Colorado Mortgage Team

Colorado FHA Streamline Refinance Now Requires Minimum 620 Credit Score

For some time, there has not been a minimum credit score requirement for Colorado FHA streamline refinance loans. Yesterday, it was announced by the last major lender that now they are requiring a minimum of a 620 credit score on all Colorado FHA streamline refinance loans. TB&W made the announcement that they were moving their minimum credit score requirement for all Colorado FHA streamline mortgage refinance loans to 620.

Details Of The Announcement of New Credit Score Requirements For FHA Streamline Refinance Loans

FHA Streamlines (credit and non-credit qualifying) and VA IRRRL’s with Credit Scores below 620 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TBW within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 620.

Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO. Any Conventional, FHA (including Streamline Refinance), or VA (including IRRRL) loan that exceeds $417,000 with a Credit Scores below 660 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TBW within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 660.

Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO. In addition, any previously announced minimum Credit Score requirements that TB&W has put into place, that did not have a specified Closing date, will be required to be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered within 10 days after closing.

Therefore, any loan, regardless of whether it may be locked, registered or approved, that has a qualifying credit score below 620 (with the exception of those loans that have specified higher FICO requirements) must CLOSE (Note Date) no later than September 15, 2009. TB&W will continue to allow non-traditional credit for those borrowers with no useable credit for the loan programs that allow the use of such credit in accordance with published guidelines. TB&W is fully aware that these limitations may result in the inability for a particular loan to meet these specified deadlines. TB&W will work as diligently as possible to accommodate all loans in the pipeline. We will be unable to grant any extensions or exceptions to these requirements.

Colorado FHA Streamline Refinance: What Happens Now?

Although FHA guidelines don’t require a minimum credit score, pretty much all lenders now require that you have at least a 620 score for the Colorado FHA streamline refinance loan program. It is possible that there are still smaller lenders who can offer the Colorado FHA refinance streamline loan with no minimum credit score requirement, but you will have to search harder to find them.

Colorado Obama Refinance To 125% Announced

Many people who have recently been told they couldn’t refinance under the Obama Refinance plan because they owed more than 105% of the value, can now refinance up to 125% of the home’s value. Today, it was announced by HUD Secretary Shaun Donovan that people who owed more than 105% of what their home was worth could now refinance up to 125% of the home’s value. This expansion to the Making Home Affordable plan will help many people right here in Colorado and is another sign that the Obama administration is doing whatever they can to contain the foreclosure problem.

Not just for people living in Colorado, but for people all across the country who currently owe more than 105%, they now can take advantage of low interest rates and refinance. Many people in Colorado will now take advantage of the Obama 125% refinance and rush to refinance while rates are low.

According to CNN reporters:

“The president’s Making Home Affordable plan is already helping far more than any previous foreclosure initiative and with today’s announcement we will extend its reach still further,” said Donovan.

According to Bloomberg:

“I don’t think it’s going to have much of an impact because you still don’t have enough qualified borrowers,” Miller said, referring to today’s announcement. “It will help on the margin, but the issues with Obama’s plans is that they all focus on affordability and not principal writedowns and at some point they’re going to have to address” that, he said.

What This Announcement Means For People Living In Colorado

Estimates vary on exactly how many people here in Colorado will benefit from the expansion, but no matter the numbers here in Colorado, there will be many people nationwide who will also benefit. To find out if you qualify under the recent Obama refinance guideline changes, be sure to contact your local Colorado mortgage expert today.

While interest rates are low, many people with Colorado FHA loans are taking advantage of the FHA streamline refinance program. The FHA streamline program is very popular because there is no income verification, no asset verification, no credit score required.

Are you sure there is no credit score required for an FHA streamline refinance?

Yes.

And yes, we are aware that many people have recently been told by their loan officer that there is a minium credit score required for all FHA streamline refinances. Many people have also been told that it is an FHA requirement that you now must have a certain minimum credit score if you want to participate in the FHA streamline.

That is just plain wrong.

What has happened though is that many lenders have started requiring that borrowers have at least a 620 credit score for the FHA streamline refinance — but it is not an FHA requirement. Since it is a lender requirement and not an FHA requirement, many lenders are requiring that you have at least a 620 credit score — but many are not.

There are still lenders who will be happy to help you with your FHA streamline refinance — even if you have below a 620 credit score. So if your loan officer has recently told you that you needed a 620 credit score to qualify, be sure to ask a different loan officer while rates are still at historic lows!

Back in April, President Obama announced the Making Home Affordable plan. This plan was designed to help people in Colorado (and across the US) refinance their home or modify their mortgage and was fairly comprehensive.

Many people who wanted to refinance under the Making Home Affordable plan quickly found out that depending on who owned their current loan, they may or may not have been able to go to any lender they wanted.  When it was announced, if Fannie Mae owned your mortgage, you could refinance under the Making Home Affordable plan with any Fannie Mae approved lender.

But if Freddie Mac owned your mortgage, you were required to go through your current servicer to refinance your mortgage.

Until now.

Recently, Freddie Mac has announced that anyone who has a mortgage owned by Freddie Mac can now use whatever Freddie Mac approved lender that they want when refinancing their home under the Making Home Affordable plan. They also released the following guidelines.

Key highlight of the announcement include:

1. Borrowers can continue to work with their existing servicer to refinance their mortgage. In the vast majority of these cases, the current servicer will not have to re-underwrite the borrower.
2. If the borrower chooses to work with another Freddie Mac-affiliated lender, the mortgage will need to be re-underwritten.
3. Freddie Mac will allow the lesser of 4 percent of the new refinance mortgage amount or $5,000 of closing costs, financing costs and prepaids/escrows to be rolled into the new refinance mortgage.
4. Freddie Mac’s standard post settlement delivery fees, up to a maximum of 2 percent, will apply to the Relief Refinance Program.

According to Freddie Mac Executive Vice President Don Bisenius:

“We are responding to consumers’ desires to have more refinancing options. As an added benefit, we are expanding the program and providing greater flexibility in financing closing costs. Freddie Mac is committed to doing everything we can to bring the benefits of the Administration’s Making Home Affordable program to as many borrowers as possible.”

This announcement is good news for anyone who has a mortgage owned by Freddie Mac. Although you can now use whatever Freddie Mac approved lender that you would like, keep in mind that should you choose to work with a lender other than your current servicer, it will be more difficult to get your refinance done — although not impossible as it was before. This is good news to anyone who has received poor service from their current lender because now they have choices of what lender to use who can help you get your loan done.

Hurry before Colorado mortgage rates go up!