February 13, 2012
Part of the Obama Administration’s announcement to help underwater homeowners includes the Streamline Refinance offered by the Federal Housing Administration (FHA). The announcement allows FHA borrowers who are current on their mortgage to refinance into a new FHA loan to take advantage of today’s historically low interest rates without requiring additional underwriting. Some lenders have been reluctant to offer the Streamline Refinance product because of the additional risk on loans they may have not underwritten and the potential negative impact this has on their Compare Ratio. On February 3, 2012, Acting FHA Commissioner Carol Galante announced that the Streamline Refinance will not be included in the lender’s compare ratio.
The Compare ratio is the value that reveals the largest discrepancies between the lender’s default percentage and the default percentage to which it is being compared. The percentages being compared are the percentages of originations that first defaulted during a selected period. A higher ratio may indicate that a lender has an unusually high default percentage in comparison with that region or lender's surrounding area.