Although refinance loans made up nearly half of all originations in October 2016 and more than half of all conventional loans, government-sponsored refinance loan programs were far behind their conventional counterparts, making up just 21% of Federal Housing Administration (FHA) loans and 31 percent of U.S. Department of Veterans Affairs (VA) loans, according to data from Ellie Mae.
As mortgage professionals begin to plan their business for 2017, they should take advantage of the many market opportunities available with these underutilized government mortgage refinance programs — particularly expedited programs like FHA Streamline and VA IRRRL loans. These programs are effective in helping responsible borrowers lower their monthly payments, and are typically quick to close with minimal documentation. Even though rates have risen recently, there are still customers who may be eligible for refinancing.
The FHA Streamline program allows borrowers who have an existing FHA loan in good standing to refinance their mortgage without an appraisal, limited credit and income documentation and underwriting. The refinance must result in a “net tangible benefit” to the borrower — like moving from an adjustable-rate mortgage to a fixed-rate loan, which is independent of the borrower’s rate and a good option in this market environment, or reducing the mortgage payment by 5%.
The VA Interest Rate Reduction Refinance Loan (IRRRL) is similar to the FHA program in a number of ways. It is for existing VA loans, and focuses on reducing payments or moving from an adjustable-rate product to a fixed-rate one. No credit underwriting package or new appraisal is required, helping facilitate a fast and smooth closing. It can also be structured to include all costs in the new loan.
Focusing on these government refinance products will provide increased opportunities for mortgage professionals to grow their refinance business with loans that are easier on their clients and quick to close.
Rey Maninang is senior vice president and national sales director of Carrington Mortgage Services, LLC’s Wholesale Mortgage Lending Division. In this role, Maninang oversees the national wholesale sales channel. Under Maninang’s leadership, Carrington’s Wholesale Division has increased volume production by over 200% within a two-year period, and successfully launched several strategic initiatives resulting in consistent profit increases.
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