In today’s harsh economic landscape, refinancing a
mortgage is an appealing cost-saving method for a homeowner. Refinancing a mortgage restructures the debt
payment, usually by way of lowering the interest rate and creating a different
loan term than the current mortgage. Our
Oak Park real estate
attorneys understand that although reducing the interest expense is
the most common goal of a refinance, some homeowners also look to extending the
loan out to 30 years, resulting in a lower monthly payment. In appreciation of the current state of the
economy and the benefits of a refinance, the Federal Housing Administration
(FHA) has created a streamline refinance program for homeowners with existing
FHA mortgages.
The FHA is a government agency that insures loans
made by banks and other private lenders for home building and home buying. One of the agency’s goals is to provide an
adequate home financing system through insurance of mortgage loans. The FHA’s streamlined refinance program is
one such method for achieving this objective.
According
to The Washington Post, this
refinancing program is reserved for FHA homeowners who have paid their mortgage
payments on time but are struggling to meet the monthly obligation. Therefore, homeowners with mortgages with
other companies, such as Fannie Mae or Freddie Mac, cannot benefit from this
refinance program.
There are several requirements for a FHA homeowner
to satisfy in order to be eligible for this streamlined refinance program. The basic requirements are: (1) the mortgage to be refinanced must
already be FHA-insured, (2) the mortgage to be refinanced should be current and
not delinquent, (3) the refinance results in a lowering of the borrower’s
monthly principal and interest payments, or the conversion of an adjustable
rate mortgage (ARM) to a fixed-rate mortgage, and (4) no cash may be taken out
on mortgages refinanced.
Once these basic requirements are met, a FHA
homeowner is eligible for the streamlined refinance program and can reap the
benefits of the program. One of the
major perks of the program is that it does not require a home appraisal. Essentially, this means that the FHA does not
care if a FHA homeowner is underwater on his or her mortgage. Therefore, even if a homeowner owes twice the
current value of the home, the FHA will still refinance the home without any
penalty.
The FHA is in a posture to offer this program with
minimal eligibility requirements because the agency’s main objective is to
insure mortgages, not to make them.
Therefore, for purposes of reducing occurrences of loan defaults, our Oak Park foreclosure
attorneys understand that it is in the FHA’s best interest to lower
the mortgage rates of as many FHA homeowners as possible. Hence, the streamlined refinance program is
beneficial for both the FHA and FHA homeowners who qualify for the
program. All parties involved in a successful
implementation of the streamline refinance program are on a more favorable
platform than before the refinance was put into action.
Of course, the streamlined refinance program entails
more detail than these basic elements.
If you are considering a FHA streamline refinance or a traditional
refinance with any other conventional lender, please contact an Oak Park or River
Forest foreclosure attorney at Emerson Law Firm to discuss your
options.
See
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