*shrug*
I think that for the most part, if a major financial institution thinks you qualify for a product, you probably do. If their underwriters screw it up and you default, it's their problem too. I'm willing to bet that the net benefit far outweighs the potential problems that these kinds of loans present (and how do you compare it to not being able to buy your own house?). Any way to find out what the default rate is on this particular product? I bet it's low. I also bet that the average one of these loans is a relatively low dollar amount.
I think if that kind of fiscal conservatism serves you well, more power to ya. But to say that people who take out these kinds of loans are idiots is probably just a projection of your own issues (mr-i-live-in-a-rent-controlled-below-market-rate-apartment). They may be the perfect product for many people who aren't as risk averse as you are and are feeling comfortable about their future cash flow scenario.
Frankly, many people (especially first time buyers) borrow their downpayment: this is just a formalization of the process, nothing new there. Except this borrowing is secured and above-board. And you're borrowing it over time, not all up front. It's actually kind of a sweet deal, if you can't get a conventional loan.
As a data point, my teaser-rate-negative-amortization loan was, in a rising interest rate environment, WAY cheaper than the equivalent fixed rate product during the 4 years I had it, even though every time there was an adjustment period it was adjusted upwards by the maximum. YMMV.
/jordan