statements/vod’s have to be sourced
� Borrower’s with pension/retirement income must provide award letter
� We will not give the borrower any impound credit shown on the demand as credit towards pay off.
o If the demand shows an impound credit, we will require a revised demand without the impound credit.
o Any credit from the borrower’s existing impound account must be refunded to the borrower via check by the existing lien holder in the form of a check; a credit to the loan amount will not be allowed at closing
o Exception allowed for FMC serviced loans
� Streamline Refinance Transactions for outside payoff’s will require a utility bill in the file at the time of underwriting and an inspection prior to funding
� FMC has amended the Insurance Policy Requirements on refinance transactions to allow for a letter from the current insurance carrier in the event that the coverage is sufficient for our transaction
Hot Buttons
� New demand requires return to UW.
� We cannot resolve a loan amount error with a principle reduction; FHA frowns upon principal reductions.
� Fund your Streamlines early in the month before the borrowers payment is processed.
� Trying to fund at month end on Streamlines is not working well. It is bottlenecking at funding and causing delays in both underwriting and funding at month end.
� The borrower will be refunded any over-payment after pay off by the lender.
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
Originating an
FHA Streamline Loan
Origination Process
Option 2: Direct Consumer Marketing (DCR)
(No Cost Streamline Refinance)
Option 1: Branch Level
(Regular FHA Streamline Refinance)
There are two (2) Options available to originating FHA
Streamline Loans at First Mortgage:
FHA Streamline Origination Process
Option 1
Option 1: Regular FHA Streamline Refinances
� Handled at the Branch Level – origination, locking, communication
� Rates as published on the FMC rate sheet
� Sufficient income must be generated in order to cover all third-party costs/expenses and branch fees and yield at least one percent (1.0%) of income.
� Conditions and other processing requisites of FMC and HUD will be the responsibility of the originator, processor and branch.
� Commissions to the originator for these loans will be calculated and paid pursuant to the Employment Agreements and Compensation Addendums (as with all other in-house loans and products)
FHA Streamline Origination Process
Option 2
Option 2: Referral to Direct Consumer Marketing
� In the event an originator determines that a prospective FHA Streamline applicant requires an interest rate lower than that available on FMC’s retail rate sheet in order to yield a premium to cover third-party costs/expenses, branch fees and at least one percent (1.0%), the following information and supporting documentation is to be referred to FMC’s Direct Consumer Marketing (DCM) department:
� Contact the DCM department for submission procedures for FHA
Streamline NO-COST
Pricing an FHA Streamline
Important Cut-off Dates
Sample Forms
Streamline Resources
First Mortgage Corporation has been around since
1975. Since then, FMC has been opening doors to the
American Dream. It’s all we do and we do it well.
Discover today why First Mortgage Corporation is
your First Time Home Buyer and Down Payment
Assistance Headquarters!
� Interest Rates for the FHA Streamline programs are available on Page 1 of the FMC rate sheet:
� For Retail: Go to the FMC website or contact Secondary Marketing
� For Wholesale: Contact your FMC Account Executive or go to your AE’s website for rates
Pricing FHA Streamline Refinance
Resources
• Mortgagee Letters:• ML 2011-11 for upcoming changes effective April 14, 2011
• Other Mortgagee letters, go to the HUD website
• Handbooks, go to the HUD website
• For information on U.S. Department of Housing and Urban Development, visit: https://www.hud.gov/https://www.hud.gov/ -
• For area median home prices: https://entp.hud.gov/idapp/html/hicostlook.cfm
• Forms:• 92900-ws Mortgage Credit Analysis Worksheet
• FHA Stacking Order
• FHA Streamline No Cost Form
• FHA Streamline Employment and Income Certification
WEB SITE
Go to our FMC websites
for:
1. RATE SHEET
2. TRAINING
MATERIALS
3. GUIDELINES
4. FORMS
5. CALCULATORS
6. TOOLS
7. MARKETING
TRAININGS
• First Mortgage offers
FREE Weekly ONLINE
Trainings
• See September Training
Schedule coming up…
• August 2012 Trainings:
• FHA 203(k) Training
8/10 @ 10am PST
• FHA Streamline
Training 8/14 @ 10am
PST
• FMC Locking System
Training 8/16 @ 10am
PST
• USDA Training 8/17 @
10am PST (FMC
Employees ONLY)
SUPPORT
Retail:
Contact Loan Help
Wholesale:
Contact your A/E
For help with your:
• Scenarios
• Pricing
• Program
Guidelines
• Loan
Submissions
• Fees
On behalf of First Mortgage, we thank you
for joining our training today and hope the
information provided was informative and
will help you… Build Your Business!
• The main purpose of First Mortgage Corporation’s (FMC) training documents is to assist real estate and mortgage
professionals in developing entry-level competence with loan programs.
• While FMC staff, employees, contractors and contributors take care to ensure the accuracy of the content of training
documents, FMC makes no warranties as to the accuracy of the information contained within these materials.
Furthermore, every user of this material uses it understanding that he or she must still conduct his or her own
original legal research, analysis and drafting. In addition, every user must refer to the relevant legislation, case law,
administrative guidelines, rules and other primary sources.
• FMC specifically disclaims any liability for any loss or damage any user may suffer as a result of information contained
within this training material.
• While the information contained in FMC’s training material addresses guidelines and issues surrounding mortgage
programs, these materials do not constitute legal advice. All non-legal professionals are urged to seek legal advice
from a lawyer.