The FHA (Federal Housing Administration) has been reviewed and deemed antiquated.The Government has decided that all that muddle in the sub-prime market has created a bad taste for mortgages on the Hill and there must be something done about it.

     Apparently, the government feels that minorities and the elderly have been targeted by shifty lenders and are slowly all being thrown into the foreclosure corral.They will come to save the day with a new and improved FHA loan before it gets even worse.

     The FHA mortgage has taken the side line to sub-prime lenders, because lenders can provide mortgages at higher loan amounts, higher loan to values without requiring insurance and even better- can anticipate a refinance in 24 months.

     FHA loans have several features that prevent the modern day borrower from choosing this loan type:low loan limits, slight down payment requirements, a lifetime mortgage insurance premium (MIP) and stricter guidelines for appraisals and documentation.All these items have made the FHA an undesirable.The Government is now drafting a revision of the FHA loan which will proceed to modernize the requirements and make the loan a more competitive product.

     They are looking at: increasing loan limits lowering the down payment requirement to as little as 1% of the purchase price introducing a risk based insurance premium rated according to credit risk making the process a bit more streamline.

     The FHA is hoping to have this revamped set of guidelines made quickly.The idea is to put the FHA out there as a major player in the market before sub prime completely kills the housing industry.What they have not thought of is a way to protect the consumer from being ripped off on this loan.The FHA mortgage is one of the biggest money makers for brokers.They can push these babies and make twice as much as they do on a conventional mortgage.Oh well, where is the borrower to turn?

– Dale Siegel