Why? The bank gets to originate a loan, have it insured by the government (so they never have to mark it down), *and* the ruse props up the value of their 'other' collateral in the rest of their mortgage portfolios.
Its an awesome deal for the banks, as it allows them to continue milking a very much over-milked market just a little bit longer. And the bank itself has no risk in doing the lending since its all insured.
So I lend you $10k in cash, and have you sign a promissory note to me for $6k, @ 50%/annum interest, for 2 years (no prepayment allowed!) -- you still think that $10k in cash 'belongs' to you?? Would you run around telling everyone you have 40% equity??Once the bank gives you 5k cashback for signing the mortgage papers. That is effectively your money. Not the banks. Bad deal for the bank but if that's the deal you made, you have to live with it.