FHA Mortgages the "next bubble"

I saw a brief presentation this morning from a mortgage broker on the latest requirements for the FHA loan program. FHA, which stands for the Federal Housing Agency, provides mortgage insurance so that a lender is made whole in the event of a mortgage default. This insurance provides an incentive for lenders to make loans that the private sector may not otherwise make.

I was surprised to learn that to qualify for an FHA loan, it is not necessary to have a credit score, it is not necessary to have money for any down payment (the down payment can be as low as 3.5% and that amount can be paid by someone else as a gift), and even borrowers in Chapter 13 bankruptcy may still be eligible for an FHA insured loan. Yes, you can be in bankruptcy, and the government still thinks it's an okay time to take on the biggest debt of your entire life.

The presenter pointed out that the FHA programs have been a "Godsend" for getting people mortgages and getting homes sold, but that the loans may be contributing to the formation of yet another "mortgage bubble". That sounds about right to me.