53872 Federal Register / Vol. 72, No. 182 / Thursday, September 20, 2007 / Notices 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5171–N–01] 

Federal Housing Administration (FHA) 

Single Family Mortgage Insurance: 

Announcement of Planned 

Implementation of Risk-Based 

Premiums 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Notice. 

SUMMARY: This notice applies to FHA 

single family mortgage insurance 

programs. This notice announces FHA’s 

planned implementation of risk-based 

premiums, which are designed for 

mortgage lenders to offer borrowers an 

FHA-insured product that provides a 

range of mortgage insurance premium 

pricing, based on the risk the insurance 

contract represents. 

DATES: Comment Due Date: October 22, 

2007. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this notice to the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. 

Communications should refer to the 

above docket number and title. 

Comment by Mail. Please note that 

due to security measures at all federal 

agencies, submission of comments by 

mail often results in delayed delivery. 

Electronic Submission of Comments. 

HUD now accepts comments 

electronically, which interested persons 

may now submit through the Federal 

eRulemaking Portal at http:// 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make them immediately available for 

public viewing. Commenters should 

follow the instructions provided at 

http://www.regulations.gov to submit 

comments electronically. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. In 

all cases, communications must refer to 

the docket number and title. 

Public Inspection of Public 

Comments. All comments and 

communications submitted will be 

available, without revision, for 

inspection and downloading at http:// 

www.regulations.gov. Comments are 

also available for public inspection and 

copying between 8 a.m. and 5 p.m. 

weekdays at the Regulations Division. 

Due to security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the comments 

by calling the Regulations Division at 

(202) 708–3055 (this is not a toll-free 

number). 

FOR FURTHER INFORMATION CONTACT: 

Margaret Burns, Director, Office of 

Single Family Program Development, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410; telephone (202) 

708–2121 (this is not a toll-free 

number). Persons with hearing or 

speech impairments may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Risk-Based Premiums 

This notice announces HUD’s plan to 

implement risk-based premiums for 

FHA loans for which case numbers have 

been assigned on or after January 1, 

2008. Section 203(c)(2) of the National 

Housing Act (12 U.S.C. 1709(c)(2)) 

establishes mortgage insurance 

premiums for most FHA single family 

programs. Such upfront and annual 

insurance premiums are set at levels not 

to exceed 2.25 percent and 0.50 percent 

(0.55 percent for mortgages involving an 

original principal obligation that is 

greater than 95 percent of the appraised 

value of the property), respectively, 

with a discount available on the upfront 

premiums for mortgagors who are firsttime homebuyers and who successfully 

complete pre-purchase homeownership 

counseling approved by the Secretary. 

By offering a range of premiums based 

on risk, FHA will be able to offer 

options to mortgagees serving borrowers 

who were previously underserved, or 

not served, by the conventional 

marketplace. Alternatively, FHA will 

also be able to offer options to 

mortgagees serving those borrowers 

wishing to lower their premiums by, for 

example, increasing their downpayment 

or by improving their credit scores. A 

range of premiums based on risk will 

also ensure the future financial 

soundness of FHA programs that are 

obligations of the Mutual Mortgage 

Insurance Fund (MMIF). Under riskbased premiums, however, no qualified 

borrower will be charged by the 

mortgage lender in excess of the current 

statutory upfront and annual mortgage 

insurance premium limits. Additionally, 

this notice, when issued in final, will 

replace FHA’s Mortgagee Letter 00–38, 

which identifies the current mortgage 

insurance premiums for FHA’s single 

family programs. 

Risk-based premiums will utilize the 

following schedule for upfront mortgage 

insurance premium rates: 

FHA SINGLE FAMILY MORTGAGE INSURANCE UPFRONT MORTGAGE INSURANCE PREMIUMS—EFFECTIVE AS OF JANUARY 1, 

2008 

[All premiums are specified in basis points (0.01%)] 

Minimum 

Downpayment a

(%) 

Decision Credit Score 

850–680 679–640 639–600 599–560 559–500 499–300 None 

Funds from Borrower or a Relative ....... 10 75 100 125 150 175 175 200 

5 100 125 150 175 200 ................ 225 

3 125 150 175 200 225 ................ ................

Other Sources of Funds ........................ 3 175 200 b 225 ................ ................ ................ ................

a. Premiums are based on two categories of sources of funds: (1) The borrower’s own funds or gifts from relatives and (2) any other acceptable source. See HUD Handbook 4155.1 for guidance on acceptable sources of funds. 

b. A minimum decision credit score of 620 is required when downpayment funds come from a source other than the borrower or a relative of 

the borrower. 

Notes: 

1. Annual premium rates are: 50 basis points for loans with 5 and 10 percent downpayments; 55 basis points for loans with 3 percent 

downpayments; and 25 basis points for all loans with amortization terms of 15 years or less. 

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2. Downpayment percentage is determined by the base loan-to-value ratio (LTV). The ‘‘base LTV’’ is calculated by: (1) Dividing the base mortgage amount by the lesser of the sales price or appraised value of the property (for refinances, the base mortgage is divided by the appraised 

value of the property); (2) subtracting the result from 1 (one); and (3) multiplying by 100. ‘‘Base mortgage amount’’ is defined as the mortgage 

amount prior to adding any financed closing costs or upfront mortgage insurance. 

3. Eligibility for the mortgage insurance premiums listed in the chart above is based on an applicant’s decision credit score (FICO). A ‘‘decision 

credit score’’ is determined for each applicant according to the following guidelines: when three scores are available (one from each repository), 

the median (middle) value is used; when only two are available, the lesser of the two is chosen; when only one is available, then that score is 

used. If more than one individual is applying for the same mortgage, the lender should determine the decision credit score for each individual 

borrower and then average them to determine the final decision credit score for the application. That application ‘‘decision’’ credit score is then 

used to underwrite and determine if the mortgage is considered an acceptable risk. 

4. Except as provided below, eligibility for these insurance premiums is dependent upon borrower acceptance by TOTAL (Technology Open to 

Approved Lenders). Therefore, all borrowers with valid credit scores must be scored by TOTAL. 

5. Borrowers not scored by TOTAL or with insufficient trade lines to generate credit bureau scores are considered as ‘‘none’’ in the premium 

chart and are priced accordingly. Borrowers falling into cells with no premium price shown are not eligible for FHA-insured financing. 

6. If TOTAL refers a loan for manual underwriting and the underwriter deems that there are sufficient compensating factors to create an acceptable risk to FHA, then the upfront insurance premium charge will be as shown on the premium chart. 

7. These premiums apply to all purchase loans and to fully underwritten (non-streamline) refinance loans. Cash-out refinance loans must meet 

a minimum 5 percent equity requirement, based on the appraised value of the property. 

8. Streamline refinance of an existing FHA loan for which a case number was assigned prior to January 1, 2008, will have an upfront premium 

of 100 basis points and an annual premium of 50 basis points. 

9. First-time homebuyers who would otherwise pay an upfront premium of 225 basis points, but who complete pre-purchase homeownership 

counseling acceptable to the Secretary, will pay an upfront premium of no more than 200 basis points. 

II. Solicitation of Public Comments 

FHA welcomes comments on the riskbased premiums for a period of 30 days. 

The risk-based premiums are based on 

FHA insurance eligibility requirements 

as they exist at the time of publication 

of this notice. FHA’s proposed rule on 

downpayment assistance, if issued in 

final, would affect the risk-based 

premiums proposal contained in this 

notice. 

Any changes made to the risk-based 

premiums in response to public 

comment will be announced through 

publication of a subsequent notice in 

the Federal Register. 

III. Findings and Certifications 

Environmental Review 

A Finding of No Significant Impact is 

not required for this notice. Under 24 

CFR 50.19(b)(6), the subject matter of 

this notice is categorically excluded 

from the requirements of the National 

Environmental Policy Act (42 U.S.C. 

4332 et seq.). 

Dated: September 13, 2007. 

Brian D. Montgomery, 

Assistant Secretary for Housing—Federal 

Housing Commissioner. 

[FR Doc. 07–4651 Filed 9–17–07; 10:16 am] 

BILLING CODE 4210–67–P 

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