HUD to Implement FHA RBP System

To augment its recently announced FHASecure program, the Department of Housing and Urban Development plans to take administrative action to implement a risked-based pricing system by Jan. 1 so the Federal Housing Administration can price its mortgage insurance premiums based on a borrower's risk profile, according to a senior HUD official.With risk-based pricing, the FHA would be able to help an additional 20,000 subprime borrowers refinance into new FHA-insured mortgages in fiscal year 2008 and help finance 120,000 new homebuyers who have fewer options due to the contraction in subprime lending, the official told reporters. The Bush administration still wants Congress to pass an FHA reform bill that would give the agency even more flexibility in setting premiums and downpayment requirements. HUD estimates that the FHA will refinance 101,000 subprime borrowers into FHA loans by the end of this fiscal year (Sept. 30) and the agency would probably refi another 160,000 subprime borrowers in fiscal 2008 without any changes to its program. With the FHASecure program (which allows the FHA to refinance delinquent borrowers and risk-based pricing), HUD expects that the FHA can help another 80,000 troubled borrowers avoid foreclosures. But it could do even more if Congress passes FHA reform. HUD officials also revealed that they plan to issue a Real Estate Settlement Procedures Act proposal in January aimed at improving disclosures of mortgage broker fees and settlement costs.