FHA loan defaults hit record highs this year while FHA rates hit record lows in 2009.  Loan defaults is a major reason why is HUD going to change FHA requirements in 2010.  According to a senior HUD official there are a few FHA guideline changes under consideration:

1. Minimum down payment will rise. Currently, you only need a 3.5% cash down payment to obtain FHA financing. Legislation has been proposed that would increase this to 5 %, which is the minimum down payment amount required on most conventional financing.
2. Minimum credit score for FHA loans will rise. A few years ago, you could get an FHA loan with a credit score of 500.  Today, most FHA lenders require you have a credit score of at least 640. This could rise even higher as FHA seeks to upgrade its borrower profile, eliminating loan opportunities for first-time home buyers with thin credit or lower credit scores.
3. FHA mortgage insurance premiums will rise. Although FHA mortgage insurance premiums rose in 2009, expect them to rise again in 2010, as FHA seeks to replenish its coffers.
4. Seller’s will be able to give buyers less money. Right now, FHA allows sellers to kick in up to 6 % to cover a home-buyers’ closing costs and other lending fees. FHA will likely lower this to 3%.
5. Kicking out abusive lenders. FHA has moved swiftly to end relationships with several lenders, including Taylor, Bean and Whitaker Mortgage Company.
6. Increasing lenders’ minimum reserves. Currently, FHA requires that lenders have only $250,000 in reserves to use to repay FHA in case of mortgage fraud. FHA is considering raising that amount to $2.5 million. That move will likely limit the number of mortgage brokers who are able to do FHA loans.