FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Programs and Products - Refinance (05/09/2022)

FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Programs and Products - Refinance (05/09/2022)

g. Programs and Products – Refinance (05/09/2022) i. Overview (A) Definition A Refinance transaction establishes a new Loan to pay off the existing debt for a Borrower with legal title to the subject Property. The existing debt to be paid off must be a Title I Property Improvement Loan. The refinance Loan may also advance funds for additional improvements. (B) Types of Refinances (1) Cash-Out or Cash Back (Not Permitted) A Cash-Out Refinance refers to a refinance of any loan that advances additional credit or provides cash back to the Borrower, or for which the loan proceeds are used for ineligible purposes. A Cash-Out Refinance transaction is not permitted for the Title I Property Improvement Loan program. (2) No Cash-Out Refinance Title I No Cash-Out Refinances are categorized into three possible refinance types. (a) Simple Title I Property Improvement Refinance A Simple Title I Refinance refers to a no cash-out refinance of an existing Title I insured Property Improvement Loan in which all proceeds are used to pay off the existing Title I Loan on the subject Property, and Financeable Fees and Charges. (b) Streamline Title I Property Improvement Refinance (Non-credit Qualifying) A Streamline Title I Property Improvement Refinance refers to the refinance of an existing Title I Property Improvement Loan for which the Lender is not required to perform credit or capacity analysis. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 994 Last Revised: 11/26/2025 (c) Title I Property Improvement Refinance with Advance of Funds A Title I Property Improvement Refinance with Advance of Funds refers to the refinance of an existing Title I Property Improvement Loan, and advances of funds for additional improvements and financeable fees. ii. FHA-Insured to FHA-Insured Refinances FHA-Insured to FHA-Insured refinances may be used with any refinance type. iii. Conditions for Refinance An existing Title I insured Property Improvement Loan may be refinanced only under the following conditions. (A) Lender of Record Only An existing Title I Loan may not be refinanced by a Lender different from the originating Lender of record, unless the Loan has been sold, assigned, or transferred to the new Lender and HUD has transferred insurance coverage for the Loan. (B) Loan in Default A Loan that is in Default must not be refinanced for an amount greater than the lesser of: • the original principal balance of the Loan; or • the current principal balance plus reasonable closing costs and Upfront Mortgage Insurance Premium (UFMIP). (C) Title I Note and Security Refinancing is subject to the Title I Note and Security Instrument requirements. Refinancing requires the Borrower(s) to execute a new Note as well as cancel the old Note. The Lender must obtain and record a new security instrument and should release the original lien unless state law permits a renewal and extension of the original lien. (D) Co-maker or Co-signer on Loan If there are any co-makers or Co-signers on the original Note, a Lender must require that the same co-makers or Co-signers be obligated on the refinanced Note, except in cases of divorce or death, unless the Lender obtains HUD’s approval to release the co-maker or Co-signer from liability on the Note. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 995 Last Revised: 11/26/2025 (E) Previous Assumption A Loan that was assumed may be refinanced as long as the original Borrower and any intervening assumptors were released from liability either at the time the Loan was assumed or later through permission from HUD. (F) Additional Improvements A Loan may be refinanced with funds for additional improvements if the additional improvements are eligible and the Loan is not in Default. iv. Nationwide Loan Limits The total principal obligation for a refinance must not exceed the Title I Property Improvement Nationwide Loan Limits for the property type/loan purpose. v. Maximum Loan Term The term of a refinance must not exceed the maximum Loan Term for the type of Loan. In addition, the total time period from the Disbursement Date of the original Loan to the final maturity of the refinance must not exceed the maximum term for the type of Loan plus 9 years and 11 months. vi. Other Documents A new Notice to Borrower of HUD’s Role in Title I Loans must be issued and signed by each Borrower. Copies of all documents pertaining to the original Loan must be retained in the case binder of the refinanced Loan. Payoff statement(s) for the existing Property Improvement Loan must be retained in order to be satisfied with the proceeds of the new refinance Loan. vii. Reporting the Loan in FHA Connection Refinanced Loans must be reported in FHAC within 31 Days from the date of loan Disbursement. When reporting a refinance, Lenders will supply information on the original Loan so that HUD may terminate the Title I insurance on the original Loan and make appropriate adjustments to the Lender’s insurance coverage reserve account. HUD will also prorate any unpaid installments on the insurance charge between the old Loan and the new Loan. Lenders are cautioned not to erroneously report a refinanced Loan as a new Loan. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 996 Last Revised: 11/26/2025 viii. Specific Eligibility Criteria (A) Simple Title I Property Improvement Refinance (1) Maximum Loan Amount The maximum loan amount of a Simple Title I Property Improvement Refinance is limited to the cost of prepaying the existing Loan, plus financeable fees and charges, not to exceed the Title I Property Improvement Nationwide Loan Limits. Cash back to the Borrower is not permitted. (2) Credit Qualification Lenders must underwrite the Simple Title I Refinance Loan to ensure compliance with Title I credit and capacity requirements. (B) Streamline Title I Property Improvement Refinance (1) Maximum Loan Amount The maximum loan amount of a Streamline Refinance is limited to the cost of prepaying the existing Loan, plus eligible fees and charges, not to exceed the original Title I loan amount. (2) Credit Qualification Lenders are not required to conduct credit or capacity analysis. (C) Title I Property Improvement Refinance with Advance of Funds (1) Maximum Loan Amount The maximum loan amount is the sum of the cost of prepaying the existing Title I Property Improvement Loan, plus the cost of additional improvements, and financeable fees and charges, not to exceed the Title I Property Improvement Nationwide Loan Limits. (2) Use of New Loan Proceeds (a) Eligible Use New funds must be used to finance: • eligible improvements for a new work project; or • additional work on an existing uncompleted project that was not financed by the prior Title I Loan. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 997 Last Revised: 11/26/2025 Funds that finance additional work on an existing project may be for an upgrade, or for new work that was unexpected and necessary to further an existing project toward completion. (b) Ineligible Use New funds must not be advanced for completion of an existing project when the original loan funds were used for purposes different from the work scope on which the prior Title I loan amount was based. New funds must not be advanced when the Lender has discovered misuse of loan proceeds, or other irregularities. (3) Credit Qualification Lenders must underwrite the Title I Refinance with an advance of funds to ensure compliance with Title I credit and capacity requirements. ix. Required Documentation (A) Disclosure To Borrower: “Notice to Borrower of HUD’s Role” For each new Title I insured Loan, a Notice to Borrower of HUD’s Role in Title I Loans must be issued and acknowledged by all Borrowers. (B) Existing Loan Payoff Amount A loan payoff statement is required on all Title I Loans secured by the Property that will be paid off with the new Title I Loan. The Lender must obtain the payoff statement for all existing Loans. (C) Note and Security Requirements Refinancing requires the Borrower(s) to execute a new Note. The new Note must comply with the same requirements as an original Title I Property Improvement Loan. When the loan amount exceeds $7,500, the Lender must obtain and record a new security instrument and ensure a release of any existing Title I lien unless state law permits a renewal and extension of the original lien. Refinance Loans must comply with Title I Property Improvement Lien Priority requirements. (D) Original Title I Case Binder For a Title I Refinance, copies of all documents pertaining to the original Title I Loan must be retained in the refinance case binder. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 3. Direct and Dealer Loan Process for Manufactured Home Loan Program Handbook 4000.1 998 Last Revised: 11/26/2025 x. Insurance Processing Refinanced Loans must be reported to HUD for insurance within 30 Days after loan Disbursement as outlined in Closing and Disbursement. When reporting a refinance of a prior Title I Loan, Lenders must supply information on the original Loan so that HUD may terminate the Title I insurance on the original Loan. HUD will also prorate any unpaid installments on the insurance charge between the old Loan and the new Loan. Lenders are cautioned not to erroneously submit a refinanced Loan as a new Loan. 3. Direct and Dealer Loan Process for Manufactured Home Loan Program Loans insured under FHA’s Manufactured Home Loan program are categorized by either of two origination processes: Direct Loans or Dealer Loans. A Dealer for a Manufactured Home Loan refers to a person or business that is engaged in the business of manufactured home retail sales. Dealers of manufactured home sales have a financial interest (either direct or indirect) in the transaction.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Programs and Products - Refinance (05/09/2022) · source URL · snapshot 8c03836f77f317e1