Wells Fargo (WFC) will only accept new streamlined refinancing on Federal Housing Administration mortgages serviced in-house beginning June 19, according to an alert sent to lenders Tuesday.
The FHA lowered its upfront mortgage insurance premium to 0.01% and the annual premium to 0.55% in order to allow more borrowers take advantage of the Streamline refinance program beginning Monday. Borrowers must be current and have a loan endorsed by the FHA on or before May 31, 2009.
The San Francisco bank confirmed it will not finance the FHA refinancing on loans serviced by other mortgage firms.
A Wells spokeswoman said there are still 500,000 FHA borrowers it will be able to refinance through a new FHA Streamline Refinance loan.
“We expect high customer demand for this product and we want to insure that our existing customers receive a high level of service without frustrating delays,” according to a statement sent to HousingWire. “Beginning Tuesday, June 19, Wells Fargo will accept FHA Streamline Refinance applications only from customers whose loans we currently service. This applies to our retail, wholesale and correspondent channels.”
The FHA projects it will streamline refinance more than 223,000 mortgages in its fiscal year 2012, which would be a 24% increase from the year before, according to its latest monthly report.
Marco Dinello, CEO of Absolute Home Mortgage Corp., a preferred HUD mortgage lender in Florida and New Jersey, said the streamlined program is one of the best government initiatives he’s participated in. Borrower demand is already starting to pick up.
“Re-amortization is the way to go. If we can get you down to a 15 year for the same payment as a 30-year, mortgage borrowers can save a lot of money. I’ve gotten some loans from 5.25% down to a 2.75% interest rate. It just squeaks out and sometimes I have to pay the closing costs, but they’re good customers who will come back,” Dinello said.
However, with the largest banks limiting their correspondent channels and the latest Wells limitation on the program, smaller brokers will have to backtrack.
Dinello said he will have to find who the current servicer is on the new files and match them up if they are serviced by Wells. This creates more uncertainty, and brokers may not be very sure where they can sell these loans, he said.
“At first this looked like a good business event, now it’s becoming much less,” Dinello said.
There are other obstacles, too. If the borrower wants to re-amortize, or if a borrower lost a job or something else changed to require a new credit check, a new appraisal is needed. In many markets, a new appraisal will show the borrower underwater and exclude them from the FHA Streamline program.
Jim Quist is president of Newcastle Home Loans, a boutique mortgage lender in Chicago. Most of Newcastle business is tied to the FHA and selling those loans through correspondent channels.
“Volume on the refinance program will pick up for a couple of months,” he said, tempering his expectations with the Wells restriction and the already high refi activity. “But the refi market will eventually stagnate. We need the purchase market to come back.”