Well, the FHA does require full-doc of income and reasonable debt ratios (I believe they’re at 29/41 right now), so it’s hard to compare them to the liar loans that most were using to buy beyond their means. While there’s no set income limit to use a FHA loan, to get the $697500 loan, the buyers would have to be able to document around 230K a year in earnings, without excessive debt on top of that.

I think the value increase was a bad idea on the FHA’s part (since their intended purpose was to help first-time buyers, hence the low down requirements), mostly because, even in San Diego, at least now (though maybe not in 2005/2006) you can get a starter house for their max previous (about 363K). I doubt many people would consider a 700K house a “starter” house.