The Federal Housing Administration could have hundreds of thousands of subprime borrowers if Congress passes an FHA reform bill, but if not, the agency will raise its mortgage insurance premiums, Housing Commissioner Brian Montgomery has told Senate appropriators.As a fallback position, the FHA commissioner testified that he will raise the FHA upfront premium from 150 basis points to 166 bps and its annual 50-bp premium by a few basis points. Sen. Christopher Bond, R-Mo., warned the commissioner that he is skeptical that the reforms will increase FHA revenues, and he doubts that the Department of Housing and Urban Development could implement the reforms fast enough to avoid a premium increase in fiscal year 2008. "As you know, HUD does nothing quickly," Sen. Bond said. Mortgage Bankers Association chairman John Robbins said the FHA could quickly regain a 10% market share if the reforms are passed, which would generate $3 billion in new revenues. Sen. Patty Murray, D-Wash., chairman of the Senate HUD appropriations subcommittee, said, "We need to work to make sure the FHA is strong and effective." However, she said she does not want the FHA to adopt risky subprime practices such as no-downpayment loans.

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