FHA Streamline Refinance Question

[Tim Porsche]

Hi All, I'm in the process of trying to do an FHA Streamline Refinance on an FHA mortgage I have. I've talked to my mortgage holder about this and he said I could save about $40 a month doing the refinance, with no out of pocket costs, so it's definitely something I want to pursue. My questions are...

1. How long does getting this refinance done typically take? Every time I ask for an update and what the status of it is, I have to email them at least 2-3 times before I receive a response. It feels like their dragging their feet, but maybe it's just my imagination? In the latest email I received they said they want to wait and see if mortgage rates go any lower...which is what they did for the original mortgage by the way, and I did get a good rate. 

2. My mortgage broker said that for several years, getting any refund on the upfront mortgage premium has gone away in the nation. From what I understood, this upfront MIP refund is why the mortgage could be refinanced without any out of pocket expenses. Has this refund indeed gone away, and if so, is there another way I would be able to refinance without any out of pocket expenses?

Thanks in advance for any advice!

[Albert Bui]

Originally posted by @Tim Porsche:

Hi All, I'm in the process of trying to do an FHA Streamline Refinance on an FHA mortgage I have. I've talked to my mortgage holder about this and he said I could save about $40 a month doing the refinance, with no out of pocket costs, so it's definitely something I want to pursue. My questions are...

1. How long does getting this refinance done typically take? Every time I ask for an update and what the status of it is, I have to email them at least 2-3 times before I receive a response. It feels like their dragging their feet, but maybe it's just my imagination? In the latest email I received they said they want to wait and see if mortgage rates go any lower...which is what they did for the original mortgage by the way, and I did get a good rate. 

2. My mortgage broker said that for several years, getting any refund on the upfront mortgage premium has gone away in the nation. From what I understood, this upfront MIP refund is why the mortgage could be refinanced without any out of pocket expenses. Has this refund indeed gone away, and if so, is there another way I would be able to refinance without any out of pocket expenses?

Thanks in advance for any advice!

HI Tim,

1) These are easy since its stated income (dont need taxes or W2's) all we do is verbally verify if you still work at your stated job on the app, make sure the credit accounts and mortgages are paid on time, min 6 months of payment on your current FHA loan, review a copy of your current FHA mortgage note, and in some cases we dont even need bank statements. There is also no appraisal needed on FHA streamline refinances (non appraisal FHA Streamline) so you dont have to pay and or wait for an appraisal report to come back either. For this reason these generally take 2-4 weeks to start and sign and close.

2) The UFMIP declines by 20% on the day of funding + 2% per month so that means if you're 12 months out from the original date of closing then you will have used up 20% + 24% (2% X 12 months) = 44% of the original UFMIP leaving you 56% of this original UFMIP refund against your new UFMIP on the new FHA loan. Keep in mind this refund is only for FHA to FHA loans, you won't be able to go FHA to Conventional and keep a UFMIP refund.

Another Myth is that this UFMIP refund is why "you're getting a no cost refinance," because the UFMIP refund is usually a partial refund so unless if the UFMIP was really high when you closed your original loan a partial percentage of this original UFMIP will not be enough to pay for the new UFMIP on today's loan (currently 1.75% of your loan amount). The lender will have to raise your rate high enough to not only pay all your closing costs, perhaps your prepaid interest, tax, insurance, but also to generate enough LC (lender credit) to pay for the UFMIP difference as well (refunded UFMIP - new UFMIP) in order to make your FHA streamline refinance a "complete no cost."

Its true you still pay for the costs like Upen mentions but to the consumer it is "no cost," especially if you can save monthly payment or interest and come out of pocket with nothing, maybe skip a month or two in payment, its not a bad trade right? Win win, lender makes his/her commission and borrower gets many net benefits.

The addiitonal benefit is if the lender pays for your entire new impound account  then your current loan impound account refund will be cash back to you and will act as a small cash back which is pretty nice to be paid to do a refinance.

I just did a few this month where the borrower:

- saved 100-200 per month (higher loan amount so easier to save a lot 400-600 loan amount)

- skiped 1-2 months of mortgage payment

- I credited them all their costs, prepaid tax/interest/insurance, and their UFMIP difference so they kept their same loan amount and had nothing financed in their new loan except for oustanding balance and perhaps some interest

- got their impound refund back from prior loan which netted them 2-4k in cash 3-4 weeks after closing depending on how much each borrower had in their impounds at the time of closing

The way I see it, its a net net positive for all.