I know I had seen this as a possibility, but can't remember who was doing them.

They were closing a second mortgage on a 10 year term with no prepay penalty.

Does anyone know any lender that is doing them?

I've come across this:

1st Time Home Buyer Tax Credit Info:
http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit
http://www.ncsha.org/section.cfm/3/34/2920
http://www.realtor.org/research/economists_outlook/commentaries/fthb_taxcredit0709

As far as I know, I haven't seen or heard of any lenders willing to monetize the tax credit before closing to be used for closing costs or putting down extra principal.  The borrowers still have to put down their own money (or gift from family) on the required down payments.  I just don't think there's enough benefit to the lender to do this, since closing costs are typically covered by the seller anyway, and the borrowers still have to have the minimum down payment.

I have not seen any lender's doing a 2nd either, however there are many states, including Texas that are providing down payment assistance in the form of a short term loan prior to filing and receiving the federal first time homebuyer tax credit.  Texas will lend up to 5% of the 1st mortgage or $7,000 for DP & CC for 90 days at zero interest.

I would be happy to give you more information, but remember this is for Texas properties.