The FHA streamline refinance has been around for a long time. It is about to get a major facelift. And when I say 'major', I really mean it. Presently for a non-cash out streamline without an appraisal, you may have some minor credit hurdles regarding the payment history on the present FHA loan. Most people jump those hurdles with ease. The rationale behind this loan is that if the borrowers find it easier to make the payments, there is less likelihood of a default. So, no additional qualifying was needed. The new loan could be written for the original loan amount plus the new Up Front Mortgage Insurance Premium. That was often enough to cover the closing costs and many borrowers brought next to nothing to the closing table. Or they might bring their escrow balance to closing knowing a check would head their way in a couple of weeks from the old lender.
Not after January 1st. The only way to NOT have to pay closing costs on a streamline will be to have an appraisal done on the property. In some states, this may mean bringing $2500 to closing. In others, that amount could be much higher. An appraisal may not help in some areas of the country. If values have declined since the purchase, the borrower is stuck. So, saving 1% or more on the note rate may not be within the reach of many consumers. And that is just another straw on the camel's back. Helping the consumer does not appear to be in the cards for many of the sweeping changes that are taking place.
SO, if YOU have an FHA mortgage that is at 6% or above, and you have wondered about refinancing, please do not procrastinate any longer. There will be a huge rush to get these closed by the year's end. Around the 25th of the month is the optimal closing date. And you all know what falls around that date in November. And ON that date in December. Another 'feature' kicking in on January 1st is the 6 month rule--if your loan is not 6 months old, you cannot streamline. You can read about more of the details in HUD's Mortgagee Letter. There are abundant rumors about even more changes with the program so stay tuned.