The U.S. Department of Housing & Urban Development (HUD) has announced that the Federal Housing Administration (FHA) has made changes to the way in which FHA Streamline Refinance loans are displayed in the Neighborhood Watch Early Warning System (Neighborhood Watch). According to the FHA, Streamline Refinances will be removed from the public compare ratio in Neighborhood Watch, but lenders will still be able to view their own traditional compare ratio (with streamlines included).
FHA Streamline Refinances allow borrowers with FHA-insured loans, who are current on their mortgage, to refinance into a new FHA-insured loan at the current low interest rates without requiring additional underwriting. However, the FHA has seen that some of its lending partners were reluctant to offer Streamline Refinances due to concerns about taking on the risk of a loan which they may not have underwritten and the potential adverse impact such a loan may have on their FHA Compare Ratio.
The FHA has noted that changes to the ways in which compare ratios are derived and viewed may require changes to Neighborhood Watch and this process may take some time to implement. As a result, in the interim period before those changes are complete, the FHA will modify its execution of the Credit Watch Termination Initiative to correspond to the changes outlined above. The FHA will issue additional implementation guidance regarding this policy change.