HUD: OK Risk Premiums, or Dole Out $1.4B

Congress will have to appropriate $1.4 billion to keep the Federal Housing Administration operating after Sept. 30 if House and Senate conferees don't agree to allow the FHA to implement risk-based premiums and stop downpayment assistance on FHA loans, according to Housing Secretary Alphonso Jackson. The secretary says in a letter that the Department of Housing and Urban Development "strongly supports" a provision in the Senate's FHA reform bill that prohibits seller-financed downpayment assistance on FHA loans. He also stresses the need for the FHA to price its loans by risk and opposes the restrictions on risk pricing in the House FHA bill and the 12-month moratorium on charging risk premiums in the Senate bill. Regarding loan limits, the secretary says he prefers raising the FHA ceiling from $362,790 to $417,000. HUD does not support raising the maximum to $729,750 on a permanent basis, as provided in the House bill and temporarily in the economic stimulus bill that Congress just passed. The Feb. 11 letter stakes out HUD's position in advance of a conference where House and Senate banking committee members will iron out the final FHA reform bill.