From what I understand they are still giving these loans out through programs like the USDA & VA where you can finance more than the value of the home. The government eats the PMI insurance. I paid PMI on my first VA loan back in the 80's.
America can no longer afford this. Setting these people up like this is terrible as housing has not bottomed in most areas. If a bank wouldn't under write it why does the goverment who has never made an investment outside of maybe TVA in my lifetime that saw a ROI figure they are smarter?