| Once 100% financing became widely available, it | | | | more money people had to put in to the |
| was enthusiastically embraced by all parties: the | | | | transaction, the less likely they were to default. It |
| lenders suddenly had a huge source of new | | | | was that simple. The borrowers probably intended |
| customers to generate high fees, the realtors and | | | | to repay the loan when they got it, however |
| builders now had plenty of new customers to buy | | | | they did not feel much of a sense of responsibility |
| more homes, and many potential buyers who did | | | | to the loan when the going got tough. High |
| not have savings were able to enter the market. | | | | loan-to-value loans had high default rates causing |
| It seemed like a panacea; for two or three years, | | | | 100% financing to all but disappear, and it made |
| it was. | | | | other high LTV loans much more expensive, so |
| There was a problem with 100% financing (which | | | | much so as to render them practically useless. It |
| was masked by the rampant appreciation brought | | | | was all part of the credit tightening cycle. |
| about by its introduction): high default rates. The | | | | |