FHA Raises Premiums for Home Loans

The Federal Housing Administration, a U.S. agency that is rapidly shouldering more of the risk on home loans, raised the premiums it charges for insuring that mortgages will be repaid.

In a posting on its Web site late Tuesday, the FHA said the up-front premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That's up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers" credit score and the amount of the down payment or equity they owned in the home. In late July, Congress approved a housing bill including a provision requiring the FHA to revert to a standard premium at least until Oct. 1, 2009.