Simple Refinance is only permissible for owner-occupied Principal or HUD-approved Secondary Residences.

Transcription

1 FHA SIMPLE REFINANCE Simple refinance refers to a no cash-out refinance of an existing FHA mortgage in which all proceeds are used to pay the existing FHA insured mortgage lien on the Subject Property and costs associated with the transaction. The difference between a Simple refinance and Streamline refinance is: You can include ALL costs (including discount points) in the maximum mortgage calculation on a simple refinance. You don t have to worry about the 5% savings on the PITI on this product or any other net tangible benefit. Simple Refinance is only permissible for owner-occupied Principal or HUD-approved Secondary Residences. For manually underwritten mortgages with less than six (6) months of mortgage payment history, the borrower must have made ALL payments within the month due. For manually underwritten mortgages with greater than six (6) months history, the borrow must have made all mortgage payments within the month due for the six (6) months prior to case number assignment and have no more than one (1) 30-day late payment for the previous six months for all mortgages. The borrower must have made the payments for all mortgages secured by the subject property for the month prior to mortgage disbursement. Six (6) months of payment history or less = no 30-day lates Seven (7) or more months of payment history = maximum one (1) 30-day late If the mortgage on the subject property is not reported in the borrower s credit report, the lender must obtain a verification of mortgage (VOM) to evidence payment history for the previous 12 months. The loan must be due for the current month: Example: If the loan is closing in March and funding in March, the mortgage loan being paid off must be due for March. If loan is closing in March, but funding in April, the March payment must be made so the loan being paid off is due for April. LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 1

2 Required Documentation The lender must review the borrower s employment documentation or obtain utility bills to evidence the borrower currently occupies the property as their principal residence. The lender must obtain evidence the Secondary Residence has been approved by the Jurisdictional HOC. Maximum LTV The maximum LTV for a Simple Refinance is: 97.75% for Principal Residences and, 85% for HUD-approved Secondary Residences. Maximum CLTV The maximum CLTV for a Simple Refinance is: 97.75% for Principal Residences and, 85% for HUD-approved Secondary Residences. The maximum mortgage amount for a Simple Refinance is: The lesser of: o The Nationwide Mortgage Limit o the maximum LTV ratio from above, or o The sum of the existing debt and costs associated with the transaction as follows: Existing debt includes: Payoff balance of existing mortgage MIP due on existing mortgage Late charges and, Escrow shortages. o Allowed costs include ALL borrower paid costs associated with the new mortgage (including discount points) less any refund of UFMIP (if financed in original mortgage). Excess Cash Back When the estimated costs utilized in calculating the maximum mortgage amount resulted in greater than $500 cash back to the borrower at mortgage disbursement, the lender may reduce the borrower s outstanding principal balance to satisfy the $500 cash back requirement. LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 2

3 Property Eligibility 1-4 Family Condo Modular (on or off frame) PUD LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 3

4 FHA Simple Refinance Credit Score residual test and 2 mths PITI in *liquid reserves Max LTV/TLTV Primary Res= 97.75% Appraisal Mortgage Lates Full appraisal required 0x30= less than 7 mths NO more than 1x30= 7-12 mths Properties listed for sale Must be taken off the market prior to application **AUS (LP or DU) Yes Needed Manufactured home financing NO 1/1***, 3/1 5/1/6 Allowed *Liquid reserves are defined as liquid cash available after closing. NO retirement or stock accounts can be used to satisfy the reserve conditions. **LP or DU refer may be over turned by the underwriter with compensating factors. ***1/1 qualifies at note rate plus 1% Borrower needs to credit qualify with full documentation: Assets Income Credit Appraisal LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 4

5 Compensating Factors Lowest Minimum Decision Credit Score 600 and above: 1. 31/43 (Energy Efficient Homes may have stretch ratios of 33/45) 2. 37/47 - Requires 1 of the following Compensating Factors: Verified/documented cash reserves equal to or exceeding 3 (1-2 units) or 6 (3-4 units) total monthly mortgage payments. Minimal Increase in Housing Payment o New total monthly mortgage payment doesn t exceed current total monthly housing payment by more than $100 or 5% (whichever is less); and o There is a documented 12-month housing payment history with no more than one 30-day late payment. In cash-out transactions all payments on the mortgage being refinanced were made within the month due for the previous 12 months. o May not be used as a compensating factor if the borrower has no current housing payment. Residual income 3. 40/40 - No Discretionary Debt: The borrower s housing payment is the only open account with an outstanding balance not paid off monthly; and The credit report shows established credit lines in the borrower s name open for at least 6 months; and The borrower can document these accounts have been paid in full monthly for the last 6 months /50 Requires 2 of the following Compensating Factors: Verified/documented cash reserves equal to or exceeding 3 (1-2 units) or 6 (3-4 units) total monthly mortgage payments. Minimal Increase in Housing Payment o New total monthly mortgage payment doesn t exceed current total monthly housing payment by more than $100 or 5% (whichever is less); and o There is a documented 12-month housing payment history with no more than one 30-day late payment. In cash-out transactions all payments on the mortgage being refinanced were made within the month due for the previous 12 months. o May not be used as a compensating factor if the borrower has no current housing payment. Significant Additional Income (Overtime, Bonuses, Part-Time or Seasonal Employment) Not Reflected in Effective Income o Received for at least 1 year, and will likely continue; and o If it were included in gross effective income, is sufficient to reduce the qualifying ratios to not more than 37/47. Residual income LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 5

6 Documentation in Byte LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 6

7 LSMG FHA Simple Refinance Product Card Revised 06/03/2016 pg. 7