Dan Green, a mortgage originator with Waterstone Mortage and author of the fabulous blog, The Mortgage Reports, wrote a terrific (and truly important) piece, FHA Streamline Refinance Changes : Banks To Stop Verifying Income, Job, And Credit.

Go. Read it.

In a nutshell, if you have an FHA mortgage, you can refinance it.

Even if you are underwater (owe more on your mortgage than the house is worth. A likely scenario in the Phoenix area).

Even if you have lousy credit (though you can not have had any late mortgage payments in the last 12 months).

No job, income or credit score verifications are done. No appraisal is conducted.

Almost sounds too good to be true.

Almost sounds like exact type of financing that got us into this mess to start with…

But, like Dan says, it’s the FHA that is on the hook for these refi’s:

Remember : The key idea here is that the FHA doesn’t actually make loans to homeowners. Rather, it insures the banks that make loans to homeowners. In this way, once a homeowners has his mortgage in the FHA’s “system”, so to speak, the FHA is on the hook for that loan no matter what its rate or loan size.

This is why FHA homeowners are not allowed to increase their loan balances with an FHA Streamline Refinance. Raising the loan size would raise the FHA’s exposure to default.

This is why the FHA Streamline Refinance skips job, income and credit verifications. It really doesn’t matter if someone lost their job; or has a 500 FICO — the FHA is still on the hook for that loan.

It’s in the FHA’s best interest to put all FHA-backed homeowners into the lowest mortgage rates possible because with lower payments, in theory, come fewer defaults, which means fewer claims.

Is Your Mortgage an FHA Loan?

Check your loan papers. Call your lender. If you’ve been turned down in the past for an FHA streamline refinance, or never tried to get one because of your credit or your home value, try again. The doors appear to be wide open.

Go. Read Dan’s post. Call him, or your lender of choice.

Photo Credit: Stolen Borrowed from Dan, with permission.