Thursday, April 26, 2012

The Federal Housing Administration Offers a Streamlined Refinance Program to Relieve Homeowners of High Mortgage Payments


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. 

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