Commish Responds to FHA Reform Critics

Federal Housing Administration reform legislation is being criticized in the Senate for raising mortgage insurance premiums on the "backs of poor people" even though the increase would only amount to $12 a month, according to FHA Commissioner Brian Montgomery.The legislation would give the FHA the flexibility to charge risk-based premiums and reach more subprime borrowers with lower-cost and safer loans, the commissioner told a Women in Housing and Finance luncheon. "The family we can't reach today is paying $255 more a month," Mr. Montgomery said. "Where is the outrage on that? They are being taken to the cleaners today." (The $255 a month is based on a 9.5% subprime loan.) On paper, it looks as if the FHA would double the upfront premium from 1.5% to 3.0% for certain borrowers. However, it would increase the monthly cost of a $200,000 loan with a 6% interest rate by $12. "It is a far better deal," Mr. Montgomery said. The House has already approved an appropriations bill that includes risk-based premiums and other FHA reforms. Senate appropriators are mulling FHA reforms as they prepare for a subcommittee mark-up of the Department of Housing and Urban Development appropriations bill.