The Federal Housing Administration would be able to charge risk-based premiums based on a borrower's credit score and downpayment under a proposed rule the Department of Housing and Urban Development will publish soon in the Federal Register.The FHA mortgage insurance program currently charges a 150-basis-point upfront premium and a 50-bp annual premium for most borrowers. Under the proposal, which is being issued for a 30-day comment period, the FHA can charge a maximum upfront premium of 2.25% and a 55-bp annual premium for loans with only 3% down. With these limits, the FHA could provide mortgage insurance for borrowers with credit scores above 499. Discounted premiums would be available for first-time homebuyers who complete pre-purchase homeownership counseling. Creditworthy borrowers with credit scores above 679 and 10% down would pay only a 75-bp upfront premium and a 50-bp annual premium. HUD plans to establish this RBP system if Congress does not pass an FHA bill by Jan. 1.

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