FHA Mortgagee Letter 2011-11 issued several changes and policy clarifications to refinancing loans. FHA borrowers with existing mortgages should be aware of these changes as they can affect a borrower’s planning when it’s time to consider refinancing a home with streamline or cash-out FHA loan products.
One of the changes, scheduled to take effect in mid-April 2011, alters the way closing costs, pre-paid items, discounts and other items are paid for during some types of FHA refinancing.
According to the new FHA guidelines, “The mortgagee may not add closing costs, discount items, prepaid items, or other financing costs to the new loan balance.” This applies to borrowers who seek “Non-Credit Qualifying Streamline Refinances” like an FHA Streamline loan.
The policy also states, “As a means of controlling risk to FHA