If the mortgage market blows up again, the FHA told you so. Faced with record high demand for government backed home loans, the FHA is concerned that it can't properly handle the additional volume and is going to get picked off.
"FHA will be challenged to handle its expanded workload or new programs that require the agency to take on riskier loans than it historically has had in its portfolio," Kenneth Donohue, the inspector general for the Housing and Urban Development Department, told lawmakers today. "The surge in FHA loans is likely to overtax the oversight resources of FHA, making careful and comprehensive lender monitoring difficult."
Evidently saying 'no' to loans that appear suspect is not a viable option.
Demand for FHA Loans Is Overtaxing Agency, HUD Official Says [Bloomberg]