Establishing Net Tangible Benefit of an Ohio FHA Streamline Refinance
Definition of Net Tangible Benefit of Streamline Refinance
The lender must determine that there is a net tangible benefit to the borrower as a result of the streamline refinance transaction, with or without an appraisal.
Net tangible benefit is defined as
- a 5% reduction to the principal and interest (P&I) of the mortgage payment plus the annual mortgage insurance premium (MIP), or
- refinancing from an Adjustable Rate Mortgage (ARM) to a fixed rate mortgage
NOTES:
- A reduction in the term of the mortgage is not a net tangible benefit.
- When refinancing to a hybrid ARM, lenders must treat the new hybrid ARM as a fixed rate mortgage.
Net Tangible Benefit of Reduction in Mortgage Payment from Streamline Refinance
To qualify as a net tangible benefit, the new mortgage payment (P&I plus MIP) must be at least 5% lower than the mortgage payment of the loan being refinanced.
Net Tangible Benefit of ARM Refinance
The table below provides the net tangible benefit requirements for various types of ARM refinances.
|
Type of ARM Refinance |
Requirement to Establish Net Tangible Benefit |
| One-Year ARM to Fixed Rate Refinance | New interest rate must be no greater than two percentage points above the current interest rate of the existing ARM. |
| One-Year ARM to One-Year ARM Refinance | Reduction of at least 5% of P&I and MIP |
| One-Year ARM to Hybrid ARM Refinance | New interest rate must be at least two percentage points below the current interest rate of the ARM |
| Hybrid ARM (during Fixed Period) to Fixed Rate Refinance | Reduction of at least 5% of P&I and MIP |
| Hybrid ARM (during Fixed Period) to One-Year ARM | New interest rate must be at least two percentage points below the current interest rate of the ARM |
| Hybrid ARM (during Fixed Period) to Hybrid ARM | Reduction of at least 5% of P&I and MIP |
| Hybrid ARM (during Adjustable Period) to Fixed Rate | New interest rate must be no greater than two percentage points above the current interest rate of the existing ARM. |
| Hybrid ARM (during Adjustable Period) to One-Year ARM | Reduction of at least 5% of P&I and MIP |
| Hybrid ARM (during Adjustable Period) to Hybrid ARM | New interest rate must be at least two percentage points below the current interest rate of the ARM |
Net Tangible Benefit of Fixed Rate Refinance
The table below provides the net tangible benefit requirements for various types of fixed rate mortgage refinances.
| Type of Fixed Rate Refinance | Requirement to Establish Net Tangible Benefit |
| Fixed Rate to Fixed Rate | Reduction of at least 5% of P&I and MIP. |
| Fixed Rate to One-Year ARM | New interest rate must be at least two percentage points below the current interest rate of the fixed rate mortgage |
| Fixed Rate to Hybrid ARM | Reduction of at least 5% of P&I and MIP. |
