Some housing officials are worried that too many mortgage companies are lending to buyers who have no money to contribute to a downpayment and who ultimately will not be able to make the payments. They point to the growing popularity of adjustable-rate financing as another red flag.

Anecdoatal evidence locally points to a growing problem with no down purchases leading to foreclosure. When I started in the industry, the rule of thumb was that half of foreclosures (in this area) were divorce related. Recently, we’ve seen as many as 3 out of 4 foreclosures coming from either low down payment loans or large refinances (often to cover credit card debt which is then run up again as soon as the refinance closes). Recently I’ve even seen several cases where the homeowner failed to even make the first payment on the loan and was foreclosed in less than a year.