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Q: What’s the best thing about hitting yourself on the head with a hammer?
A: Stopping

During the housing bubble, an alliance of homebuilders and mortgager lenders teamed up to give unqualified
buyers access to the mortgage market. The vehicles were Down Payment Assistance Programs (DAPs) and
subprime mortgages, and were designed to circumvent Federal Housing Administration rules prohibiting
builders from colluding with buyers to obtain zero down payment financing.

Here is how these arrangements worked.

  • A builder would artificially inflate the price of the home by the required down payment.
  • The builder would channel the down payment to the buyer, effectively reducing the real selling price to its net amount.
  • The buyer could then purchase the property with 100% debt financing.