Was the U.S. Federal Government’s 1932 Intervention in the Market for Home Ownership Desirable? How Did the Creation of Fannie Mae in 1938, Ginnie Mae in 1968, and Freddie Mac in 1970 Expand Homeownership and Shape

1160 Words Jun 2nd, 2012 5 Pages
Was the U.S. federal government’s 1932 intervention in the market for home ownership desirable? How did the creation of Fannie Mae in 1938, Ginnie Mae in 1968, and Freddie Mac in 1970 expand homeownership and shape lending practices at banks and other mortgage lending firms?

Yes, I do believe that the U.S. federal government’s 1932 intervention in the market for homeownership was desirable, not only for the government but also for potential home owners as well as those in construction, etc. Prior to the intervention only short-term, nonamortizing loans with lower LTV ratios were available and the result was many loans being defaulted on. The intent of the intervention was to assist in minimizing defaulted loans on short-term mortgages
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I think they sort of set precedence for private institutions because what they were doing worked. These three institutions are basically the foundation of mortgage lending and provided a framework that seemed to be effective so other institutions followed in their footsteps. There is definitely a positive correlation to these three lending institutions and the rise in home ownership in the U.S. to for 60 years thereafter.

Why did the U.S. Congress enact the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Depository Institution Deregulation and Monetary Control Act, and the Housing and Community Development Act? Was this legislation effective in expanding homeownership? Did the government’s promotion of subprime mortgages and high loan-to-value (LTV) subprime mortgages create additional risks for lenders and the holders of mortgage backed securities (MBSs) or collateralized debt obligations (CDOs)?

U.S. Congress enacted the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Depository Institution Deregulation and Monetary Control Act, and the Housing and Community Development Act were all aimed at expanding home ownership in the U.S. One purpose of enacting these Acts was to allow lower-income families to be able to qualify to buy a home. They were also supposed to “fix” problems related to unfairness of current regulations at the

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