Basics

• FHA is an agency within the United States Department of Housing and Urban Development. HUD reimburses lenders' losses in the event a homeowner defaults on an FHA-insured loan. As such, insurance minimizes lenders' risk, allowing them to finance borrowers that might not otherwise qualify for conventional financing. The streamline refinance is so-called due to the limited amount of documentation needed to process the transaction. It may be completed with or without an appraisal and credit qualifying.
  
  

Loan Limits

• To manage HUD's risk, FHA limits the amount it will insure on a loan. Maximum loan caps vary by county and property size. They may change annually, although limits remained unchanged from 2009 through 2011. FHA's maximum loan limit for each of Alabama's 67 counties is $271,050, with the exception of Baldwin ($285,000) and Russell ($289,000), on single-unit dwellings. Limits are based on the median sales price of homes in these areas. A streamline refinance mortgage may not exceed these limits, except by the amount of the Up-Front Mortgage Insurance Premium required at closing. The fee helps fund the FHA insurance fund from which claims are paid.
  
  

Approved Parties

• Only FHA-approved lenders may originate FHA-insured loans. Lenders undergo an approval process with HUD to ensure compliance with FHA underwriting guidelines and policy. According to HUD's database, 191 lenders in Alabama may originate single-family programs such as the streamline refinance. When the streamline refinance involves an appraisal, the lender must hire an FHA-approved appraiser to perform the inspection report. There are 711 state-certified appraisers eligible to appraise for FHA streamline refinances in Alabama.
  
  

Considerations

• If the property being refinanced belongs to a condominium project, the project must still be on FHA's list of approved projects in order for the unit to qualify for a streamline refinance. Status of an approved condo complex may change after the initial FHA-loan origination for various reasons, including a lack of sufficient reserves on the homeowners association financial statements. Alabama had 141 approved condominium projects as of mid-2011.