New FHA Refinancing Rules
Some borrowers apply for an FHA insured mortgage fully intending to refinance it later on using an FHA Streamline Refinancing loan--the availability of these refinancing options are why some borrowers may be tempted to choose an adjustable rate mortgage, planning to refinance and get a better interest rate later on.
But for those who make such plans, the new rules change how soon a borrower can take advantage of an FHA streamline refinancing loan. Effective immediately, there is a minimum amount of time the FHA borrower must own the property and make FHA mortgage payments before they are allowed to apply for refinancing.
Borrowers are now required to make at least six payments on the mortgage being refinanced and wait until "at least six full months must have passed since the first payment due date of the refinanced mortgage".
The new rules also include the requirement that "at least 210 days have passed from the closing date of the mortgage being refinanced." As an example, the FHA rules say, "...if the FHA case number on the mortgage being refinanced was closed on or before December 1, and if mortgagor's first payment on that mortgage was due on January 1, the mortgagee may request assignment of an FHA case number for the refinancing mortgage no earlier than July 1."
There are other changes to streamline loans. Borrowers must now be "current on the mortgage being refinanced for the month due prior to the month in which they close the refinancing and for the month in which they close" according to the new FHA requirements.
Another quote from an FHA policy update says, "FHA no longer requires mortgagees to certify employment and income on streamline refinance transactions." That changes the way lenders process streamline refinancing loans and doesn't necessarily affect the borrower directly, but the FHA's new rules alters the process for lenders on several levels.
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