Section B. Maximum Mortgage Amounts on No Cash …

1 HUD 3, Section B3-B-1 Section B. Maximum Mortgage Amounts on No CashOut/Cash Out Refinance TransactionsOverviewIn This SectionThis Section contains the topics listed in the table NameSee Page1No Cash Out Refinance Transactions With anAppraisal3-B-22 Cash Out Refinance Transactions3-B-8 HUD 3, Section B3-B-21. No Cash Out Refinance Transactions With an AppraisalIntroductionThis topic contains information on no cash out refinance transactions with anappraisal, including the Maximum Mortgage calculation calculating the existing debt subordinate liens refinancing to buy out ex-spouse or coborrower equity Mortgage calculation for a property acquired less than one year before loanapplication, and short DateMarch 24, Maximum Mortgage for a no cash out refinance with an appraisal (creditqualifying) is thelesserof the Loan-To-Value (LTV)

2 Factor applied to the appraised value of theproperty, or existing total FHA first Mortgage is limited to 100% of the appraised value,includingany financed upfront Mortgage insurance premium (UFMIP).Most FHA mortgages require payment of an UFMIP. The statutory loanamounts and LTV limits described in this handbook do notinclude , the Maximum Mortgage mayneverexceed the statutory limit,except by the amount of any new UFMIP. However, the Maximum mortgagemay exceed the statutory limit on certain specialty : The borrower must comply with any appraisal requirements, includingrepairs, before the Mortgage is eligible for insurance : For more information on Maximum LTV factors, see HUD , and UFMIP Amounts , see HUD on next pageHUD 3, Section B3-B-31.

3 No Cash Out Refinance Transactions With an Appraisal, theExisting Debton a No CashOut RefinanceWith anAppraisalThe underwriter should follow the steps in the table below to calculate theexisting : On this type of refinance transaction, the borrower may not receivecash back in excess of $500 at the amount of the existing first Mortgage . The existingfirst Mortgage must be current for the month due and mayinclude the interest charged by the servicing lender when the payoffwill not likely be received on the first day of the month (as istypically assessed on FHA-insured mortgages) any prepayment penalties assessed on a conventional mortgageor an FHA Title I loan late charges, and escrow shortages, and may notinclude delinquent the prepaid expenses, which may include the per diem interest to the end of the month on the new loan hazard insurance premium deposits monthly Mortgage insurance premiums, and any real estate tax deposits needed to establish the on next pageHUD 3, Section B3-B-41.

4 No Cash Out Refinance Transactions With an Appraisal, the Existing Debt on a No Cash Out Refinance With an Appraisal(continued)StepAction3 Add the following to the existing first Mortgage amount: any purchase money second Mortgage any junior liens over 12 months old closing costs prepaid expenses (even if the lender refinancing the loan is theservicer) borrower-paid repairs required by the appraisal, and discount : If the balance or any portion of an equity line of credit inexcess of $1000 was advanced within the past 12 months and wasfor purposesotherthan repairs and rehabilitation of the property,that portion above and beyond $1,000 of the line of credit isnoteligible for inclusion in the new any refund of : The resulting figure is the existing on next pageHUD 3, Section B3-B-51.

5 No Cash Out Refinance Transactions With an Appraisal, subordinate lien, including a Home Equity Line of Credit (HELOC),regardless of when taken, may remain outstanding (but subordinate to theFHA-insured Mortgage ), provided the FHA insured Mortgage meets the eligibility criteria for mortgages withsecondary financing outlined in HUD , and combined amount of the FHA-insured Mortgage and the entire subordinatelien does not exceed the applicable FHA LTV lender must use the Maximum accessible credit limit of the existingsubordinate lien to calculate the Combined Loan-to-Value (CLTV) : For more information on the refinance of borrowers in a negative equity position program, see HUD ML 10-23, and ML 10-35, and streamline refinances, see HUD : Both of these programs may have different LTV toBuy Out Ex-Spouse orCoborrowerEquityWhen the purpose of the new loan is to refinance an existing Mortgage inorder to buy out an ex-spouse s or other coborrower s equity, the specifiedequity to be paid is considered property-related indebtedness, and eligible to be included in the new Mortgage divorce decree, settlement agreement, or other bona fide equityagreement must be provided to document the equity awarded to the ex-spouseor on next pageHUD 3, Section B3-B-61.

6 No Cash Out Refinance Transactions With an Appraisal, fora PropertyAcquired LessThan One YearBefore LoanApplicationIf the property was acquired less than one year before the loan application,and is not already FHA-insured, the original sales price of the property mustbe considered in determining the Maximum Mortgage , in addition to thecalculations described previously in this conclusive documentation, expenditures for repairs and rehabilitationincurred after the purchase of the property may be added to the original salesprice in calculating the Mortgage Maximum Mortgage amount will be based on thelesserof the total cost to acquire the property, which includes the original purchase priceplus any documented costs incurred for rehabilitation, repairs, renovation, orweatherization closing costs, and reasonable discount points,or current appraised value,or total of all Mortgage liens held against the subject on next pageHUD 3, Section B3-B-71.

7 No Cash Out Refinance Transactions With an Appraisal, PayoffsTo be eligible for refinancing with a short payoff, a borrower must be currenton his/her will insure the first Mortgage where the existing note holder(s) write offthe amount of the indebtedness that cannot be refinanced into the new FHA-insured Mortgage if there is insufficient equity in the home based on its current appraised value,and/or the borrower has experienced a reduction in income and does not have thecapacity to repay the existing indebtedness against the instances where the existing note holders are reluctant to write downindebtedness, a new subordinate lien may be executed for the amount bywhich the payoff is payments on subordinate financing are required, they must be included inthe qualifying ratios unless payments have been deferred for no less than 36months.

8 This policy appliesonlyto no cash out (rate and term) refinanceswith short : For more information on Mortgage payment history required for refinancing, see HUD , new subordinate financing see HUD , and short sales, see HUD 3, Section B3-B-82. Cash Out Refinance TransactionsIntroductionThis topic contains general information for cash out refinance transactions,including eligibility for cash out refinances ineligibility of delinquent borrowers and payment history requirement forcash out refinances restriction on addition of non-occupant coborrower for credit underwritingcompliance subordinate liens and combined loan-to-value (CLTV) ratios on cash outrefinances Maximum Mortgage amount calculation based on length of ownership, and cash out refinancing for debt DateMarch 24, forCash OutRefinancesCash out refinance transactions are only permitted on owner-occupiedprincipal owned free and clearmaybe refinanced as cash out.

9 For more information on three and four unit properties, including self-sufficiency requirements, seeHUD , and eligibility and Mortgage payment history, see HUD on next pageHUD 3, Section B3-B-92. Cash Out Refinance Transactions, ofDelinquentBorrowers andPaymentHistoryRequirementfor Cash OutRefinancesBorrowers who are delinquent, in arrears, or who have suffered any mortgagedelinquencies within the most recent 12 month period under the terms andconditions of their mortgages arenoteligible for cash out a property is encumbered by a Mortgage , the refinancing lender mustdocument that the borrower has an acceptable payment payment history is acceptable if the borrower is current, and has made all payments on the Mortgage being refinanced within the monthdue for the previous 12 mortgages with more than six months and fewer than 12 months ofpayment history.

10 The borrower must have made all payments when with fewer than six months of payment history are not eligible forcash out onAddition ofNon-OccupantCoborrower forCreditUnderwritingComplianceNon-occup ant coborrowers maynotbe added in a cash out refinancetransaction in order to meet FHA s credit underwriting guidelines for themortgage. Any coborrower or cosigner being added to the note must be anoccupant of the on next pageHUD 3, Section B3-B-102. Cash Out Refinance Transactions, andCLTV Ratioson Cash OutRefinancesThe table below lists the policy requirements regarding subordinate financingand combined loan-to-value (CLTV) requirements on cash out of Subordinate LienPolicy RequirementNew subordinate financingIf new subordinate financing is being offeredby the lender or other permitted entity, theCLTV is limited to 85% (the FHA-insuredfirst Mortgage and any new junior lienswhen added together).