What are the Net Tangible Benefit requirements for an FHA Streamline Refinance?

A Net Tangible Benefit (NTB) is the financial benefit to the Borrower that results from a Streamline Refinance.  The Mortgagee must determine that there is a net tangible benefit to the Borrower for all Streamline Refinance transactions (Non-Credit Qualifying or Credit Qualifying).

There are three types of Net Tangible Benefit: Combined Rate Reduction; Changing from an Adjustable to a Fixed Rate Mortgage (ARM to a Fixed); and a Reduction in Term. Combined Rate refers to the interest rate on the mortgage plus the Mortgage Insurance Premium (MIP) rate. 
 
COMBINED RATE REDUCTION NTB
 
  FROM TO
Fixed Rate
New Combined Rate
One-Year ARM
New Combined Rate
Hybrid ARM
New Combined Rate
  Fixed Rate   At least 0.5 percentage
  points below the prior
  Combined Rate.
  At least 2 percentage
  points below the prior
  Combined Rate.
  At least 2 percentage
  points below the prior
  Combined Rate.
  Any ARM With 
  Less Than 15
  Months to Next 
  Payment Change
  Date
  No more than 2
  percentage points
  above the prior
  Combined Rate.
  At least 1 percentage
  point below the prior
  Combined Rate.
  At least 1 percentage
  point below the prior
  Combined Rate.
  Any ARM With
  Greater Than or
  Equal to 15 
Months
  to Next 
Payment  
  Change Date
  No more than 2 
  percentage points
  above the prior
  Combined Rate.
  At least 2 percentage
  points below the prior
  Combined Rate.
  At least 1 percentage
  point below the prior
  Combined Rate.


REDUCTION IN TERM NTB (Note: the NTB requirements under Combined Rate Reduction are not applicable for Reduction in Term scenarios)
 
For a Reduction in Term the Net Tangible Benefit is met if all of the following apply:
  • the remaining amortization period of the existing Mortgage is reduced; and
  • the new interest rate does not exceed the current interest rate; and
  • the combined principal, interest and MIP payment of the new Mortgage does not exceed the combined principal, interest and MIP of the refinanced Mortgage by more than $50.
 
For additional information see Handbook 4000.1 II.A.8.d.vi.(C)(4)(c) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
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US Department of Housing and Urban Development

Topic Information
  • Topic #: 57345-8501
  • Date Created: 12/23/2015
  • Last Modified Since: 10/27/2017
  • Viewed: 7934