Part 2 of FHA Week looks at changes to the FHA Refinance options that will be released as part of the major FHA overhaul effective July 14th.

The notable changes include:

Full Qualifying Refinances
Streamline Refinances
Refunds
Summary of Refinance Changes and New Risk-Based Premium Information

Refinance Transactions

The mortgage insurance premium for refinance transactions will depend on several variables. These include whether the refinance is of a FHA-insured mortgage to another FHA-insured mortgage, as under FHA’s streamlined refinance options, is a rate-and-term refinance or is a refinance under the FHASecure initiative. Except for streamlined refinances and mortgage refinancing under the FHASecure initiative, the new LTV and new decision credit score determine the mortgage insurance premiums. Additional information is provided below:

Full Qualifying Refinances (e.g., rate-and-term; FHASecure refinance of a conventional mortgage not presently delinquent; cash-out refinances; any that require complete underwriting). These refinances are subject to the mortgage insurance premiums based on the LTV and decision credit score for the refinance application.

Streamline Refinances . The mortgage insurance premiums charged are subject to whether the existing FHA-insured loan being streamline refinanced was charged premiums based on A) the pre-July 14, 2008 premium structure of 150/50 basis points or B) the post July 14, 2008 LTV/decision credit score premium schedule. The following examples illustrate the appropriate premiums that will be charged for streamline refinances.

• FHA-insured loans pre-July 14, 2008/Borrower paid 150/50 basis points

• Borrowers with an existing FHA-insured loan where the case number for the streamline refinance transaction was assigned before July 14, 2008, will be charged 150 basis points upfront and 50 basis points annually. On subsequent streamline refinances where the case number is assigned on or after July 14, 2008 borrowers will be charged 100 basis points upfront and 50 basis points annually.

• Borrowers with an existing FHA-insured mortgage where the case number for the streamline refinance transaction was assigned on or after July 14, 2008, will be charged 100 basis points upfront and 50 basis points annually. On subsequent streamline refinances borrowers will be charged 100 basis points upfront and 50 basis points annually.

• FHA-insured loans On or After July 14, 2008/Borrower paid Risk-based Premium

• Borrowers with an existing FHA-insured mortgage (purchase or full qualifying refinance transaction) where the case number for that existing mortgage was assigned on or after July 14, 2008, will be charged premiums on the subsequent streamline refinance transaction using the decision credit score and LTV for the existing mortgage being refinanced.

• If the streamline refinance transaction is “credit qualifying” (with or without an appraisal) premiums are based on the new decision credit score and the LTV from the existing mortgage being refinanced.

Borrowers who refinanced their delinquent non-FHA ARM into an FHASecure mortgage are not eligible to streamline refinance their FHASecure mortgage. The refinance transaction subsequent to the FHASecure mortgage must be a full qualifying refinance.

Refund of Upfront Premiums . Refunds of upfront premiums are available to borrowers refinancing to another FHA-insured mortgage within a three-year time period, as shown below.

Summary of Refinance Changes and New Risk-Based Premium Information