The Federal Housing Administration (FHA) is considering raising insurance premiums on loans above $625,500, according to HUD secretary Shaun Donovan.

In testimony before a House committee on Thursday, the Housing and Urban Development (HUD) secretary said FHA is looking at how it should price premiums for higher balance loans of up to $729,750.

Donovan said HUD's fiscal year 2013 budget will include "specific proposals about how we move forward with those loans." The agency's annual budget proposal typically is published in February.
Congress recently restored FHA's maximum loan to $729,750, but left the Fannie Mae/Freddie Mac cap at $625,500.

HUD expects the move will push more business to FHA.

The secretary noted that the performance of higher balance FHA loans has been good thus far. The main reason for increasing the insurance premium or adopting other policies would be to "encourage private capital to come back" to the jumbo market.

The secretary also revealed the HUD is going to publish an indemnification rule in the "very near future" to hold FHA lenders responsible for bad loans.

"In addition, we will soon publish a rule that reduces allowable seller concessions to protect the Mutual Mortgage Insurance Fund from risks associated with inflated appraisal values," he testified.

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