CNN 2010-01-26

As the mortgage crisis has deepened, more people have turned to Uncle Sam for their home loans. And for many, it's their last hope for home ownership.

Well, beginning today those FHA mortgages are going to be even tougher to get.

Let's break it all down. Christine Romans, part of the CNN money team. Ok, how are things going to change and what do we do?

Well, look. These are very popular over the past couple of years. These are loans for relatively 1 small loan balances for people who might not have 720 or even a 700 credit score.

This is a way that the United States government for years has tried to make sure that underserved communities have been able to get in there and show that they can be responsible borrowers and buy a home. Incredibly, incredibly popular, this is the government backing these mortgages, not necessarily giving them but backing them.

So here is -- what are the new rules? More cash up front. These are mortgages that require mortgage insurance. They're going to raise that insurance premium 2. It's going to mean a larger down payment if your credit score is below 580, a 10 percent down payment.

Right now you can get a loan through the FHA -- backed by the FHA, rather, for as low as three and a half percent down. And it's going to mean tighter oversight 3 of lenders and also it's going to limit the amount of money that sellers can kick in for closing costs. Something else that sort of helps people get over the hump if they don't have a lot of money saved and they have a lower credit score and they are trying to borrow a little bit of money for their homes.

Now, we know that first-time home over the past years, first-time home buyers, about half of those loans have been backed, have been loans backed by the FHA. And in 2009 a third of all home loans are backed by the FHA, but the FHA of course, also trying to protect its bottom line and taxpayers 4 as well and trying to protect against rising defaults.

Well, we've got a weak housing market too; it's hard to pay those loans.

Yes.

All right, give us the Romans numeral today.

The Romans numeral is 2,824,674 and that number is exactly what you're talking about, Kyra. It's the weak housing market. That's how many people got a default notice last year. I mean, that's a record. I mean, think of that, one in 45 homeowners in this country got a notice in the mail saying, "Hey, you're late paying your bills." It's one of the reasons why the government agencies, the banks, everyone trying to make sure they're making credit available to responsible borrowers but also knowing that they're going to have to try to protect taxpayers from future losses. A lot of people defaulting on their homes; it's still happening.

Yes, we're waiting for change, that's for sure. Thanks, Christine.