SAN FRANCISCO — The Department of Housing and Urban Development is reducing the premiums it charges to insure its mortgages, a move that could save borrowers up to $1 billion a year and spur growth for mortgage lenders that rely heavily on FHA loans.

HUD Secretary Andrew Cuomo said Monday that the agency will reduce its up-front premium by 75 basis points, or one-third of the current 225-basis-point annual premium, when homeowners have built up 22% equity in their home. It also plans to pay premium refunds to current borrowers. The changes, part of the Homebuyer Savings Plan, are to be implemented Jan. 1. The plan is modeled after private mortgage insurance legislation passed by Congress in 1998. Unlike that legislation, the department said, this program will continue to insure the mortgages after the annual premium payments are eliminated.

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