FHA To See Risk Pricing

A legislative proposal that would allow the Federal Housing Administration to use risk-based pricing is expected to be included in the president's fiscal year 2007 budget. The proposal would authorize the FHA to adjust mortgage insurance premiums on single-family loans on the basis of the borrower's credit score and other risk characteristics, according to sources.

"It would allow FHA to set premiums like all the other mortgage insurers," one source said, who did not want to be identified. The Bush administration is expected to unveil the president's budget on Feb. 6.

Conceptually, risk-based pricing would help the FHA compete for more creditworthy borrowers while still serving subprime borrowers.

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