Also, the FHA could provide more refinancing options for riskier households if it could tailor the premiums it charges for mortgage insurance to the risk profile of the borrower. As I have discussed in earlier testimony, the Federal Reserve is taking steps to avoid subprime lending problems from recurring while preserving responsible subprime lending.
In coordination with other federal supervisory agencies and the Conference of State Banking Supervisors (CSBS), we have issued principles-based underwriting guidance on subprime mortgages to help ensure that borrowers obtain loans that they can afford to repay and have the opportunity to refinance without prepayment penalty for a reasonable period before the first interest rate reset.