Here is a new head scratcher direct from the Feds.

First the info:

Since the Feds took over Freddie and Fannie they have been limited to only lending on high quality mortgages. This should reduce "future" losses. BUT

The Fed has since shifted their high risk mortgages over to FHA  and two other government programs.

Did you know that 60 percent of home purchase loans now have down payments of less than 5 percent, compared to 40 percent at the height of the bubble?

In 1990 FHA had about 4%of loans with less than a 3% down payment. In 2008 44%of their loans had less than a 3% down payment.

Pre 1990 policy required 10 to 20% down payments to purchase homes. You had to have good credit and low debt to income ratios. HUD policy loosened lending creating the wonderful bubble we just experienced.

Despite the governments recent regulation of the financial industry, they seemed to have overlooked their own backyard. Will current HUD policies create the next bubble with their lending practices?

I just don't get it!

Here is an article asking these same questions from the Journal of American Enterprise Institute.