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.

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