There was a long term American Policy of promoting home ownership. The main aim was to make the financing of a new home as easy as possible for the homebuyer. Overtime, various financial institutions have been set up to promote homeownership such as Fannie Mae (The Federal National Mortgage Association). This government sponsored enterprise (GSE) was founded during the great depression by Congress, its aim was to stimulate the housing market by making more mortgages available to moderate-to-low income borrowers. They do not originate or provide mortgages to borrowers, they purchase already issued mortgages off the mortgage originators and guarantees them via the secondary mortgage market.…
After the crash of 1929, there was a need for an act that would limit the use of bank credit for speculation and to direct bank credit into what more fruitful uses, such as industry, commerce, and agriculture. In response to these concerns, the main requirement of the Banking Act of 1933 was to separate commercial banking from investment banking. Basically, commercial banks, which took in deposits and made loans, were no longer allowed to finance or deal in securities , while investment banks, which financed and dealt in securities, were no longer allowed to have close connections to commercial banks. After the act passed, banks were given a year to decide if they would dedicate all their attention to commercial or investment banking. Only…
The Federal Housing Administration (FHA) was created by National Housing Act of 1934. The FHA set standards for mortgages, properties, and buyers and insured loans originated by qualified lenders. While the FHA provided reassurance to mortgage lenders and created liquidity for the housing market, HOLC helped to avert default in the U.S. by refinancing defaulted loans. The Home Owner’s Loan Corporation (HOLC) raised capital by issuing bonds and buying FHA-insured mortgages. Subsequently, the HOLC purchased these toxic financial instruments; they reconstructed mortgages.…
Currently, the two most common mortgages are conventional and FHA. FHA is nothing more than a big insurance program for lenders. FHA is not lending you any money, they are just insuring the lender that you are obtaining your loan through against default. When choosing between an FHA and conventional mortgage you must ask yourself a few questions.... Is my credit good?…
Home buyers are now more successful and able to buy homes today. The mistakes of the past have lead to the increase of financial checks which verify the individual’s ability to pay back the loan on the house. Thus, it is less likely the individual’s home will be foreclosed upon. The transaction is safer. Home buyers have lower interest rates on their mortgages and are more likely and able to pay them back.…
Veterans loan programs include the prerequisites to ensure they offer the best assistance to our military veterans. While selecting a house, it must be one you can stay in, and you have to be ready to relocate without delay. You'll have to stay there for at least 3 years, so be certain that the home you acquire is located in an area where you and your family could be comfortable. You can use your VA eligibility in Texas to purchase a multi-family property, but it needs to be less than five years old. There are three categories of loan programs for military veterans.…
The Great Recession was caused by a number of different factors and the effects were abundant. With so much disagreement on what truly caused the recession, it is apparent that it cannot be pinpointed to one single event or action, but rather a number of factors that set off this devastating economic event. The recession can be blamed on a combination of factors such as deregulations by politicians, AIG, the S.E.C, and many others. The effects of the recession were felt by homeowners, banks, and many working Americans as the economy declined, leaving numerous drowned in debt.…
As stated by the chief economist at the National Association of Realtor, this can be partially explained by the fact that many mortgage lenders refuse to give out large loans to individuals with large debt obligations, such as those resulting from student loans (Holland). After college graduation, some young adults choose to move back in with their parents to avoid having to pay rent and other expenses. Approximately 36% of Americans aged 18 to 31 were living with their parents in 2012 (Fry). Because the housing market accounts for approximately 15% of the total economic activity in America, postponing homeownership directly creates negative economic consequences (“Social Benefits of Homeownership and Stable Housing ”). Residential investment, which includes construction of single and multi-family structures, residential remodeling, and production of manufactured homes, specifically comprises about 5% of America’s overall national gross domestic product (GDP) (Greiner).…
In 2007, the ongoing once-in-a-century financial crisis has seriously impacted the development of the United States, causing the subsequent Great Recession. What was the major factor that causes this recession? The financial crisis, triggered by American subprime mortgage crisis in August 2007, has gradually turned into a great recession. The central area of crisis is unquestionably Wall Street. Investment banks in Wall Street collapsed along with the recession Therefore, the subprime mortgage crisis, also known as “mortgage meltdown” is the immediate cause of the recession.…
Middle Class: The American middle-class is anyone who comfortably (though surely, not without hardship at times) affords life’s necessities. These include: shelter, sustenance, clothing and transportation. It can be used as a label for those in the vast socio-economic group which is comfortably above the poverty level, but not within reach of say, the top ten-percent. Many people believe the middle-class shrunk as interest rates on mortgages rose, making it difficult for people to make payments and hold onto their homes. African-American: Any people of African ancestry who have been born in America as well as those who have or were forced to settled in America and who have made a home in America.…
Aims & Their Importance Our aim is to find out if there is Interest Rate Parity (IRP) between the USA and China, over an annualised period of 10 years (April 2005-April 2015). We think that this is an important topic as the US are the current global economic superpower, and China is an up and coming power. Also, as there is a lot of trade between the two countries, and we know that china is highly dependant on their exports for GDP growth. A higher Yuan causes exports to slow ( 1% decline for every 10% increase in Yuan), leading to slower economic growth. As economic growth slows, their economy becomes more risky, which adds a risk premium to their interest rates in order to compensate investors for a riskier investment in their economy, as…
The Giant Pool of Money Analysis Every individual in the United States wishes to be a homeowner because owning a home is considered as the ultimate achievement by majority of the population and is a symbol of successful and fulfilling life (Grant, Rick). So in the early 2000s when individuals were provided an extremely easy way of getting a loan and buying a home irrespective of their job and background, majority of them grabbed the opportunity. But, this scheme of simplifying mortgage rules and procedures led to overvaluation of mortgages based on an assumption that housing prices will continue to escalate led to the financial crisis of 2008 (Blumberg and Davidson). One of the biggest issue during crisis was that the decisions made around…
For example when you buy a house for $200,000 but the current market value of the house can increase or…
The American Dream of home ownership was no doubt sucker punched during the Great Recession and became what many wished was a nightmare they could wake from. Deep emotional scars pierced many of all ages who had lost their homes during the housing crisis. As a result, visions were blurred as they wondered whether they would ever be able to own their own home again. People who were fortunate enough to maintain their mortgages saw their home values decline. Trust in our economy was compromised in the process.…
When is the right time to purchase a home? Buying a home is a huge financial decision and moment in your life. It’s the “American Dream” to own a home with a white picket fence but it can also become an American nightmare if you are not prepared. There are three major expenses that go in to buying and maintaining a home. Your on-going costs, closing cost and down payment.…