Is this the end near for the FHA loan?

The House Financial Services Committee has sought out to improve the financial standings for the Federal Housing Administration (FHA). Is this a good thing or a bad thing? Lets dig deeper, to sum up the proposed bill its main point would be to raise the down payment from the current 3.5% to 5% so that the borrowers have more "skin in the game" and become less likely to default. There has been a lot of arguement on this topic as the smaller down payment is not the only factor that has been found common among mortgage defaults. A group known as The Cato Group who is a group devoted to limiting government participation in free markets is in agreement with the House Financial Services Committee. In oposition to the bill Real Estate Industry advocates such as National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA) feel that a higher down payment will disqualify a lot of credit worthy borrowers and have a negative impact on housing recovery.

My take on this is that as long as we have consistent underwriting standards like we have currently and given the high priced rental market that maintaining the 3.5% down payment will put many borrowers in a better financial position than before. Remember that buying is actually cheaper than renting in this market and if you are thinking about financing with an FHA loan I would advise not gambling as rates are at a 200 day low and the down payment is really affordable.