HUD Handbook 4000.1 Part II.A.8.d — Refinances (Forward Mortgages)

HUD Handbook 4000.1 Part II.A.8.d

(ii) Non-credit Qualifying The Mortgagee does not need to perform credit or capacity analysis or obtain an appraisal. (3) Refinances for the Purpose of Rehabilitation or Repair A Borrower may refinance existing debts and obtain additional financing for purposes of rehabilitation and repair. Refer to 203(k) Rehabilitation Mortgage Insurance Program for guidelines for refinances under FHA’s Section 203(k) (4) Refinancing of an Existing Section 235 Mortgage An existing Section 235 Mortgage may be refinanced as any no cash-out In refinancing a Section 235 Mortgage, the Mortgagee is required to repay to FHA any amount of excess subsidy. The outstanding principal balance on a Section 235 is calculated by adding back to the balance any amount of the excess subsidy paid to FHA. If FHA has a junior lien that was part of the original Section 235 financing, FHA will subordinate the junior lien to the Section 203(b) Mortgage that refinances the Section 235 Mortgage. ii. General Eligibility (A) FHA-Insured to FHA-Insured Refinances FHA-insured to FHA-insured (FHA-to-FHA) refinances may be used with any refinance type. The Mortgagee must obtain a Refinance Authorization Number from FHA Connection (FHAC) for all FHA-to-FHA refinances. FHA will not issue a new case number for any FHA to FHA Refinance where the existing Mortgage to be paid off has a repair or rehabilitation escrow account that the Escrow Closeout Certification has not been completed in FHAC. (B) General Borrower Eligibility At least one Borrower on the refinancing Mortgage must hold title to the Property being refinanced prior to case number assignment. (C) General Mortgage Eligibility The Mortgagee must not approve any Mortgage that refinances or otherwise replaces a Mortgage that has been subject to eminent domain condemnation or seizure, by a state, municipality, or any other political subdivision of a state. If the Mortgage to be insured is located in an area where a state, municipality, or other political subdivision has exercised eminent domain condemnation or seizure of a Mortgage, the Mortgagee must obtain a certification from the Borrower stating the Mortgage being refinanced was not subject to eminent domain condemnation or seizure. iii. Temporary Interest Rate Buydowns Temporary interest rate buydowns are not permitted with refinance transactions. iv. Upfront Mortgage Insurance Premium Refunds If the Borrower is refinancing their current FHA-insured Mortgage to another FHAinsured Mortgage within 3 years, a refund credit is applied to reduce the amount of the Upfront Mortgage Insurance Premium (UFMIP) paid on the refinanced Mortgage, according to the refund schedule shown in the table below: Upfront Mortgage Insurance Premium Refund Percentages Year Month of Year v. Cash-Out Refinances Nonprofit agencies, state and local government agencies and Instrumentalities of Government are not eligible for cash-out refinances. Income from a non-occupant coBorrower may not be used to qualify for a cash-out refinance. If the subject Property is a one-unit with an Accessory Dwelling Unit (ADU), rental income from the ADU cannot be used as Effective Income to qualify for a cash-out

Source: HUD Handbook 4000.1 II.A.8.d.ii(B) — General Borrower Eligibility · source URL · snapshot 3bf33edadcf6461d