The Federal National Mortgage Association Essay

1133 Words Oct 26th, 2016 5 Pages

The Federal National Mortgage Association functions as an entrepreneurial agency for the reason that the costs are heavily concentrated on some industry, profession or locality, however the benefits are spread over many, if not all people.1 This type of agency will face hostile interest groups because of the low-per capita benefits. Due to costs having a high per capita value, the agency has a strong incentive to oppose the law.1
The Federal National Mortgage Association The Bank Act of 1932 led to the establishment of The Federal National Mortgage Association (FNMA). The act gave 215 million dollars in treasury along with tax-free bonds to help fund mortgage and other financial institutions.2 Before the era of FNMA, homeowners could not afford home mortgages. The mortgage loans were short term renewable loans that required 50 percent of the home’s value as a down payment.3 There was no regulation of loan prices including large balloon payments with short maturities. Franklin Delano Roosevelt created FNMA as part of his New Deal.2 FNMA was an amendment to the National Housing Act of 1934.2 The company worked as a way to boost the economy after the Great Depression. Its mandate was to provide liquidity and stability to the United States mortgage market in order to achieve affordable housing.3 Separate from its mandate, the government wanted FNMA to encourage more people to buy houses with loans to increase homeownership. The increase will create more jobs in…

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