STREAMLINE REFINANCES

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					                                       Stream Line Refinance
                                        FHA MORTGAGES

STREAMLINE REFINANCES

   •   Streamline refinances are designed to lower the monthly principal and interest payments on a
       current FHA-insured mortgage and must involve no cash back to the borrower except for minor
       adjustments at closing not exceeding $250
   •   Streamline refinances can be insured with or without an appraisal, and HUD's Credit Alert
       Interactive Voice Response System (CAIVRS, see paragraph 2-4C) need not be checked.
       LDP/GSA to be completed
   •   Processing and underwriting instructions are described below.

Streamline Refinances WITHOUT an appraisal

   •   Maximum base loan amount of the new loan is limited to the original loan amount including the
       upfront MIP. If subject to an upfront MIP, the new absolute maximum mortgage would equal the
       original principal plus the new upfront MIP. The term of the mortgage is the lesser of 30 years or
       the remaining term of the mortgage plus 12 years
   •   Streamline refinances by private investors or for secondary residences may only be made without
       an appraisal.
   •   The new security instruments will contain FHA's standard provision permitting acceleration of the
       mortgage upon assumption by an investor or as a secondary residence, however, FHA does not
       intend to authorize the lender to exercise the acceleration provision if the investor assumptor is
       found to be credit-worthy
   •   Although a property purchased as a principal residence may under certain circumstances as
       described in the security instruments, be a rental , a streamline refinance without an appraisal does
       not "convert" the mortgage to one eligible for assumption by an investor.

Streamline Refinances WITH appraisals (no credit qualifying) [*]

   •   The maximum insurable mortgage amount is the lesser of the appropriate loan-to-value ratio
       applied to the appraised value or the sum of the existing indebtedness and related closing costs for
       the refinance
   •   The 97.75 percent and 98.75 percent limitations must also be applied
   •   The new mortgage amount may not exceed the sum of the existing first lien, closing costs, prepaid
       expenses, and reasonable discount points
   •   Any refund of UFMIP, if originally financed in the mortgage, must be subtracted from existing
       indebtedness in calculating the new mortgage amount.
   •   [*] If no underwriting is performed, HUD regulations require that the new mortgage not exceed the
       original principal balance, excluding financed MIP, of the mortgage being refinanced
   •   If the lower of the two amounts calculated above will exceed the original principal balance, the
       lender must document that the mortgagor's record of payment on the existing mortgage is
       satisfactory, and the borrower has not otherwise exhibited a disregard for credit obligations.




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                                       Stream Line Refinance
"Credit-Qualifying" in "Streamline Refinances"

   •   These contain all of the normal features of a streamline refinance while at the same time providing
       a level of assurance of continued performance on the mortgage
   •   The lender must provide evidence that the remaining borrowers have an acceptable credit history
       and ability to make payments
   •   A 12 month perfect mortgage rating is required
   •   If owned less than 12 months, a rental rating to complete the 12 month period is required
   •   Credit Documentation/Qualifying:
   •   Verification of income, credit report, computation of acceptable mortgage payment- and
       obligation-to-income ratios
   •   Credit Qualifying may be used:

   •   When change in mortgage term will result in an increase in the mortgage payment. Acceptable on
       owner occupancy, principal residence only.
   •   When deletion of a borrower or borrowers will trigger due-on-sale clause
   •   Following an assumption of a mortgage that does not contain restrictions (due-on-sale clause)
       limiting assumptions only to credit-worthy borrowers and the assumption occurred less than six
       months previously.

   •   Following an assumption of a mortgage where the transferability restriction (due-on-sale clause)
       was not triggered, such as in a divorce where a property transfer results from the divorce decree or
       by devise or descent and the assumption occurred less than six months previously.

Additional information on Streamline Refinances

Appraisal Fee and Credit Report Fees

   •   Although we do not require an appraisal on streamline refinances, if the lender is required by law
       or banking regulations (e.g., FIRREA) or its investors to obtain an appraisal on a mortgage that
       will be processed as if no appraisal was made, the appraisal fee may be paid by the borrower out-
       of-pocket (i.e., not financed)
   •   Likewise, if the lender must obtain a credit report even though we do not require it for streamline
       refinances, the credit report may be paid by the borrower out-of-pocket (not financed)
   •   This aspect of the transaction must be thoroughly explained to the borrower to prevent any
       misunderstandings

Cash-to-Close

   •   Borrowers are not required to provide evidence of cash to close
   •   Since streamline refinances are designed to reduce the borrower's principal and interest payments
       on a current FHA-insured mortgage, that portion of the borrower's payment for escrowed items
       need not be considered

Remaining Buydown Funds

Remaining buydown funds on current mortgage must be used to pay down the principal balance and then
the new payment cannot exceed $50 more than what the payment would be at the fully extended note rate.


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                                      Stream Line Refinance
Project Approval Condo/PUD

   •   If a condominium project has its approval withdrawn, FHA will only insure streamline refinances
       without appraisals in that condominium project

Underwriting

   •   Mortgage credit underwriting is not required
   •   The loan application and HUD-92900-WS must be submitted, although those sections regarding
       income, assets, and debts and obligations need not be completed unless the borrowers must credit
       qualify

Insurance Submission

   •   When submitting the case for insurance, the lender must provide a valid refinance authorization
       number
   •   The original FHA case number is required to obtain a new case number.
   •   If the loan is to refinance a FHA-insured mortgage for which the borrower financed an up-front
       MIP, the unearned premium must be subtracted from the principal balance (except on cash-out
       refinances)
   •   The refund of unearned premium may be applied to the total amount of the UFMIP; the net amount
       remitted to FHA on the new mortgage loan will reflect the refund of unearned premium
   •   Please note that no annual mortgage insurance premium is required for streamline refinancing of a
       mortgage that was executed before July I, 1991
   •   The lender must be certain to calculate the full amount of UFMIP to be charged on the new
       mortgage, otherwise, the loan proceeds will be insufficient

Decreasing The Term of A Mortgage

A 30-year mortgage on a principal residence may be refinanced to a shorter-term mortgage provided the
new monthly principal and interest payment increases no more than $50. (The $50 latitude is not available
for mortgages on investment properties or secondary residences unless the borrower qualifies

Delinquent Mortgages

A 12 month perfect mortgage rating is required. If owned less than 12 months, a rental rating to complete
the 12 month period is required.

"No Cost Refinances"

   •   "No-cost" refinances, in which the lender charges a premium interest rate to defray the borrower's
       closing costs and/or prepaid items, are permitted
   •   The lender may also offer an interest-free advance of amounts equal to the present escrow




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                                       Stream Line Refinance
Assumed Loans

   •   A borrower who assumed or took title subject to a FHA-insured mortgage without being credit
       qualified with the previous owners receiving a release of liability, must have owned the property
       for at least six months before being eligible for the streamline refinance program without credit
       qualifying
   •   This applies to those mortgages that do not contain restrictions limiting the assumption only to
       credit-worthy borrowers, typically those mortgages made prior to December, 1989

Adding or deleting individuals to title

   •   New individuals may be added to title on a streamline refinance without credit-worthiness review
       and without triggering due-on-sale clauses
   •   Deleting individuals from title on a streamline refinance can only be accomplished under the
       circumstances described above or:

   •   When an assumption of a mortgage not containing a due-on-sale clause occurred more than six
       months previously and the person who assumed the loan can document that he or she has made the
       mortgage payments during this interim; or

   •   Following an assumption of a mortgage where the transferability restriction (due-on-sale clause)
       was not triggered, as in a divorce where a property transfer results from the divorce decree or by
       devise or descent and the assumption or quit-claim of interest occurred more than six months
       previously and the remaining owner-occupant can demonstrate that he or she has made the
       mortgage payments during this time.

Seven unit exemptions

   •   An eligible investor that has a financial interest in more than seven rental units must receive local
       FHA office approval for streamline refinancing with an appraisal.
   •   Seven-unit waivers are not required for any refinances without appraisals
   •   The refinances are to be processed by the DE lender

Subordinate financing

   •   May remain in place without regard to the total indebtedness against the property on streamline
       refinances, with or without Appraisal
   •   The borrower is not required to satisfy any outstanding subordinate liens as long as they will
       clearly be subordinate to the new FHA-insured refinance mortgage
   •   When refinancing a Section 235 mortgage to a Section 203(b) mortgage, the second mortgage used
       to secure repayment of Section 235 subsidy funds may be subordinated by the local FHA office
   •   The second mortgage debt must also be included as an eligible lien in the mortgage calculation
       process when the borrower is credit qualifying

Proceeding as if no appraisal was completed

   •   If the appraised value is such that the borrower would be better advised to proceed as if no
       appraisal had been made, the appraisal may be voided and a notation made in the "remarks"
       section of the HUD-92900-WS

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                                      Stream Line Refinance


Repair Costs

   •   Repair costs may not be included in the mortgage amount on a streamline refinance
   •   Although FHA does not require repairs (except for lead-based paint repairs) on streamline
       refinances with appraisals, the lender may require completion of repairs as a condition of loan
       approval

Solicitation by D.E. Lenders

DE lenders may solicit and process streamline refinance applications from any area of the country
provided the lender is approved for DE by at least one HUD office.

Streamline Refinances of Other HUD Mortgage Products

   •   ARM to ARM: An adjustable-rate mortgage (ARM) may be refinanced to another ARM provided
       that an immediate payment reduction occurs and that the maximum interest rate of the new
       mortgage not exceed the interest rate of the old mortgage being refinanced
   •   These may be transacted with or without an appraisal
   •   ARM to Fixed-Rate: An ARM may be refinanced to a fixed-rate mortgage, with or without an
       appraisal, provided the interest rate on the new fixed-rate mortgage will be no greater than two
       percent above the current rate of the ARM. In addition, all mortgage payments must have been
       made within the month due for the past twelve months or period that the loan has been in force, if
       shorter
   •   Fixed-Rated to ARM: Fixed-Rate mortgages on owner-occupied principal residences may be
       refinanced to an adjustable-rate mortgage, with or without an appraisal, provided the interest rate
       of the new mortgage is at least two percent below the interest rate of the current mortgage. An
       ARM may be used for refinancing only on an owner-occupied principal residence.
   •   Graduated-Payment Mortgages to Fixed-Rate: Section 245 GPM's may be refinanced with or
       without an appraisal to a fixed-rate mortgage provided the new mortgage payment will not exceed
       the current mortgage payment. (If the streamline refinance is completed without an appraisal, the
       new mortgage amount may exceed the statutory limit by the accrued negative amortization and the
       new UFMIP.)
   •   GPM to ARM: A GPM may be refinanced to an ARM provided the note rate results in a
       reduction to the current P&I payments. (If the streamline refinance is completed without an
       appraisal, the new mortgage amount may exceed the statutory limit by the accrued negative
       amortization and the new UFMIP.
   •   ARM or Fixed-Rate to Hybrid ARM: Either product can be refinanced to a Hybrid ARM and
       will be treated in the same manner as a fixed rate since these products provide for a minimum of
       three years of fixed mortgage payments. The streamline refinance need only result in an
       immediate payment reduction to the borrower to be eligible.




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