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Speculation is swirling right now that the Federal Housing Administration (FHA) may need a bailout. The FHA insures mortgage with low down payments (FHA loans require only a 3.5% down payment) so that more people can enjoy home ownership. However, that doesn’t mean that things are going well for the FHA. Even as the housing market heats up and FHA loans enjoy more popularity than they have in years, there is a budget shortfall.

Right now, the FHA shortfall is projected to be around $54 billion for the fourth quarter. The FHA is having a hard time absorbing those losses, and it may require a bailout from the taxpayers in order to survive the current situation. In order to help alleviate some of the problems, there is talk of increasing the required down payment to 5%. That might help shore things up. But there are concerns that fewer people would be able to buy homes if the down payment requirement were raised.

In the end, there are a lot of concerns surrounding the lending market, as well as concerns about ability to pay. One of the things about FHA loans is that the documentation required is stricter than what other lenders ask for, so it is less likely that borrowers will default. However, with the labor market continuing in weakness, more prime loans — and FHA loans — are moving into delinquency.