FHA mortgages, loans insured by the Federal Housing Association, have needed to be modernized and generally overhauled for a long time. Finally, HUD (Department of Housing and Urban Development) is doing the job. But not all housing leaders agree with its current proposal. The proposed changes are designed to increase homeownership opportunities for more Americans, according to HUD. And they want to make FHA mortgages a more attractive and important financing option in today's market.

?FHA was created during the Depression to stimulate the housing market at a time when homeownership wasn't a reality for most people,? said Brian Montgomery, assistant secretary of HUD. ?FHA has helped over 33 million families become homeowners since that time, but now it needs to be able to adapt to today's marketplace. A new FHA would offer many more Americans a variety of homeownership financing options.?

The recently proposed legislation would create a risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower, HUD noted. It would also eliminate the currently required 3 percent minimum down payment, reducing a significant barrier to homeownership for many families. And it would increase and simplify FHA's loan limits. Among other changes, it would make it easier for FHA to serve purchasers of affordable housing such as manufactured homes and condos. And it would increase the loan limits to reflect the real cost of manufactured housing today.

?To meet the needs of underserved families who desire to purchase a home, we believe Congress should grant the FHA broader authority outlined in the Administration's fiscal 2007 budget proposal,? a HUD spokesman said.