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FHA STREAMLINE Training

FHA STREAMLINE Training. Offered by… FIRST MORTGAGE CORPORATION. May 3, 2013.

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FHA STREAMLINE Training

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  1. FHA STREAMLINETraining Offered by… FIRST MORTGAGE CORPORATION May 3, 2013 Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 5/3/2013

  2. AGENDA • What is an “FHA Streamline” refinance? • FHA Streamline Refinance Program • Purpose of the Program • Program Guidelines • Origination Process Flow • Pricing • Resources • FMC Support Understanding FHA Streamlines – How we do it…

  3. What is an 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: • NO credit qualifying Streamline • Credit qualifying Streamline • Streamline withOUT an appraisal • Streamline with an appraisal • 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: • Income (Verbal VOE only) • Assets (only enough for funds to close if necessary) • Credit Rating (Unless doing full credit qualify) Understanding FHA Streamlines – How we do it…

  4. Purpose and Requirements Understanding FHA Streamlines – How we do it…

  5. Net Tangible Benefit Understanding FHA Streamlines – How we do it…

  6. Certifications and Verifications Understanding FHA Streamlines – How we do it…

  7. Certifications and Verifications Cont’d… Understanding FHA Streamlines – How we do it…

  8. Additional Guidelines Understanding FHA Streamlines – How we do it…

  9. Certifications and Verifications Understanding FHA Streamlines – How we do it…

  10. Basic Underwriting Guidelines Understanding FHA Streamlines – How we do it…

  11. Basic UW Guidelines Understanding FHA Streamlines – How we do it…

  12. 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. Understanding FHA Streamlines – How we do it…

  13. FHA STREAMLINE REFINANCE No Credit Qualifying Credit Qualifying Understanding FHA Streamline – How we do it…

  14. ‘NO Credit Qualifying’Streamline • 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 (DU/LSC) 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 • Program …FG: A minimum 680 credit score applies and may use a credit supplement to document the credit score only Understanding FHA Streamlines – How we do it…

  15. ‘Credit Qualifying’Streamline • Credit qualifying must be considered when: • A change in the mortgage term will result in an increase in the mortgage payment by more than 20% • When deletion of a borrower(s) will trigger the due-on-sale clause • 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) • 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 Understanding FHA Streamlines – How we do it…

  16. ‘Credit Qualifying’Streamline • 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 • 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 Understanding FHA Streamlines – How we do it…

  17. FHA STREAMLINE REFINANCE Without an Appraisal With an Appraisal Understanding FHA Streamline – How we do it…

  18. ‘WITHOUT’ an Appraisal Streamline Refinance WITHOUT appraisal • Maximum insurable mortgage amount cannot exceed: • The outstanding principal balance • plus up to 60 days of interest • minus the applicable refund of UFMIP • plusthe new UFMIP that will be charged on the refinance • Calculation above applies only to owner occupied properties. • New BASE loan amount cannot exceed the original TOTAL loan amount of the previous loan (which includes UFMIP) • Non-owner occupant properties regardless of how it was originally acquired may only be refinanced for the outstanding principal balance. Understanding FHA Streamlines – How we do it…

  19. ‘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. Understanding FHA Streamlines – How we do it…

  20. ‘WITH’ an Appraisal (Full Credit Qualify Only) Streamline refinance WITH appraisal ( must be FULL Credit Qualifying ONLY) This program is used when the borrower has built up equity through an increase in the appraised value and needs to roll in closing costs and pre-paids. • Maximum loan amount is the lesserof (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 Understanding FHA Streamlines – How we do it…

  21. ‘WITH’ an Appraisal (Full Credit Qualify Only) • Closing costs and prepaids can be rolled into the loan amount (FULL Credit qualifying WITH an Appraisal 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) Understanding FHA Streamlines – How we do it…

  22. FHA STREAMLINE REFINANCE Payoff Calculation Cash BackAdding/Deleting Borrowers Manufactured Homes Understanding FHA Streamline – How we do it…

  23. ‘PAYOFF’ Calculation Items that can be included in a Streamline Refinance are: • The existing unpaid principal balance • Interest (allowed up to 60 days with FMC) Items that cannot be included in a Streamline Refinance are: • Delinquent Interest • Late Charges • Escrow shortages • Fax fees or other miscellaneous fees shown on the payoff • Any other debt including seasoned subordinate liens or money due an ex-spouse (these should be processed through a regular refinance) • Escrow refund Understanding FHA Streamlines – How we do it…

  24. 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 Understanding FHA Streamlines – How we do it…

  25. Adding or Deleting Borrowers Adding/Deleting Borrower(s) Individuals may beADDEDto title without • A credit worthiness review, AND • Triggering the due-on-sale clause Individuals may beDELETEDfrom 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 • 6-Mos cancelled checks required to verify remaining borrower made payments on their own Understanding FHA Streamlines – How we do it…

  26. Adding/Deleting Borrower(s) 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 • Provide 6 months cancelled checks proving they’ve been making the payments on their own • 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, standard 1003/URLA will be required for this scenario, along with applicable income documentation (pay stubs, 2 years W2’s, etc.) Understanding FHA Streamlines – How we do it…

  27. Adding/Deleting Borrower(s) Cont’d… • Additional Information regarding Title: • When a person gets married and they have a name change, the married name MUST be validated with a “PASS” through FHA Connection. • This alerts us that the SSA has been notified of the change and has been updated on their system. • A copy of their SS Card reflecting their married name will also be required • Vesting from the old loan MUST transfer in the same order on the new FHA Streamline loan. • Eg., John Smith and Mary Smith, Husband and Wife as Joint Tenants • New loan must remain in the same order • Make sure the LT, 1003 and FHA Connection ALL MATCH Understanding FHA Streamlines – How we do it…

  28. Manufactured Homes Understanding FHA Streamlines – How we do it…

  29. 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 Understanding FHA Streamlines – How we do it…

  30. 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 no more than 1x30x12 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. Understanding FHA Streamlines – How we do it…

  31. 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/VODs have to be sourced • Borrowers with pension/retirement income must provide award letter • We will notgive the borrower any impound credit shown on the demand as credit towards pay off. • If the demand shows an impound credit, we will require a revised demand without the impound credit. • 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 • Exception allowed for FMC serviced loans • Streamline Refinance Transactions for outside payoff’s will require 2 utility bills plus a drive-by inspection – see previous slide • 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 Understanding FHA Streamlines – How we do it…

  32. Additional Information • Input the subject property in the REO screen of FirstBase. Input the lien holder and then complete the OTMIP Refund Screen including old and new case numbers. This screen affects the Insuring Department and MIP remittance Department. • If there is HOA and additional liens on subject property, indicate that in the “existing” payment on the 1003 page 2, as well as the “proposed”. Regardless, these additional costs to live there are not included in the qualifying. • Use the property taxes on the prelim as they are the actual taxes. No need to calculate 1.25% or 2% for new construction. Understanding FHA Streamlines – How we do it…

  33. HOT Buttons • New demand requires return to UW. • FHA frowns upon principal reductions. We cannot resolve a loan amount error with a principle reduction. • 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. Understanding FHA Streamlines – How we do it…

  34. FHA STREAMLINE REFINANCE Origination Process – Branch Level Origination Process - DCM Understanding FHA Streamline – How we do it…

  35. Origination Process There are two (2) Options available to originating FHA Streamline Loans at First Mortgage: Option 1: Branch Level (Regular FHA Streamline Refinance) Option 2: Direct Consumer Marketing (DCM) (No Cost Streamline Refinance) Understanding FHA Streamlines – How we do it…

  36. ORIGINATION: 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) Understanding FHA Streamlines – How we do it…

  37. ORIGINATION: 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 Understanding FHA Streamlines – How we do it…

  38. PRICING Pricing an FHA Streamline Important Cut-off Dates Sample Forms Streamline Resources Understanding FHA Streamline – How we do it…

  39. Interest Rates for the FHA Streamline programs are available on Page 1 of the FMC rate sheet. Available Programs are: Program ….07 Program ….FM Program ….FG 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 an FHA Streamline Understanding FHA Streamlines – How we do it…

  40. 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 Understanding FHA Streamlines – How we do it…

  41. FMC SUPPORT • SUPPORT • Retail: • Contact Loan Help • Wholesale/Correspondent: • Contact your FMC A/E • For help with your: • Scenarios • Pricing / Fees • Guidelines • Loan Submissions • Trainings • WEB SITE • Go to FMC websites for: • RATE SHEET • TRAINING MATERIALS • GUIDELINES • FORMS • CALCULATORS • TOOLS • MARKETING • TRAININGS • First Mortgage offers FREE Weekly ONLINE Trainings • See June Training schedule for upcoming trainings • Trainings for May, 2013: • 5/3: FHA Streamline • 5/10: VA Guaranteed • 5/15: Property Flipping • 5/17: CHF Platinum Understanding FHA Streamlines – How we do it…

  42. THANK YOU FOR YOUR BUSINESS… On behalf of First Mortgage, thank you for joining today’s training and we hope the information provided 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. Understanding FHA Streamlines – How we do it…

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