The Federal Housing Administration is experiencing a major surge in business from homeowners with conventional loans refinancing into FHA products and the agency suspects a large majority of these borrowers are escaping high cost subprime loans.FHA refinanced 60,400 conventional loans in fiscal year 2006, up 80% from FY 2005 and this trend is accelerating. During the first seven months of FY 2007, FHA refinancings of conventional loans jumped 84% compared to the same period in the last fiscal year. As of April 30, FHA had refinanced 51,349 conventional loans. "In today's mortgage environment, it is safe to say that a significant portion -- we conservatively estimated 60% -- are subprime loans," FHA commissioner told a mortgage conference recently. The commissioner has been meeting with housing counselors and lenders to promote FHA as an affordable option for subprime borrowers. The Bush administration also is urging Congress to pass FHA reform legislation that would allow more subprime borrowers to qualify for FHA-insured single-family loans.

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