Money.com is reporting that the FHA and Congress are close to striking a deal that will make FHA loans more expensive for consumers.

Unfortunately, a higher number of FHA foreclosures over the last 3 years is causing the FHA and HUD to shore up there cash reserves by passing mortgage insurance costs onto new FHA borrowers.

The tragedy here is that loans currently being underwritten by FHA guidelines are done so under a more rigid set of rules, with an extra money going towards down payments, and in an mortgage environment where banks and underwriters are double checking every condition.

I would argue that as a whole, FHA borrowers today are better qualified than the borrowers from years past.  This, in turn, means better borrowers of today are paying higher premiums for the foreclosures and poor repayment history of past borrowers.  Furthermore, strategic errors by the FHA and poor underwriting over the last decade is causing financial penalties for more qualified current home-buyers.

Much like borrowing money today, and passing that cost on to future generations; this increase of costs by the FHA is pushing the financial burden of previously failed policy onto a younger group of buyers.

The full article can be viewed here:

http://money.cnn.com/2010/01/19/real_estate/fha_loan_requirements/index.htm