HUD proposal allows FHA to offer risk-based premiums

The Department of Housing and Urban Development (HUD) is reportedly finalizing a proposal that would offer Federal Housing Administration (FHA) insured mortgages with no upfront insurance premium to homebuyers with good credit, according to National Mortgage News. The legislation will allow FHA to offer risk-based premiums to both serve and attract borrowers with high credit scores as well as subprime borrowers. "This would provide an option to potential homebuyers who have no choice right now except to go to subprime lenders,” HUD Secretary Alphonso Jackson said, adding that FHA is a cheaper and safer option. Based on their credit score and loan-to-value ratio, creditworthy borrowers would only have to pay a 50-basis point annual insurance premium on FHA loans.