3% down payment options were not responsible for the mortgage crisis. I would even go out on a limb and say 100% financing was not responsible. It was stated income, stated asset loans in conjunction with people that were refinancing their homes to pay off high interest credit card debt using inflated values that shady appraisers used.
Even if banks used responsible underwriting guidelines during that time, the housing market was still in a bubble. And that bubble would have corrected itself regardless. We were caught in a perfect storm because a majority of homeowners couldn't even afford to pay back the loans they were approved for. It crashed and burned. 5-10% down payments meant nothing when you lost 50% of your home value within a few years.
Think of it this way....in the beginning of your loan amortization most of your payment will go into interest and maybe a hundred bucks will go into principal. In the first 10 years of your loan, you are hardly making a dent. The average person will keep their loan for about 5 years regardless. 30 year loans in itself are really what screw over the consumer because you pay almost twice as much for the house you take a loan out for.
I think lower down payment options are a great idea, provided that people qualify to repay the loans they are approved for. In the long run it will be great for all of us that are shareholders. The housing market will continue to make a long and steady recovery and rates will remain historically low.
We can never go back to exotic loans, negative amortization, or NINJA loans. That is a history I hope we never repeat.
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