Senate Banking Committee leaders have drafted a Federal Housing Administration reform bill that cuts the FHA downpayment requirement to 1.5% and raises FHA loan limits, according to a copy obtained by MortgageWire.However, negotiations are still under way over several provisions, and it is unclear whether committee members can reach an agreement in time to mark up and pass an FHA bill on Wednesday. The draft bill gives the FHA the green light to vary premiums based on loan or property type, loan-to-value ratios, and other factors, and to charge upfront premiums of up to 3%. The current limit is 2.25%. However, the bill stops short of allowing the federal mortgage insurance program to charge premiums based on credit scores -- a major reform objective of the Bush administration. In lowering the downpayment requirement from 3% to 1.5%, the bill prohibits seller-funded downpayment assistance on FHA loans.

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