No, that can put the home upside down, but as long as borrower can easily afford the monthly payments, its not a problem. Where we/you/people run into issues with these loan down loans is they also tend to have lower credit and are not very much able to afford the payment.
Just because he's *able* to make the payments doesn't always mean he's *willing* to.
Where your reasoning falls apart is in the fact that there is a certain amount of inevitable turnover in the housing market. Job loss, illness, death in the family, divorce, etc. There are many reasons why a family may have to move and sell their house.
If they are upside down they lose everything.
A long enough period of this feeds on itself, depressing home prices for years and leading to ruin for many well-intentioned families.
3% down is ridiculous.
As a real estate investor, I have taken advantage of the dips to buy properties and can now withstand and even profit from the crashes that always follow this kind of program, but I will confess I am a fat cat getting fatter.