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Refinancing Now: Lower Rates, Fees Coming Soon

Monday, May 21, 2012

The government is about to make refinancing FHA mortgages more affordable — and potentially easier — for hundreds of thousands of homeowners.

The Federal Housing Administration will reduce mortgage fees significantly for borrowers who qualify for the FHA's streamline refinance program. The lower fees go into effect June 11 and will be available to borrowers who refinance loans that were endorsed by the FHA before June 2009.

"If you had your loan endorsed prior to that, this is your chance to save money with a streamline refi," says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill.

In the streamline program, the FHA asks for limited documentation from borrowers and doesn't require an appraisal of the home. The no-appraisal rule allows owners to refinance even if they owe more on their mortgages than their houses are worth.

Lower Fees Make Streamline Feasible

Since the financial crisis of 2008, more than 750,000 borrowers have refinanced their mortgages through FHA's streamline program, according to data from the Department of Housing and Urban Development. More than half of those refinances took place in 2009 after the housing and mortgage markets collapsed.

But rising mortgage insurance premiums on FHA loans have become an obstacle for many homeowners who want to refinance. Depending on the size of the loan, the fees can eat up much of what the borrower would save through the refinance.

The new, lower fees will make streamline refinances much more feasible to borrowers, Conarchy says.

When the new fees take effect, a borrower refinancing $200,000 will pay $20 — instead of $3,500 — in upfront mortgage insurance. The borrower also will pay about $92 — instead of $208 — per month for annual mortgage insurance.

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