In the governments never ending odyssey to put an end to the current housing crisis FHA has put in some new guidelines to the FHA Streamline FHA process in hopes of helping homeowners refi into today’s lower rates. As with all the alphabet soup programs out there this program sounds great on paper but will it work? Here is a quick snapshot of what this program does and doesn’t do:
- If your loan is a FHA backed loan you can refi at today’s low rates. Look to see if your mortgage is an FHA backed loan here
- Will overlook your current credit, employment status, and negative equity ( i.e. its okay to be underwater). As I understand it there is a “no credit and employment check” written into this new program.
- You can reapply for a FHA refi even if you have be turned down in the past
- If the loan goes bad after the FHA refi Uncle Sam is still on the hook (this is huge for lenders who are nervous about picking up anymore bad loans.
- The reason for your refi must be to A. lowers your interest rate B. change from an adjustable to fixed.
What the FHA Streamline process doesn’t do:
- It does not reduce your borrowed amount( i.e. principle amount). This is really important! Many of the Short Sales I do in the Fairfax and Loudoun County are due to homeowners being massively upside side down. Neighborhoods in Ashburn and Brambleton where the majority of the homes were sold during the housing boom are sometimes hundreds of thousands of dollars upside. Most of the homeowners I help with Short Sales know that it will be years before they regain any type of equity in there homes.
- In most cases your home line of equity or second trust will not be covered under this plan if it is not FHA backed( most second trusts are not FHA backed..that I’ve seen) So, if you got one of those adjustable HELOCs guess what? You are in most cases out of luck.
- You cannot take money out. Another words you cannot refi and take out equity if you have any to speak of.
“What say you”, you ask me?I’m glad you asked. I think until the banks and the federal government put on their big boy and girl shorts and allow homeowners to refi their homes at today’s prices these programs will only put a bandage on today’s housing crisis. So what if you refi at 3% for 30 years if you are $100k or $300k underwater. You are paying 3% on value that is not there! And what about the second trust that so many of us got? What happens when the rates on those puppies expire? Let’s not forget things like job transfers, divorce or simply the need for more space? What do you do then? Let’s also not also forget who is going to process the FHA Streamline program.Yep, those same bank that are still trying to figure out how to process HAMP 1, HAMP 2, HAFA and Short Sales.
Need more information on the FHA Streamline Process or would like a confidential appointment with a Short Sale specialist in the Fairfax and Loudoun County area? Give me a ring or drop me an email today!
Want to see what the program looks like directly from the Feds website? Click Here.
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