Federal Housing Administration Acting Commissioner Carol Galante outlined changes this month to FHA’s loan programs that will encourage its lenders to lend under a housing refinance initiative announced earlier this month by President Obama.
FHA Streamline Refinance, one such tool, allows borrowers who are current on their mortgages to refinance their FHA-insured home loans into new FHA-insured loans at the current low interest rates without additional underwriting.
“It has become apparent that some of our lending partners are reluctant to offer this product widely because of concerns about taking on the risk of a loan which they may not have underwritten and the potential adverse impact such a loan may have on their FHA Compare Ratio,” Galante wrote in a memo to FHA lenders. “In order to expand the availability of this product for eligible borrowers, FHA will make changes to the way in which FHA Streamline Refinance loans are displayed in the Neighborhood Watch Early Warning System (Neighborhood Watch). Streamline Refinances will be removed from the public compare ratio in Neighborhood Watch, but lenders will still be able to view their own traditional compare ratio (with streamlines included).”
The changes will take place over time, with FHA modifying its Credit Watch Termination Initiative in the meantime to correspond with the changes.
View the memo from Acting Commissioner Galante.
Written by Elizabeth Ecker