The Bush administration hopes to replace some subprime loans with FHA mortgages.
In a presentation to state housing officials, U.S. Housing and Urban Development Secretary Alphonso Jackson talked about a pending bill that would enable risk-based pricing for loans insured by the Federal Housing Administration.
HUD is encouraging Congress to pass the bill because it "would provide an option to potential homeowners who have no choice right now but to go to subprime lenders," according to a statement Tuesday. "A risk-based premium structure would allow HUD to match FHA insurance premiums with the credit profile of the borrower."
HUD said it believes the FHA program should have flexibilities similar to those of private lenders.
The Bush administration is "committed to breaking down barriers to increase the number of all affordable housing in the U.S., including rental dwellings," HUD's announcement said.