FHA lenders and originators can now offer cashouts up to 95%.
The increase, just for one- and two-unit owner-occupied properties, is available for borrowers who have lived in the property, owned the property and paid the mortgage on time for at least the preceding 12 months, according to Mortgagee Letter 2005-43 issued by Federal Housing Commissioner Brian D. Montgomery this week.
Subordinate loans may remain, the letter said, and non-occupant owners may not be considered for underwriting purposes.
The letter from FHA, a division of the Department of Housing and Urban Development, also indicated loans may be refinanced for a shorter term without being fully underwritten as long as the monthly principal and interest payment does not increase more than 20%. The previous payment increase was limited to $50.
Hybrid adjustable-rate borrowers meeting the 20% payment increase limit may use a streamline loan to refinance into a fixed-rate mortgage, according to the commissioner.
"These changes are designed to provide expanded alternatives for homeowners wishing to refinance their mortgages, and offer greater flexibility to mortgagees in processing and underwriting certain refinance transactions," the letter said.