January 24, 2022

Bulletin 2022-012 FHA Streamline Refinance – Revised Definition of Net Tangible Benefit (NTB) Standard for Reduction in Term

Revised Definition of Net Tangible Benefit (NTB) Standard for Reduction in Term

Newrez Approved Correspondent Clients: please note, effective with FHA Case Numbers assigned on or after January 24, 2022, the 4000.1 Handbook definition for the Net Tangible Benefit (NTB) standard for Reduction in Term on FHA Streamline Refinances has been revised to include only a reduction in term of three years or more from the remaining amortization period on the current FHA mortgage.

 

The Net Tangible Section in the Newrez FHA Streamline Product Profile and NTB Worksheet has been revised to align with this new NTB definition for what qualifies as a Reduction in Term from the remaining amortization on the current FHA mortgage. See the highlight changes below.

 

 

Net Tangible Benefit
  • The borrower must receive a Net Tangible Benefit (NTB) resulting from the streamline refinance transaction
  • Delegated Clients are responsible for determining when NTB is met
  • Non-Delegated Clients
    • Complete the product specific NTB worksheet for FHA Streamline Refi
    • State Specific forms required for the following states: CO, MA, MD, ME, RI, SC, VA, and WV
  • A Net Tangible Benefit is
    • a reduced Combined Rate;
    • a change from an ARM to a Fixed Rate; and/or
    • a reduced term that results in a financial benefit to the borrower (reduction in term by itself is not an NTB)
  • Combined Rate Reduction refers to the interest rate on the mortgage plus the MIP rate
  • Reduction in Term refers to the reduction of the remaining amortization period of the existing mortgage by three years or more

 

Combined Rate Benefit Test (with no term reduction or term reduction of less than three years)

  • The following defines the permissible minimum thresholds to define net tangible benefit

From

To

Fixed Rate

ARM

Fixed Rate

New Combined Rate at least 0.5% below prior Combined Rate

New Combined Rate at least 2% below prior Combined Rate

ARM

New Combined Rate no more than 2% above prior Combined Rate

New Combined Rate at least 1% below prior Combined Rate

 

Reduction in Term from current remaining amortization of Three Years or More Benefit Test

  • Must meet the permissible minimum thresholds stated below
  • Combined principal, interest and annual MIP payment of the new mortgage does not exceed the combined principal, interest, and annual MIP of the existing mortgage by more than $50

 

From

To

Fixed Rate

ARM

Fixed Rate

New Combined Rate below prior Combined Rate

Not eligible

ARM

New Combined Rate no more than 2% above prior Combined Rate

Not eligible

 

 

 

Please refer to the Newrez FHA Streamline Product Profile for additional details.

 

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