The FHA Program which has long been a one size fits all program where someone with no established fico score or credit history as well as someone with a seasoned credit history and perhaps a score of 720 were eligible for the same interest rate pricing. In addtion, the up front mortgage insurance premium and montly premiums were also the same...well not for long. 

FHA has issued changes to its mortgage insurance structure in an effort to assist more homeowners who are struggling to keep their homes out of foreclosure due to higher cost adjustable rate mortgage.

The FHA today issued final guidance that will permit its flagship mortgage insurance program to assist more homeowners stay out of foreclosure due to higher cost adjustable rate mortgage loans.

To ensure taxpayers do not assume the cost of this expansion, HUD's Federal Housing Administration (FHA) will implement a fair and flexible premium pricing structure beginning July 14, 2008.  Read more here...

"By charging slightly higher premiums based on risk, FHA will be able to extend the benefits of its FHASecure program to more homeowners affected by the volatility in the mortgage market. Borrowers refinancing into FHA from the subprime market are better off, even with slightly higher mortgage insurance premiums, because FHA insurance gives them access to substantially lower interest rates, and lowers their overall mortgage costs. The difference between the existing 1.50 percent upfront premium and a 2.25 percent premium for a $150,000 mortgage is only about $7 per month. With families turning to FHA in record numbers, the agency is on pace through its expansions to help approximately 500,000 families refinance into its affordable mortgage product by the end of this year."

For a long time now, FHA has been deemed the "A paper" loan for higher risk/subprime homeowners and I've always found it odd that truly someone who may had not established themselves as a low risk borrower was able to borrow money at the same rate as someone who had.

What FHA is doing is fair and long over due...we'll still have flexible guidelines where homeowners with perhaps a few dings on their credit profile can still obtain excellent interest rates and simply pay a slightly higher premium to guard lenders agains default.  I applaud the move and believe that many homeowners will benefit along with the expansion of the FHA Secure Program.

We're not out of the woods and won't be for some time, but I think things are heading in the right direction.