New 15-Year Mortgage "Makes Downpayment Unnecessary"

``But isn't it risky for the Wealth Building Home Loan to allow for a zero percent down payment? Within 10 months, a Wealth Building Home Loan with a zero down payment has a lower loan-to-value ratio than an FHA loan with 5 percent down. After the 41st month, the Wealth Building Home Loan drops below 80 percent loan-to-value ratio even without any house price appreciation, while the loan-to-value ratio on the FHA loan is still over 90 percent. The 15-year loan is an equity generating machine, which makes a down payment unnecessary -- the funds are better used to fund the interest rate buydown.''

Interesting idea, but of course, you need to be able to afford to pay a larger monthly payment, or equivalently, can only buy a more modest property, so the applicability of this is limited (the idea is described in more detail here, where they claim "90% of the buying power is preserved", but we don't see how that happy result is modeled...). We also wonder about their risk provisioning, as even more is riding on not having early payment defaults (and it's not as if those didn't trigger a mortgage meltdown before...)