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FHA Will Boost Premiums, Sell Mortgages to Improve Finances

The Federal Housing Administration will raise annual premiums by 10 basis points, sell 10,000 delinquent loans per quarter and boost relief for borrowers as part of a plan to improve the agency’s finances, U.S. Housing and Urban Development Secretary Shaun Donovan said today.

Donovan spoke at a briefing in Washington a day after the FHA reported a $16.3 billion deficit in its insurance fund due to defaults on loans it insured during the housing bubble.

“This set of measures will reduce the likelihood that FHA will need to tap into Treasury assistance next September,” Donovan said.

The FHA, which currently backs 15 percent of U.S. mortgages, provides liquidity to the housing market by insuring lenders against losses on loans with down payments as low as 3.5 percent. The premium increase outlined today is for the annual fee charged to borrowers to guarantee their lender will be made whole in the event of a default.

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