Grasping Reality on TypePad, by Brad DeLong

...announced that mortgage-finance companies Fannie Mae and Freddie Mac would start backing loans with down payments as low as 3%. And on Tuesday, three federal agencies approved a loosened set of mortgage-lending rules, removing a requirement for a 20% down payment for a class of high-quality loan known as a 'qualified residential mortgage'.... In addition, veterans can apply for 100% financing on loans insured by the Veterans Administration, and the U.S. Department of Agriculture has several loan programs.... Borrowers with low down payments do default in higher numbers than similar borrowers with higher down payments, said Mark Zandi.... However, Mr. Zandi still believes that low-down-payment lending can be done in a responsible way, by making sure borrowers have solid credit, have low ratios of debt compared with their income and are taking on standard loans...