Flagstar Bank in Michigan will "gift" down payments to low-income borrowers to buy a house. What can possibly go wrong?

Housing Wire reports Flagstar rolls out zero-down mortgage with closing cost aid for low-income borrowers.

Flagstar Bank is targeting low- to moderate-income borrowers with a mortgage offer that’s seemingly too good to be true.

The program, which Flagstar introduced earlier this week, requires no down payment from the borrower and also provides the borrower with closing cost assistance.

Under the program, Flagstar will gift the required 3% down payment to the borrower, plus up to $3,500 to be used for closing costs.

Free Money Gift

I think we tried this kind of thing before with unpleasant results.

Home prices were very cheap in 2009 and 2010. Now homes are expensive, but now a bank comes up with a free money scheme to homes affordable.This is a typical action that one sees at the end of every cycle.

Free down payments. What can possibly go wrong?