Partial excerpt from the White House transcript of remarks by the President to the National Association of Home Builders:

"To build an ownership society, we'll help even more Americans buy homes.  Some families are more than able to pay a mortgage, but just don't have the savings to put money down.  We'll continue to help them realize their dreams with a downpayment.  So I'm asking Congress to pass my Zero Down Payment initiative.  We should remove the 3 percent down payment rule for first time home buyers with FHA-insured mortgages.  This change could help as many as 150,000 people become homeowners in the first year alone."

As I said before, 100% financing as a single loan is a disaster waiting to happen.  With no equity in the home, delinquent payments and foreclosures rise.  100% financing in the conventional market has contributed to the dramatic drop in average equity in home ownership in the U.S.

What makes more sense to me is 100% financing but in the form of two loans.  I know this already exists, but not the way I would structure it.  Right now 100% financing in the conventional market consists of one long term fixed rate loan for 80% or 90% of the purchase price and an additional adjustable loan, also a 30 year loan, for the remainder of the purchase price.  My change would be to make the second mortgage a short term loan.  This way equity starts right away and the homeowner gets a sense of value out of the home quickly.  Since the shorter term would be only on the smaller loan the impact on monthly payment would be limited and as has been noted 100% financing is usually used by people who can afford the payments but just don't have the downpayment. 

I would expect that the delinquency and foreclosure rates would be closer to the norm, thus eliminating the problem with 100% financing for investors.  And the 150,000 homeowner's would get a true sense of ownership and positive asset growth sooner.  A win-win for all.