[Federal Register Volume 72, Number 182 (Thursday, September 20, 2007)]
[Notices]
[Pages 53872-53873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-4651]



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Part IV





Department of Housing and Urban Development





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Federal Housing Administration (FHA) Single Family Mortgage Insurance: 
Announcement of Planned Implementation of Risk-Based Premiums; Notice

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

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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.

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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 
toll-free 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 first-time 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 risk-based 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%)]
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                                                                Minimum                                 Decision Credit Score
                                                            Downpayment \a\ ----------------------------------------------------------------------------
                                                                  (%)         850-680    679-640    639-600    599-560    559-500    499-300      None
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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  .........  .........  .........  .........
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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 risk-based 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