Fannie’s decision to lower downpayments is idiotic but not surprising. Our credit crisis was partially brought on by a Fed that kept rates too low so as part of their hair of the dog philosophy, Bernanke tried solving it by lowering rates into negative real rate territory once again. The American economy has burdened itself to the point of a recession with overconsumption fueled by excessive consumer debt (mortgages, credit cards, et al). So as part of our government’s hair of the dog philosophy, the administration created this ridiculous fiscal stimulus scheme and have given consumers money in the hopes they will consume even more. We have a housing / mortgage crisis because people didn’t put enough equity into their homes and so it really shouldn’t be a surprise to anyone that Fannie decides that it would be a great idea to solve this crisis with more of the hair of the dog philosophy and allow people to purchase homes with almost no equity. BRILLIANT! And it is important to note that this decision was done either with the support of or with the suggestion of our politicians. This is a policy decision pure and simple. These guys are convinced that it is wise to do more of what got us into trouble with the hopes that it will slow home price declines or maybe even prop up weak markets. Good luck with that.