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
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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…show more content… Ultimately, in my opinion, these Acts all seemed to contribute to allowing those who maybe should not be qualified for a loan, to obtain one anyways. The legislation was definitely effective in expanding homeownership because now way more people were able to qualify for mortgages. The government’s promotion of subprime mortgages and high LTV subprime mortgages most definitely created additional risks for lenders and those who obtained MBSs and CDOs. I would think that by offering loans to those with low incomes, unstable employment, high debt to income ratios, etc. the risk is increased for all parties involved. By not ensuring (as much as a lender possibly can) that an individual is capable (now and in the future) of making the mortgage payments is bound to result in disaster. By the government promoting such loan types, it just further enabled the lenders and homeowners to basically dig themselves their own graves.
Was CFC pursuing an ethical strategy? Were all of CFC’s business practices ethical? Were CFC’s compensation practices ethical and in the best interest of shareholders? Did its lending practices harm borrowers? Is there anything unethical about its VIP loan program?
By no means was CFC pursuing an ethical strategy. I think it’s pretty safe to say that their business practices were the definition of predatory. They didn’t abide by their own underwriting standards nor the industry’s, they put
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