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FHA streamline refi

We are getting ready to close on our FHA streamline Refi tomorrow and I'm starting to feel pretty uneasy that we're being told the wrong thing here. We are one of the lucky few who are able to use the new streamline that started in June with the low UFMI, etc. However, we are now being told that the escrow balance from our current mortgage will be applied to the balance. We will then have to bring with us $2200ish to pay for the new escrow. This means that the balance on the house is going down a couple of thousand because the money that is in the escrow is paying the balance down. Does this sound right?

We were given the option of raising the interest rate .25% to pay for this, but that is a large increase for something we didn't think we would have at all.

I had thought that the escrow balance would be refunded to me, and I would still pay for the new escrow, but they would be close to a wash. I had also read that if you're refi-ing through the same lendor that sold you the original loan, that often this process doesn't even have to happen. They can just apply the balance over to the escrow with no out of pocket.
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October 29 2012 - US
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Sounds to me like they did an escrow reduction on your payoff and on your loan amount. Technically they just used your current escrow balance as a principal reduction. I would have them change the payoff so you're not getting stuck with the new escrow setup without the refund.

They could have correctly reduced the escrow from the payoff and left the loan amount the same thus having you come to close with nothing. Sounds like they did something wrong.
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October 30 2012
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Just out of curiosity  when did you start your refi process?
I signed paper work to do a streamline refi back in July and am still waiting 120+ days now 
I just wanted to know if we are all in the same waiting line 
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November 04 2012
That is ridiculous.  You should have closed on a FHA Streamline by the end of August.  I believe rates are basically the same as they were back then.  You may want to look elsewhere so you can close before 2013
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November 04 2012
 
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