One of my strongest pet peeves has long been those who insist on calling FHA "The New Subprime". I have addressed it many times here and on my website at FHA Loan Advice (where I'm about to address it once again in more detail).

FHA has always underwritten loans based on a real concern for whether the borrower can indeed afford the payments. FHA has never cared only about  whether or not the borrower fit into a "matrix" or not, with no consideration or explanation of previous patterns of credit. FHA has also always theoretically held lenders and brokers to reasonable limits on defaults on the loans they originate.

Last week I read an interesting article in Business Week that ticked me off so badly I had to think about it before I penned any sort of response. Now that I have calmed down, though, I find the article does make some very good points. HUD needs more more emphasis on managing compliance and preventing fraud and they need more staff to do that. They need tighter control over the people allowed to take part in the FHA program. They need this more than we need increased limits, and higher down payments and the banning of down payment assistance. This should be the first order of business for the politicians rather than dreaming up one ridiculous ineffective bailout program after another.

You can find the article at "FHA-Backed Loans: The New Subprime" if you would like more information.