Case 15

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Tausha Johnson
Case #15

1. In 1932, the federal government’s intervention in the market for home ownership was desirable. Not only was it desirable, but it was needed. It has been the federal government’s desire to have every American become a part of the American dream and be a homeowner. In 1932 President Hoover signed the Federal Home Loan Bank Act to establish a series of discount banks for home mortgages. This would assist in increasing the likelihood of Americans owning a home and not feeling that they were restricted because of financial pressures. Fannie Mae, Ginnie Mae, Freddie Mac were created to help bail out banks that had a growing number of defaults in mortgages. These three enterprises made it possible for banks to offer mortgages to riskier clients who normally would not qualify. This greatly expanded homeownership. It also shaped lending practices at banks and other mortgage lending firms by creating new forms of financing and creating the market of secondary mortgages. 2. Why did the U.S. Congress enact:

* Community Reinvestment Act – passed in 1977 requiring banks to lend in the low income neighborhoods * Mortgage Disclosure Act – passed in 1975 to provide the public with loan data that can be used to determine whether or not financial institutions are serving the needs of their community, identify possible discriminatory lending patterns and make this data publicly available * Depository Institution Deregulation and Monetary Control Act – passed in 1980 to provide gradual elimination of limitations on the rates of interest payable on deposits and accounts; authorize interest bearing accounts * Housing and Community Development Act – amended to create section 8 housing These methods were effective in expanding homeownership by making it easier and providing greater methods to become a homeowner. The government’s promotion of subprime mortgages created more problems that assistance. It was the initial cause of the 2008...
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