Cash Out Refinance
1-4 unit Primary Residence only
Properties that are owned free and clear are eligible for FHA cash out
refinance
Full appraisal required
Loans must be evaluated using TOTAL Scorecard.
Non-occupying co-borrower may not be added. Any borrowers that are
added to the loan must occupy the property.
A payoff statement is required.
Cash out may be used of any purpose. However, cash out used for debt
consolidation may represent a higher level of risk and must be carefully evaluated.
Refer to Revolving Debt for additional guidance.
Paying off an installment debt for qualifying purposes is acceptable. It is not
acceptable to pay down an installment debt for the purpose of omitting the payment. Refer to Installment Debt for additional guidance.
Mortgage payment history:
Payment history <6 months: Cash out refinance not allowed Payment history ≥6 to ≤12 months: 0 x 30 for 12 months
Payment history ≥12 months: Current and 0x30 in the most recent 12
months
See Modified Mortgageand/or Restructured Mortgages/Short Payoff for
additional requirements.
Maximum LTV/CLTV for Cash Out Refinance
Maximum 85% LTV/CLTV.
If the borrower has owned and occupied the property for less than one year
prior to loan application, the LTV/CLTV is limited to the lesser of the appraised value or the original sales price.
If the borrower has owned and occupied the property for at least one year
prior to loan application, the 85% LTV/CLTV is based on appraised value.
If the borrower inherited the property and is occupying or will occupy the
property as a primary residence, 85% LTV/CLTV based on current appraised value is allowed regardless of the length of ownership.
Occupancy of Former Investment Property
When a borrower is re-occupying a property formerly used as an investment property, the transaction must comply with all Rate/Term refinance policies but is limited to 85% LTV/CLTV.
Secondary Financing
New subordinated financing is not allowed. However, modifying an existing
subordinate lien to lower the total indebtedness is not considered a new subordinate lien and may remain in place.
If the secondary financing is an equity line, the maximum amount of the
equity line is used in the calculating the CLTV. Net Tangible Benefit
The refinance must provide a net tangible benefit as required by any state or local regulation.
Purchase
Property must be occupied by the borrower as their primary residence. Occupancy must take place within 60 days after signing the security
instrument, with continued occupancy for one year. Maximum Loan Amount for Purchases
The maximum mortgage amount that FHA will insure on a purchase is
lesser of the sales price, subject to certain required adjustments, or appraised value.
In order for FHA to insure the maximum loan amount, the borrower must
make a required investment of at least 3.5% of the lesser of the sales price or appraised value.
Rate/Term Refinance
May be used to pay off an existing FHA, VA or Conventional first lien. 1-4 unit Primary Residence only.
Full appraisal required.
Borrower may not receive more than $500 cash back at closing. Loans must be evaluated using TOTAL Scorecard.
Payoff statement is required.
See Modified Mortgageand/or Restructured Mortgages/Short Payoff for
additional requirements.
Maximum LTV/CLTV for Rate/Term Refinance The maximum mortgage amount is the lesser of:
97.75% of the appraised value (or acquisition cost as applicable), or The sum of the outstanding balance of the first lien up to two months of
pro rate MIP if paying off an FHA mortgage, closing costs and prepaids, borrower paid discount points, purchase money seconds, non-purchase money second liens ONLY IF at least 12 payments have been made (see Subordinate Financing topic below), prepayment penalties, accrued late charges, escrow shortages, borrower paid repairs required by the
appraisal, minus any refund of UFMIP. Prepaid expenses are limited to per diem interest and hazard/flood property taxes and mortgage
insurance impound).
If the loan being paid off is NOT an FHA loan and the borrowers have owned
and occupied the property less than one year prior to application date, the LTV is based on the lesser of the current appraised value or original
acquisition cost (sales price plus any documented costs to repair,
rehabilitate, renovate or weatherize the property plus closing costs including reasonable discount points) or total of all mortgage liens held against the property. Use current appraised value for all other scenarios.
The existing mortgage outstanding balance may include per diem interest
charged as follows:
Loans with an original note date prior to January 21, 2015:
30 days interest for the month preceding the month of closing, and Up to 30 days interest for the month of closing.
Loans with an original date on or after January 21, 2015:
30 days interest for the month preceding the month of closing, and Per Diem interest through the payoff date only.
Delinquent interest or late charges may not be included in the outstanding
principal balance of the mortgage being paid off for the maximum mortgage calculation.
Occupancy of Former Investment Property
The following guidelines apply when a borrower is re-occupying a property formerly used as an investment property:
If re-occupied as a Primary Residence for 12 months or more prior to the
initial loan application date: Maximum financing allowed.
If re-occupied for less than 12 months prior to the initial loan application
date: Allowed as a Rate/Term Refinance only, but LTV/CLTV is limited to 85%.
Secondary Financing
Subordinate liens (including credit lines), regardless of seasoning, may
remain outstanding provided the combined liens do not exceed 97.75%.
If disbursements from an equity line exceed a total of $1,000 within the past
12 month and the funds were NOT used for repair and rehabilitation of the subject property, the line of credit cannot be included in the new mortgage.
Non-purchase money second liens must be seasoned 12 months (12
payments made) in order to be included in the loan amount.
The maximum credit limit on a HELOC is used to calculate the CLTV. Spousal or Co-Borrower Buy-Out
The amount of the buyout is considered property related indebtedness and
can be included in the new loan.
Buyout amount must be documented in a recorded property settlement
agreement or divorce decree.
If the borrower is newly separated and no property settlement agreement
has been prepared, a legally recorded document prepared by an attorney specifically outlining the division of equity is acceptable to HUD.
Short Refi / FHA Refinance of Borrowers in Negative Equity Positions The borrower must be current on the existing mortgage to be refinanced. All borrower(s) must occupy the subject property (1-4 units) as their primary
residence.
The borrower(s) must qualify for the new loan under standard FHA
underwriting requirements.
The existing loan being refinanced may not be an FHA loan and the existing
lien holder must write off at least 10% of the original first lien mortgage unpaid principal balance.
Existing subordinated mortgages must be re-subordinated and the new loan
may not have a CLTV greater than 115%. At the discretion of the first lien holder, the new FHA mortgage to include the refinanced unpaid principal balance on the first lien after the required reduction of at least 10%,
amounts used to pay down or pay off any existing second lien debt, plus the interest charged by the servicing lender, provided the new principal balance
has a loan-to-value (LTV) no greater than 97.75% and combined LTV no greater than 115%.
For loans that receive a Refer recommendation and/or are manually
underwritten, maximum ratios are 35% / 48%.
Pacific Union Financial does not participate in the Trial Period option
described in ML 2012-05.
To find more information on this program, refer to:
Mortgagee Letter 2010-23
Mortgagee Letter 2012-05
Net Tangible Benefit
The refinance must provide a net tangible benefit as required by any state or local regulation.
Streamline Refinance
FHA Streamline Credit Qualifying and Non-
Credit Qualifying Streamline With Appraisal
Non-Credit Qualifying With an Appraisal and Without an Appraisal (No Credit Score Streamlines)
Loan Purpose May be used to pay off an existing FHA first lien.
Lower the monthly P&I on a current FHA-Insured mortgage.
Net Tangible Benefit (NTB) requirements must be met.
State specific Tangible Net Benefit requirements will supersede the NTB guidelines, if they are more conservative.
All streamline refinance transactions must result in a NTB to the borrower. See detailed NTB requirements below.
Manual underwriting required, streamline refinances should not be submitted to TOTAL Scorecard.
If the loan is inadvertently submitted to an AUS, manual underwriting is still required and the underwriter’s CHUMS ID must be entered on the 92900-A and 92900-LT.
A payoff statement and Refinance Authorization Number from FHA Connection (FHAC), are required.
If a condo project is no longer FHA approved, the transaction is eligible only as a Streamline without Appraisal
Application Type Credit Qualifying:
Fully completed 1003 Non-Credit Qualifying:
An abbreviated 1003 is allowed. The following sections of the 1003, DO NOT have to be completed:
IV. Employment Information,
A VOE or VVOE is not required when an abbreviated URLA is utilized and employment is not disclosed
V. Monthly Income and Combined Housing Expense Information,
Note: In FLOW, enter $1 as the base income for the primary borrower.
VI. Assets and Liabilities,
VIII. Declarations (a) through (k) Appraisal Without an Appraisal:
The original appraised value will be provided on the Refinance Authorization
Without an appraisal
The original appraised value will be provided on the Refinance Authorization.
FHA Streamline Credit Qualifying and Non- Credit Qualifying Streamline With Appraisal
Non-Credit Qualifying With an Appraisal and Without an Appraisal (No Credit Score Streamlines)
With an appraisal
If the appraised value is such that the borrower would be better advised to proceed as if no appraisal had been
performed, the appraisal may be ignored/not used and the loan converted to a Streamline
without an appraisal transaction.
This decision must be noted on the 92900-LT.
With an appraisal
Appraisal required.
Credit Qualifying Credit qualifying refinance must be considered:
When a change in the mortgage term will result in an increase in the mortgage payment of more than 20%
When deletion of a borrower(s) will trigger the due-on-sale clause
Following the assumption of a mortgage that occurred less than six months previously that:
Does not contain restrictions limiting assumptions to creditworthy borrowers; or
Did not trigger the transferability restriction, such as in a property transfer resulting from a divorce decree, devise, or decent.
Loans previously modified or restricted allowed.
Individuals may be added to the title on a streamline refinance without a credit worthiness review and without triggering a due-on-sale clauses.
Higher Priced Mortgage Loan (HPML)
HPMLs are eligible provided they comply with the Federal Higher Priced Mortgage Loan requirements (no prepayment penalties, ARMs are qualified at the higher of the note rate or fully indexed rate, etc.).
The borrower’s ability to repay must be satisfied as follows:
A complete loan application.
Fully documented income and asset.
The payment must be equal to or lower than the existing payment.
If a credit report is provided, the report will only be used to validate the mortgage payment history and if applicable, improve pricing.
Note: Other information on the credit report will not be used in the underwriting analysis.
HPML refinances are eligible when one of the following apply:
The mortgage payment history complies with the mortgage payment history requirements. See Mortgage Payment History and Seasoning Requirements.
The DTI on the new loan is congruent with or lower than the DTI on the loan being paid off.
Verification that the new payment is equal to or lower than the existing payment.
HPML Hybrid ARM transactions must be qualified at the higher of the note rate or the fully indexed rate.
Loan Decision
Score Credit Qualifying: See Minimum Loan Decision Scores. Non-Credit Qualifying:
A decision score is not required, but may be used for improved pricing purposes. Maximum
FHA Streamline Credit Qualifying and Non- Credit Qualifying Streamline With Appraisal
Non-Credit Qualifying With an Appraisal and Without an Appraisal (No Credit Score Streamlines)
With an appraisal
97.75% / 125% (based on the new appraised value) Maximum
Mortgage Amount
Cash back is limited to minor adjustments at closing, not to exceed $500.
The existing mortgage outstanding principal balance may include per diem interest charged as follows:
Loans with an original note date prior to January 21, 2015:
30 days interest for the month preceding the month of closing, and
Up to 30 days interest for the month of closing.
Loans with an original date on or after January 21, 2015:
30 days interest for the month preceding the month of closing, and Per Diem interest through the payoff date only.
The existing mortgage outstanding principal balance MAY NOT include delinquent interest, late charges or escrow shortages.
Discount points may not be included in the new loan amount. Credit Qualifying with an appraisal:
The lesser of the outstanding principal balance of the existing mortgage:
Minus the UFMIP refund; and
Per diem interest, closing costs, prepaid, and the new UFMIP; or
97.75% of the appraised value plus the new UFMIP.
Prepaid expenses may include:
Per Diem interest on the new loan.
Hazard/flood insurance premium deposits
Up to two months monthly MIP.
Any real estate tax deposits needed to establish the escrow account Credit Qualifying without an appraisal & Non-Credit Qualifying with or without an appraisal:
Primary residence:
May not exceed the outstanding principal balance:
Minus the applicable refund of the UFMIP
Plus the new UFMIP
Second Home or Investment Property:
Fixed rate only
May not exceed the current outstanding principal balance
Up to two months monthly MIP may be included in the mortgage amount.
Note: For Non-Credit Qualifying transactions with an Appraisal, the appraisal may not be used to increase the new loan amount.
Maximum Term Note: Pacific Union only allows terms in increments of 5 years. Without an appraisal: The lesser of :
the remaining term of the existing mortgage, plus 12 years; or
30 years. With an appraisal: 30 year Mortgage Payment History and Seasoning Requirements
Mortgage history must be verified as follows:
Mortgage only credit report; or
Cancelled checks (front and back); or
VOM directly from the current servicer; or
Payment history from servicers website provided by the borrower that includes the following:
The servicers name in the header.
At minimum, the last four digits of the mortgage account number.
FHA Streamline Credit Qualifying and Non- Credit Qualifying Streamline With Appraisal
Non-Credit Qualifying With an Appraisal and Without an Appraisal (No Credit Score Streamlines)
The monthly payment amount.
The date payments were made.
The date the document was printed.
FHA will not assign a Streamline refinance case number until the loan being refinanced meets all the following seasoning requirements:
Must be current for the month due prior to closing and the month of closing.
Six months payment history required. At least six full months must have passed since the first payment due date.
At least 210 days must have passed from the closing date of the mortgage being refinanced.
<12 months: 0 x 30 for 12 months
≥12 months: 1 x 30 for 12 months and 0 x 30 for the 3 months prior to the loan application.
Loans that have been previously modified or restructured, require a 24 month satisfactory mortgage payment history under the new terms. This requirement will be waived for loans currently serviced by Pacific Union.
Note: When a borrower has withheld payment due to a Formal or Informal Disaster Forbearance, the borrower’s payment history should be analyzed, as noted above, based on the period prior to and, where applicable, following the forbearance period. See ML 2013-11 for additional details.
Net Tangible
Benefit
All streamline refinance transactions must result in a net tangible benefit to the borrower by meeting one of the following requirements:
The principal and interest payment (including monthly/annual MIP) must be reduced by 5% when refinancing:
From a Fixed Rate to a Fixed Rate
From a Fixed rate to a Hybrid ARM
From a Hybrid ARM during the Fixed Rate period to a Fixed Rate
From a Hybrid ARM during the Fixed Rate period to a Hybrid ARM
The new interest rate must be no greater than 2% above the current interest rate of the existing ARM loan when refinancing:
From a One-Year ARM to a Fixed Rate
From a Hybrid ARM during the Adjustable Period to a Fixed Rate
The new interest rate must be at least 2% less than the current interest rate when refinancing:
From a One-Year ARM to a Hybrid ARM
From a Hybrid ARM during the Adjustable Period to a Hybrid ARM
Reducing the term of a mortgage is acceptable if the new mortgage meets the net tangible benefit test. Refinance transactions that are originated for the sole purpose of lowering the term with no net tangible benefit must be underwritten and closed as a Rate/Term Refinance.
Occupancy of Former Investment Property
Prior to the loan application date, if the borrower has occupied the former investment property
For 12 months or more, the maximum LTV is 97.75% / 125%
Less than 12 months, the transaction is ineligible for a Streamline refinance. R/T only allowed, LTV may not exceed 85%.
Occupancy Type 1-4 unit primary residence only
1-4 unit second homes or investment properties only allowed when a change in the mortgage term resulted in an increase in the mortgage payment and required the loan to be credit qualified.
1-4 unit primary residence
1-4 unit second homes or investment properties allowed
Fixed rate only.
The maximum loan amount may not exceed the current outstanding balance of the existing loan.
FHA Streamline Credit Qualifying and Non- Credit Qualifying Streamline With Appraisal
Non-Credit Qualifying With an Appraisal and Without an Appraisal (No Credit Score Streamlines)
An appraisal should not be obtained.
The maximum loan amount may not exceed the
outstanding balance of the existing loan.
Note: Credit qualifying required if a change in the mortgage term will result in an increase in the mortgage
payment. Property Type Condo projects that are no longer
FHA approved are NOT allowed.
Condo projects that are no longer FHA approved are allowed.
Reserves See Cash Reserves Not required.
Subordinate
Financing No new subordinate financing allowed.
Subordinate financing (including a HELOC), regardless of when taken, may remain outstanding, but the entire lien must be subordinated at refinance.
For HELOCs, the maximum accessible credit limit of the existing subordinate lien must be used to calculate the maximum 125% CLTV ratio.
The CLTV is based on the new