The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
On Monday, June 11, 2012 new, lower Mortgage Insurance Premium (MIP) rates went into effect for borrowers who refinance FHA loans originated before June 1, 2009. These rates have been increasing over the past few years, making it impossible for many borrowers to save money by refinancing, even at today’s very low rates. When President Obama unveiled his plan to cut these fees, he estimated that the typical American family who refinances under the new rates could save about $1,000 per year.
[Related Story: President Obama Pushes New Mortgage Payment Relief Plan]
Now less than a week later, mortgage heavyweight Wells Fargo has notified brokers and correspondents that on or after June 19th it will no longer accept FHA enhanced streamline refinance transactions unless Wells Fargo already services the loan. Why is this important? Because Wells Fargo plays such a crucial role in the residential mortgage industry. It originated 31% of all residential mortgages in the fourth quarter of 2011, and is “one of the top refinance mortgage producers in the country,” according to Guy Cecala, publisher of Inside Mortgage Finance. Many mortgage brokers and firms originate loans to be sold to, or underwritten by, them.
But that’s not all.
“Other lenders may mirror this announcement,” said Joe Kelly, president of ArcLoan.com, in an email to me this morning. “That means less than three days after this new program went into effect many eligible FHA homeowners may miss their chance to refinance under this great program. So if you have an FHA mortgage from before May 2009 — and you are not serviced by Wells Fargo — you should act immediately and contact a trusted lender to lock you into this program.”
[Credit Score Tool: Get your free credit score and report card from Credit.com]
As a post in Mortgage Daily News points out: “The government does what it can to help borrowers… But as we’ve all found out, many times the government can’t “make” an investor follow a program, and investors often add overlays or restrictions when their own risk position is compromised.”
“This affects approximately 60-70% of the eligible FHA homeowners who hold mortgages from before May, 2009,” says Kelly, who adds that while there are other lenders willing to do these loans at this time, “their rates and pricing are not as good as Wells, and (this) will likely cause some other investors to follow suit. We are not trying to ‘cry wolf’ or put false pressure on consumers to rush on a decision. But it is strong motivation for people to act,” he adds.
Listen to a podcast with Joe Kelly where he describes the enhanced FHA Streamline Refinance program on Talk Credit Radio. Arcloan.com is a sponsor of Talk Credit Radio.
Listen online here; download the podcast; or listen on iTunes.
[Featured Products: Research and Compare Mortgage Rates at Credit.com]
Image: Mr. T in DC, via Flickr
December 13, 2023
Mortgages