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August 8th, 2008

Goodbye Risk-Based Pricing

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Hello higher upfront mortgage insurance premiums on all FHA single-family loans beginning October 1. Despite the president’s support for risked-based pricing (RBP), the recent version of the housing rescue bill signed into law did away with RBP because opponents argued that the government was essentially charging the highest premiums to the poorest and weakest borrowers.

According to National Mortgage News, the 1.5% mortgage insurance premium is expected to be raised by at least .25%. The boost in premium is a clear acknowledgment that new loans may still present some risk. Since the FHA will no longer be able to assess the reliability of their borrowers, the higher premium will help ensure that the program remains solvent.

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One Response to “Goodbye Risk-Based Pricing”

  1. andar839 Says: August 11th, 2008 at 3:32 pm

    hello dear sir, andar here. i enjoy post of yours very much so. i am agree to you. good day.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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