Fannie Mae: Securitization History In The United States

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred as the Dodd-Frank Act. This act was passed as a response to the Great Recession in order to prevent potential financial debacle in the future. This regulation has a significant impact on American financial services industry by placing major changes on the financial regulation and agencies since the Great Depression. This paper examines the history and impact of Dodd-Frank Act on American financial services industry.

The bursting of the housing bubble, known more colloquially as the 2008 mortgage crisis, was preceded by a series of ill-fated circumstances that culminated in what has been considered to be the worst financial downfall since the Great Depression. After experiencing a near-unprecedented increase in housing prices from January 2002 until mid-2006, a phenomenon that was steadily fed by unregulated mortgage practices, the market steadily declined and the prior housing boom subsided as well. When housing prices dropped to about 25 percent below the peak level achieved in 2006 toward the close of 2008, liquidity and capital disappeared from the market.

The turmoil also led to an adjustment of the banking system in the country in 1934. This period witnessed the creation of a new agency known as the Federal Housing Administration popularly known as the FHA. The primary purpose of the agency was to control terms, requirements, and the interest rates on home loans. The company bought mortgages and then insured them, helping lenders along with other such lending institutions with their mortgage loan

Real estate finance in the modern community is changing the perspective of modern lending and purchases. It is a means to contemporary community’s ability to develop a foundation for discussing the nature and means of public spending and purchase. As a self-government sponsored agency, Federal National Mortgage Association (FNMA) also known as Fannie Mae works with the ultimate responsibility of lending and buying secondary mortgages in the market (Oesterle, 2010). It helps in the conservation of interest rates in the real estate business in the contemporary community. There is also the need for focusing on the impacts of the Fannie Mae on real estate finance. The approach of the Fannie Mae helps lenders to use the money gained from the secondary

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?

The reporter received a call from Ms. Merriweather on 09/01/15 stating on 08/31/15 her daughter told her that her father has forced her to have sex. The reporter met with Fannie but the child was withdrawn and did not disclose much information about the allegations. During a meeting with the child on 09/01/15, Fannie told Ms. Reed she did not want to discuss the issue but told her it happened once; the specific details are unknown. It’s unknown when the child last visited her father but she last had contact with him this past summer. Fannie lives with her mother primarily and has occasional visits with her father. It’s unknown if Fannie has been taken to see a doctor at this time but her mother mentioned she will be taking Fannie for an examination.

I left you a voice mail asking to use you as a reference. I’m interviewing for a Process Improvement position later this week. Would you be willing to speak on our time at Fannie Mae? Here are some of things you might want to highlight:

Before the 1970s the banking was not a business that you went into to make money. That was until Louis Ranieri came around. Louis Ranieri had one idea that changed the housing market forever. His plan was to have a mortgage back security. A mortgage back security is an assist based security backed by a mortgage. For example, if you use your mortgage to start a business, your business is backed by that mortgage. The average mortgage loan has a fixed rate loan and takes thirty years to pay off, but then he thought to bundle them all together. They thought these would still be less risky because who would not pay their mortgage. They were doing hundreds of million dollars in mortgage bonds a year, but that all changed when they ran out of mortgages to put into the bonds. If there were no bonds then there was nothing left to make money, and the banking world was going to back to the way it was. Rather than letting that happen, the banks made a loan called a subprime loan.

One of the first indications of the late 2000 financial crisis that led to downward spiral known as the “Recession” was the subprime mortgages; known as the “mortgage mess”. A few years earlier the substantial boom of the housing market led to the uprising of mortgage loans. Because interest rates were low, investors took advantage of the low rates to buy homes that they could in return ‘flip’ (reselling) and homeowners bought homes that they typically wouldn’t have been able to afford. High interest rates usually keep people from borrowing money because it limits the amount available to use for an investment. But the creation of the subprime mortgage

Loans at the time were nonamortizing and required a balloon payment at the expiration of the term. Mortgages were available to a limited client base, with home ownership representing about 40 percent of U.S. households. Many of these short-term mortgages went into default during the Great Depression as homeowners became unable to make regular payments or find new financing to pay off balloon payments that became due. The United States government intervened in the housing market in 1932 with the creation of the Federal Home Loan Bank (FHLB). The FHLB provided short-term lending to financial institutions (primarily Savings and Loans) to create additional funds for home mortgages. Congress passed the National Housing Act of 1934 to further promote homeownership by providing a system of insured loans that protected lenders against default by borrowers. The mortgage insurance program established by the National Housing Act and administered by the Federal Housing Administration (FHA) reimbursed lenders for any loss associated with a foreclosure up to 80 percent of the appraised value of the home. With the risk associated with default on FHA-backed mortgage loans reduced, lenders extended mortgage loan terms to as long as 20 years and LTVs of 80 percent. In 1938, Federal National Mortgage Association (FNMA) was established

The first step in the chain dates back to 1938, when the Federal National Mortgage Association (Fannie Mae) was

companies, and others now entered an environment where they could compete freely on the domestic credit market. The deregulation quickly made its impact, as lending increasing by a massive 136 percent (73 percent in real terms), and institutions previously hit directly by the regulations were now free to expand, and they did. Between 1986 and 1990, banks expanded by 174 percent and mortgage institutions by 167 percent. However, finance and insurance companies went from thriving under the regulations to losing market shares rapidly, and the finance companies that originally were involved in – and benefitted – from activities such as leasing, factoring, and credit cards into direct lending under the regulation, now lost the superior amount of freedom that they had over banks. With banks entering the market, the finance companies was pushed into higher-risk markets, and since they no longer were able to receive deposits nor to issue bonds, they now had to be financed by direct borrowing in banks or by issuing what Englund refers to as marknadsbevis. Marknadsbevis can be likened to non-callable bonds and were normally guaranteed by banks, which indirectly exposed the banks to extra credit risk (Eklund, “The Swedish Banking Crisis”). Although, it should be noted that Sweden – who between 1985 and 1990 had a current account deficit-to-GDP ratio of 1.1 percent – experienced less overheating than Finland – who had a corresponding figure of 2.9 percent – during the latter part of the

The Savings & Loans crisis of the 1980s produced the biggest collapse of US financial institutions since the Great Depression. It emerged due to volatile interest rate climate in late 1970s when depositors withdrew from these S&L institutions in large number and put them in money market funds where they could get higher returns as these money market funds were not under the purview of Regulation Q which restricted the interest these S&Ls could offer to their depositors.

The subprime loan crisis (SLC) was a national banking emergency caused by a sharp increase in high-risk mortgages going into default after the bursting of the housing bubble. A financial crisis occurs when there is a disruption in the flow of funds between borrowers and lenders within the financial system causing financial friction. A financial crisis can arise due to a number of factors such as incorrect speculation of stock markets, an international crisis or like in the case of the 2008 crisis, an asset price boom or bust. A global financial crisis (GFC) is a situation where many nations at the same time decide that the contracts they hold are risky or that the financial assets they hold are likely to be worth less than thought