C. Maximum Mortgage Amounts on Streamline Refinances

Streamline refinances

• are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and
• must involve no cash back to the borrower, except for minor adjustments at closing, not to exceed $500.

Streamline refinances can be made with or without an appraisal.

References: For information on streamline refinances

• without an appraisal, see HUD 4155.1 3.C.2 , and
• with an appraisal, see HUD 4155.1 3.C.3.

For additional policies, processing guidelines, and underwriting instructions for streamline refinances, see HUD 4155.1 6.C.

Generally, the streamline refinance mortgage amount may never exceed the statutory limits, except by the amount of any new UFMIP. However, the maximum mortgage may exceed the statutory limits on certain specialty products.

The streamline refinance mortgage term is the lesser of

• 30 years, or
• the remaining term of the mortgage plus 12 years.

The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance

• minus the applicable refund of the Upfront Mortgage Insurance Premium (UFMIP),
• plus the new UFMIP that will be charged on the refinance.

Note: The outstanding principal balance

• may include interest charged by the servicing lender when the payoff is not received on the first day of the month, but
• maynot include delinquent interest, late charges or escrow shortages.

Reference: For step-by-step instructions on calculating the existing debt, see HUD 4155.1 3.B.1.b.

The mortgage calculation process described in HUD 4155.1 3.C.2.c applies only to owner occupied properties. Non owner occupant properties, even if originally acquired as principal residences by the current borrowers, may only be refinanced for the outstanding principal balance.

Streamline financing by investors, or for secondary residences may only be made without an appraisal. The loan must be made solely in the business entity's name, if the residence was previously insured in the business entity's name.

The new security instruments must contain FHA's standard provision permitting acceleration of the mortgage when assumed by an investor, or as a secondary residence. However, FHA does not authorize the lender to exercise the acceleration provision if the investor assumptor is found to be creditworthy.

Although a property purchased as a principal residence, under certain circumstances as described in the security instruments, may be rented or become a secondary residence, a streamline refinance without an appraisal does not "convert" the mortgage to one eligible for assumption by an investor.

References: For more information on refinancing non owner occupant properties, see

• 4155.1 4.B.3
• 4155.1 4.B.4
• 4155.1 6.C.5.a, and
• 4155.1 6.C.5.b.

Subordinate liens, including credit lines, regardless of when taken, may remain outstanding, but must be subordinate to the FHA-insured mortgage.

If subordinate financing remains in place, the

• maximum combined loan-to-value (CLTV) is 125 percent
• CLTV is based on the original appraised value of the property, and
• maximum CLTV is calculated by taking the original FHA base loan amount (the original FHA principal balance excluding financed UFMIP), adding all other financed liens still outstanding, and dividing by the appraised value. This calculation may not exceed 125 percent.

The maximum insurable mortgage for streamline refinances with an appraisal is the lesser of

• the existing principal balance
• minus the applicable refund of UFMIP
• plus closing costs, prepaid items to establish the escrow account, and the new UFMIP that will be charged on the refinance transaction, or
• 97.75 percent of the appraised value of the property plus the new UFMIP that will be charged on the refinance.

Notes:

• The outstanding principal balance
• may include interest charged by the servicing lender when the payoff is not received on the first day of the month, but
• maynot include delinquent interest, late charges or escrow shortages.
• Prepaid expenses may include
• per diem interest to the end of the month on the new loan
• hazard insurance premium deposits
• monthly mortgage insurance premiums, and
• any real estate tax deposits needed to establish the escrow account, regardless of whether the lender refinancing the existing loan is also the servicing lender for that mortgage.
• Discount points may not be included in the new mortgage. If the borrower has agreed to pay discount points, the lender must verify that the borrower has the assets to pay them, along with any other financing costs not included in the new mortgage amount.

Subordinate liens, including credit lines, regardless of when taken, may remain outstanding, but must be subordinate to the FHA-insured mortgage.

If subordinate financing remains in place, the

• maximum combined loan-to-value (CLTV) is 125 percent, and
• CLTV is based on the new appraised value.

A streamline refinance transaction with an appraisal must involve no cash back to the borrower, except for minor adjustments at closing, not to exceed $500.