The housing crisis that nearly brought down our financial edifice in the period of 2007-2009, never actually disappeared, for today's sheer amount of mortgage debt is about to surpass the heights of quarter 2 of 2008, in which mortgage debt at that time was as reported by the federalreserve.gov a total of $14,736,703 trillion dollars, and as of quarter 2 of 2017, is currently at $14,589,985 trillion dollars, or just 1% below its previous peak, in which no doubt, that peak will be surpassed sometime within the next six months. This would signify, that all those mortgages that were created earlier in this millennium via "liar" loans, or when pricing for homes was sky-high and pundits were stating that housing prices never go down, have somehow in some form come back home to roost, for our current mortgage debt is virtually the same.
To get a perspective of how high this mortgage debt is, $1 trillion dollars in mortgage debt was not first succeeded until quarter 3 of 1977, and by 2001, statista.com, reported a mortgage debt of $7.48 trillion dollars, so when the mortgage debt nearly doubled again in a scant seven years, that should have been a clarion call that not all was right in regards to mortgage lending, and while this number, did moderate and come down somewhat during the financial crisis, it never dropped below $13.31 trillion dollars, which equates to a correction of only about 10%, which would basically imply that the remaining 90% of all mortgages are healthy, or healthy enough.
In point of fact, this stunning growth in mortgage debt, indicates that the financial institutions that lend the money, do so, knowing that by selling their loans to Fannie Mae and Freddie Mac which are government sponsored agencies, that having done so, that the maintenance and responsibility that these loans remain current and viable are no longer their essential responsibility, but those agencies, which are, backed by the American government, and the taxpayers of this nation.
This means that a prudent down payment of 20% in order to procure a home, is no longer de rigueur in mortgage lending, instead conventional loans are initiated at 3% down for qualified buyers, FHA loans at 3.5% down, and VA loans can require no down payment at all. In fact, as reported by the latimes.com, "The typical down payment for 60% of first-time home buyers is 6% or less." So that, when homes are consistently purchased with down payments which are consistently low, mortgages are thereby created which are significantly higher in the amount of money due to the originator or owner of it, and the more money borrowed, equates to more money "earned" so banks and other lending institutions have an incentive to lend out as much as they can, in order to meet their sales and profit goals.
The main problems with purchasing houses with little money down, is that it encourages buyers of housing to purchase more "house" than their financial resources would be prudent to actually buy, as well as the more leverage that any investment has, equates to more risk, and while it is true, that leverage can make people money, so too, leverage can bankrupt and ruin people just as well.
In an era of so-called "full employment" and of an economic "recovery" of nine years and counting, recognize that economic cycles are a part of American life, so that, when the next recession comes, as it will, those that lose their jobs, or can't pay their bills, or have to relocate, or aren't able to budget their money, will find that having a mortgage that they no longer can afford to pay for, will create incredible havoc for them, and once again, our banking institutions, and our country's financial well-being, will be rocked.