FHA to FHA Refi Q
I received a DU with an odd condition, it's a FHA to FHA refinance and the DU states that if the property was acquired within 12 months (which it was) then we can only use the lesser of the purchase price or appraisal to calculate max loan amount.
I know that is the case when doing a sub 12 month refinance coming from conventional, but FHA to FHA should not have that condition. How can I rectify it? UW has suspended the file based on the DU condition even though it the guideline is nowhere to be found in the 4155 HUD handbook.
by SanDiegoLoner November 1, 2012 12:21 PM
If you are doing a cash out refinance, FHA does have this restriction and it is in the 4155.1. FHA no cash out refinances do not have the restriction.
by Jon Elwell November 1, 2012 12:53 PM
That's what I thought, it's a no cashout R/T but DU is still spitting out that condition. I've been on the phone with fannie who cannot help.
by SanDiegoLoner November 1, 2012 1:38 PM
I can only guess that there is an error somewhere in the input.
by Jon Elwell November 1, 2012 1:47 PM
Just got word from HUD, the DU findings are correct. Any fha refinance with <12 mo seasoning can only use the lesser of the appraisal or the original purchase price.
by SanDiegoLoner November 1, 2012 1:50 PM
Why not go streamline and skip DU?
by dust10b November 1, 2012 2:28 PM
FHA to FHA R/T should be a streamline which is a manual underwrite. Toss out the DU findings because it is not programed to do FHA streamlines.
by PDRMortgage November 1, 2012 4:52 PM
I don't know why "HUD" told you that "Any fha refinance with <12 mo seasoning can only use the lesser of the appraisal or the original purchase price"
The written word fron HUD states the following:
No Cash-Out Refinances (non-streamline): The maximum mortgage is based on the lesser of "a" and "b" below (a third calculation is applicable if owned less than 12 months):
a)The maximum LTV percentage is multiplied by the appraised value, exclusive of closing costs (please refer to Mortgagee Letter 2010-24).
b)The sum of the existing first lien, any purchase money second mortgage and/or any junior liens over 12 months old, closing costs, prepaid expenses, accrued late charges, escrow shortages, borrower paid repairs required by the appraisal, discount points, prepaid penalties charged on a conventional loan and FHA Title 1 loans as determined by the appropriate HOC subtract any refund of refund of upfront MIP. Note that the prepaid expenses may include per diem interest through the end of the month for the new loan, hazard/flood insurance premiums, mortgage insurance premiums and property tax deposits needed to establish the escrow account. The existing first lien may include the interest charged by the servicing lender, when the payoff is not received by the first of the month, but may not include any delinquent interest.
c)If the property was acquired less than one year before the loan application, AND THE EXISTING LOAN IS NOT AN FHA LOAN, the original sales price, must be considered in calculating the maximum mortgage. Refer to Handbook 4155.1, section 3.B.
by Jon Elwell November 3, 2012 9:02 AM