On January 1, 2010, would-be borrowers will get a rude awakening from FHA. The agency's streamline refinance will no longer be the easy transaction it is today. Today, the biggest advantage of FHA streamline refinances is that they don't require an appraisal or credit qualifying. So even if your home's value has tanked and you have bad credit, you have been able to refinance easily into a better FHA loan. That opportunity is about to go away.
Until recently, FHA's objective always was to help its homeowners lower payments any time. Because FHA insured the mortgage it didn't care if your credit imploded or if your home's neighborhood was blighted with foreclosures and fraternity houses. By helping homeowners to lower their monthly mortgage payments, the FHA was also lowering its overall credit risk.
That's about to change.
Starting January 1st of next year, FHA will start to turn down streamline refinance applications on the basis of employment, income, assets, and appraised value. You can be sure a lot of today's FHA borrowers will be wishing they acted sooner. So here's the deal: If you've got an FHA mortgage--just for fits and giggles--check available streamline refinance rates against what you're currently paying. If you can save money, pull the trigger on a refi ASAP--those with bad credit may not get the opportunity again soon.
