Why did HUD create the FHA/VA Streamline Rate Reduction Program?
In the early 1980’s, HUD launched one of the best programs available for FHA and VA homeowners – the FHA Streamline Mortgage Refinance program. Initially the program allowed anyone with an FHA or VA loan to lower their existing mortgage interest rate, with no credit checks, using their original FHA paperwork. Unfortunately, as FHA loan defaults increased, many lenders started imposing additional requirements, to protect themselves from penalties and scrutiny associated with having high loan default rates.
Today the program is still very effective; however, not widely publicized. Unlike traditional refinance transactions, streamline guidelines limit the amount of fees that lenders can charge and earn on loans; therefore, few institutions find it cost-justifiable to promote streamline products. Nevertheless, the FHA and VA streamline programs remain one of borrowers’ greatest advantages to having FHA/VA-insured mortgages.