In preparation for a vote on Federal Housing Administration reform bill, Senate Banking Committee leaders have agreed to cut the FHA 3% downpayment requirement in half, to 1.5%, but only allow upfront mortgage insurance premiums to be financed into the loan amount.The loan-to-value ratio cannot exceed 100%, which means the FHA borrower or seller has to pay the closing costs. However, the interest rate on the loan can be increased to cover closing costs. According to sources, the FHA bill, which the committee is scheduled to mark up on Wednesday, is "silent" on the issue of charging risk-based premiums. Key senators decided to drop a provision in an earlier version of the bill that would have restricted the mortgage insurance agency from setting premiums based on credit scores. The Senate bill would also raise the FHA loan limit to $417,000 in high-cost areas.

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