Foreclosures - May see more coming in the future...

An article on MSN.com today captured the essence of the problems that FHA has been dealing with over the recent months. FHA has been struggling to keep foreclosures from piling up, they are paying for 1 of every 4 loans that were made since 2007, and there willingness to insure loans with lower down payment are all reasons for the increase of foreclosures that is on the horizon.

These foreclosures are different, in that they are economically driven. They are due to unemployment, furlows, and tanking retirement accounts. These new foreclosures aren't just for people that couldn't afford the loan and were taken advantage of by a Predatory Lender. No, these loans that are now in foreclosure, are from people that got the right loans and worked hard to keep the house but now can no longer afford to do so.

There are always competing arguments as to whether requiring only 3.5% down is really enough for a person to buy a home. My opinion is that with the right person(s) as the owner of the home, then yes it is a good product. It does lend for people to "justify" abandoning a home because they didn't have to give a lot to get into the home, but it also gives people that would otherwise be unable to own a home the security of having a place to call their own.

With the news about FHA facing difficulties with rising foreclosures, it is no wonder that they are raising the Upfront Mortgage Insurance Premium from 1.75% to 2.25% and requiring 10% down for people with lower than 580 credit scores (even though most lenders won't underwrite an FHA file with less than 620 credit score).

FHA is a viable product with the right people and the right loan officer educating them about the process of obtaining a mortgage and what it means. Without the FHA making an effort to help people get into homes, there would be a lot less movement in the housing market. It is still just a matter of selectively choosing (with proper documentation, income, etc.) the qualifications people must meet in order to obtain FHA insurance on their new home purchase.

Do you think that FHA should change their qualifications and requirements or do you believe the product is great for people who understand what they are doing and manage their finances in the best way possible.