Several years from now we will look back at these days of 80/20 financing, shake our heads and say "can you believe we got people in with zero down, stated income and marginal credit?"

You read it here first. 80/20 financing for all but the cleanest of borrowers will be a footnote in Mortgage Banking history some day along with the graduated payment mortgage and the 3-2-1 buydown.

The reason is simple economics.

As we discussed here recently, there is no housing bubble that will cause Real Estate values to crash. However, when price appreciation slows or stops in the most heavily populated parts of the country, those 80/20 borrowers who have to sell will be in big trouble thanks to their negative equity and cash poor position. The number of foreclosures and massive associated losses will then dictate a change to more traditional underwriting guidelines.

So enjoy the 80/20s... while they last!