Essay On Subprime Lending

Essay on Subprime Lending
Subprime Lending
Discuss in detail the event, the people involved, and its background and impact of America.
Before 1930, features of Housing loans presented significant challenges. To obtain a home loan a
down payment of half the value the house was required. Further issues with these loans were large
balloon payments and short maturities. The pricing for mortgage loans varied widely due to no
nationwide housing market. The main funding for these loans was provided by life insurers, thrifts,
and commercial banks.
By 1932, a housing crisis was wreaking havoc on home loans. The estimated defaulted loans were
rising to twenty –five percent. In response to this crisis, the FHL Bank System was designed to
provide relief to lending ... Show more content on Helpwriting.net ...
The Veterans Administration mortgage assistance program was created to help veterans purchase
home loan with long term and low cost mortgages. With the purchases of these VA loans, Fannie
Mae increased business rapidly.
In the 1950s as the funds started to dwindle Fanny Mae was acquired by the Housing and Home
Finance Agency as a constituent unit in 1950. Four years later the Federal National Mortgage
Association Charter Act turned Fanny Mae into a mixed–ownership corporation. This exempted
Fannie Mae from all taxes except pay property taxes.
The Housing and Urban Development Act of 1968 morphed Fannie Mae yet again. The prior change
to a mixed–ownership corporation was voided. HUD made Fannie Mae a for–profit, shareholder–
owned company. This took Fannie Mae off the government books and into stock and bond
marketing funding. Regulatory authority was given to HUD and required lenders to devote a
reasonable portion of their loans to low and moderate– income housing.
HUD affected the housing market a third major way by creating the Government National Mortgage
Association. Also known as, Ginnie Mae, which is the only one backed by the government
Ginnie Mae sole purpose is to guarantee bonds backed by home mortgages. These home mortgages
have been guaranteed by FHA and the VA. Ginnie Mae does not own or purchase any home
mortgages. It bundles several home mortgages and gives government insurance the bond will be
paid. Regardless of the mortgage status, Ginnie Mae
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The Looming Of A Miracle Worker Essay
The Looming Shadow If life could be solved on "good" intentions alone then the government would
be revered as a miracle worker, unfortunately in reality good intentions are often followed by those
who would seek to profit from them Across American history this trait is a pattern that has repeated
itself numerous of times, from the past century alone good intentions created the great depression
and the savings and Loans collapse. Most recently the new good intention became low–income
families, and from it blossomed a thorny rose of a new standard of business ethics. The intention of
assisting low–income families started becoming more prevalent under Bill Clinton's administration,
and can traced to 1992 with the creation of the Office of Federal Housing Enterprise Oversight
(OFHEO). In time, from administration to administration while people either looked away or got
paid under the table the remaining ethics of every the American industry vanished, leaving in its
wake a crisis which even today remains as a shadow on the minds of all Americans. A shadow
greater than the one created by the explosion of the USS Maine in the harbor of Havana, or even the
darkness on the day of Pearl Harbor. The reason the shadow remains is because of that very
vanishing ethics, which had created it under the guise of good intentions starting with OFHEO. In
1992 the Federal Housing Enterprises Financial Safety and Soundness Act was passed, which was
responsible for the creation of the OFHEO

The Subprime Mortgage Crisis Of 2008
There have been many different theories that claim to provide reasons as to what caused the
subprime mortgage crisis of 2008. Whether it was the effects of the dot.com bust or unforeseen
aftermath of the terrorist attack on September 11th, decisions made by congress, or money–hungry
bankers and investors or homebuyers themselves, this crisis veered the country into a financial
catastrophe, claiming to be second to that of the great depression. This paper will give an overview
of the subprime mortgage crisis, discuss perceived causes, persons involved, persons affected and
the outcome it had on business practices and the country as a whole.
Subprime Mortgage Crisis of 2008
The subprime mortgage crisis is the financial banking crisis that stimulated the country's recession
between the years 2007 – 2010. At the fountain of the crisis was an expansion of mortgage credit to
borrowers who previously would have difficulty being approved for loans due to low credit scores
and inadequate down payments. History tells a story that after the Great Depression, the government
felt the need put regulations into effect to protect investor's deposits. A new legislation known as the
Glass–Seagall Act passed in 1933 was enacted not only protected investor's deposits but also
separate dealings of commercial banks from investment banks. As David Ingram wrote,
"commercial banks manage deposit accounts, such as checking and savings accounts, for individuals
and businesses. They make loans to

How Do House Of Cards Because Caused The Crash?
"Let 's hope we are all wealthy and retired by the time this house of cards falters." – Internal Email,
Wall Street, 12/15/06
I chose to do House of Cards because I felt like it gave me, albeit a little dramatically, a nice
overview of everything that happened in 2008. Not being old enough to remember what happened, I
decided that instead od focusing on a more micro topic, I would choose one that gave me a broad
view to educate myself more on everything that caused the crash, and how we can, at least try, to
prevent it in the future.
How our economy collapsed
Subprime Loans
The dot–com bubble in 2000 was the start to the, still current, historically low interest rates – all
thanks to the Federal Reserve. Since interest rates were so low, many Americans decided that now
was the time to get the "American Dream" and buy houses, since the values were going up and
mortgage and insurance rates were so low. By serially refinancing, people were quite literally
treating their homes as a money bank, and not thinking twice of the equity they were loosing in the
process, because they thought that the value would only go up, while their mortgages would
decrease, and were blinded by the so called "American Dream".
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac, started in 1992, was a company started to subsidize LMI housing
without appropriating any funds. In 1997, an urban report claimed that local lenders seemed more
than happy to serve creditworthy low, moderate income, and

Pennymac Loan Services Llc Financial Statement
The Department reviewed audited financial statements provided by PennyMac Loan Services, LLC
for year–end December 31, 2014, 2015 and 2016. Deloitte & Touche LLP completed the
independent audits in accordance with generally accepted accounting principles. The financial
analysis is based on a review of the stated financial condition of the company and should not be
considered an attestation regarding the validity of the figures. Capital
The capital position of the Licensee is satisfactory. As of December 31, 2016, the Licensee reported
$1,299,047,000 in capital in relation to total assets of $5,008,274,000. This reflects a capital to asset
ratio of 25.94%. The reported Member's Equity increased by $ 253,404,000 from ... Show more
content on Helpwriting.net ...
The Licensee's agreements with the Agencies and other investors include representations and
warranties require adherence to Agency and other investor origination and underwriting guidelines,
including but not limited to the validity of the lien securing the mortgage loan, property eligibility,
borrower credit, income and asset requirements, and compliance with applicable federal, state, and
local law. In the event of a breach of its representations and warranties, the Licensee may be
required to either repurchase the mortgage loans with the identified defects or indemnify the
investor or insurer. In such cases, the Licensee bears any subsequent credit loss on the mortgage
loans. Nationally, the Licensee was required to repurchase four loans totaling $224,245 during 2015
and 2016. The Licensee has not been required to repurchase any North Dakota loans during the
same timeframe.
Earnings
Earnings performance appears satisfactory and trending upward. Earnings were positive as of the
three reporting periods and were sufficient to cover operations, fund loss reserve accounts, and
augment capital. Reported Net Income increased from $173,959,000 as of December 31, 2014, to
$253,404,000 as of December 31, 2015, and to $361,824,000 as of December 31, 2016. This
increase is due mainly to an increase in Net

Fannie Mae Case Study
The congress has determined that the executive compensation system is unreasonable during the
crisis in 2000s. Fannie Mae's compensation committee was equally in effective. The committee
allowed the company's CEO, Franklin Raines, to select the consultant employed to design the
mortgage firm's executive compensation plan and agreed to a tiered bonus plan that would permit
Raines and other senior managers to receive maximum bonuses without great difficulty. Raines
receives $52 million in performance–based bonuses and $90 million in total compensation during
1999 and 2004. The Office of Federal Housing Enterprise Oversight found that Fannie Mae had
cautiously overstated earnings to obtains bonus linked to financial performance. Securities and
Exchange Commission also found evidence which indicates that Fannie Mae is involve in improper
accounting and required it to restate its earnings between 2002 and 2004 by $6.3 billion. Moreover,
Freddie Mac was also involved in manipulative accounting to receive bonuses. Freddie Mac's CEO
Richard Syron received $19.8 million in compensation while the mortgage company's share decline
from a high $70 in 2005 to $25 in the end of the year 2007. Fannie Mae's compensation philosophy
is that it should attract, retain, and reward the skilled talent needed to successfully manage a leading
financial services company.
Compensation must be consistent with its charter, which require compensation plan to be realistic
and comparable to the

Key Factors Affecting The Foreclosure Crisis
Beginning in the late 1990's and accelerating into the early and mid–2000's, mortgage lending
became easier. And it became easier for everyone involved: the borrower, the lender, the guarantor
and the investor. The rise of the risk–free, no–down payment, low–documentation loan was not only
born, but metastasized beyond imagination.
Traditionally, the biggest hurdle to home ownership was the down payment. Ever since banks began
lending, from the secondary market innovations of the depression era 1930's and through the 1990's,
a down payment was always required. You could not buy a home unless you were willing to first put
up some of your own money. Three factors changed this equation, and when combined this change
proved unstoppable: ... Show more content on Helpwriting.net ...
Investors felt protected because of the credit default swap. The real estate market boomed beyond
anything anyone had ever seen. And it fed itself; the more the market boomed, the more people
wanted to buy homes and the more investors were willing to lend.
A case in point: to remain relevant, FHA altered its own rules. FHA loans have always required a
down payment and prohibited the seller from making that down payment on behalf of the buyer. But
FHA altered their own rule by allowing the seller to make a "contribution" to a third party non–
profit agency, who would then provide the down payment on behalf of the buyer. And of course, the
non–profit would keep a small portion of the seller's contribution for its work as acting as the
"middleman" in the down payment transaction.
When the real estate market became saturated and values began to plateau, there was a rush to the
exit. The consumers buying homes turned out to be speculators who could not afford to make the
payments, and they quickly defaulted. As the defaults began, they multiplied exponentially. As the
defaults multiplied, the credit default swaps began to kick in. As the credit default swaps began to
pay out, the insurers behind these swaps began to go suffer. They began to pay out far more than
they had ever expected, and far more than they had ever earned. As the investors began to incur
losses, they began to sell their

Solving The Subprime Mortgage Crisis
Introduction:
Subprime represents the borrowers with weak credit history including defaults, bankruptcies etc.
The U.S subprime mortgage crisis was a situation where the subprime borrowers started defaulting
their loans and sharp reduction in home prices occurred as a result of which the heavy investors in
mortgage sector suffered substantial losses. These crises created a global impact and triggered
adversity throughout various sectors in the economy.
Events That Lead To Subprime Mortgage Crises (Causes):
Mortgage backed securities:
Previously banks extended credit to the applicants for mortgages and these mortgages were kept in
the books of the banks and they were accountable and responsible for any default. Therefore, inorder
to alleviate the chances of default, due diligence (inquiry of credit history) was exercised. However,
major drawback to banks was that their funds locked up for long time period. Therefore new
phenomenon was introduced according to which the originators of mortgage loans could sell that
mortgage rapidly in the secondary market in the form of securities. This was also termed as originate
to distribute model. For implementing this concept,mortgage backed securities were created through
which the mortgage initiator would sell the streams of mortgage loans to the investment banks
which would later sell it to the investors and they would receive the interest payments.
Moreover, many credit worthy customers already purchased homes so banks started

Subprime Meltdown
Subprime Meltdown: American Housing and Global Financial Turmoil Borrowers with a lower
credit score were considered as risky and were called 'subprime borrowers'. Therefore the interest
rates on these loans were higher than the rates given to borrowers with a higher credit rating. In the
1970s it was very difficult for these borrowers to avail loans. They had to apply through
conventional lenders for loans insured by the Federal Housing Administration (FHA). The procedure
was long and tedious and required a lot of documentation. Early Days: Lenders traditionally offered
the fixed 30–year mortgage with no prepayment penalties which were offered by the banks and
Savings and Loan Associations (S&Ls) However in the 80s short term ... Show more content on
Helpwriting.net ...
These agencies used their own statistical models to rate the MBSs. They also rated the CDO entities
and underwriters. There was competition between two major rating agencies– Moody's and S&P.
Moody's was accused of being tough and conservative. It ultimately had to relax its standards in
order to get more business. Another major problem with the rating agencies was that they could be
influenced by the powerful and influential people who were behind major investment banks and
hedge funds. Who's responsible? A crisis of such magnitude cannot be brought about by the actions
of one player. The subprime crisis is a result of the actions/behavior of a number of factors. Who's to
be blamed most is a difficult question to answer. Was it the lenders who gave out mortgage loans to
subprime customers at higher rates, or was it the borrowers themselves who borrowed beyond their
means and did not actually understand the features of the mortgages. And what about the
underwriters and insurers who gave the tranches better ratings through credit enhancement tools. It
was these guarantees that made the investors more confident. The Financial System: Thus the
economy trusted that the matured markets would govern themselves leading to lose regulation. But
as the crisis unfolded, it was quiet evident the markets were not doing what they were supposed to.
Everyone, be it the lenders, borrowers, underwriters, insurers or investors, believed that the housing
bubble

Understanding Your Passion Essay
Understanding your passion is a concept that the author uses to allow you, as a future business
leader, to think about the traits that will transform your business from an ordinary, or good business
to a great business. The thought process of believing in what your business 'is' to what it 'can be'.
This text is primarily focused around what thoughts and actions can turn you business from good to
great using his metric of sustaining a profitable business in a 15 year increment or longer. If you
look at a few of the businesses he references, some have had ill effects in years after their
profitability, such as Circuit City failing and Fannie Mae causing catastrophic economic collapse in
the recent day. A company is only as good as their leadership and profitability remain intact.
A company, to remain profitable through the longevity of world commerce can be difficult unless
you continually stove to meet consumer demand for your product. The internet businesses such as
Amazon have decimated some businesses because of low cost and availability and have only
succeeded because of companies inability to adapt to this new business model.
The authors words of insight are from 2001, which is a minimum of 15 years ago. The Global
economy has changed drastically since then. The principles are still sound in this era, but must be
adapted to the current economic climate where the consumer wants and demands much more from a
company. Consumers temperaments have changed

Fannie Mae Failure
The Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac) were to central semi–public organizations that assisted buyers with
qualifying for mortgages. The both the company failed during the year 2008 when they were left
with no money and were bankrupt. Like every company they were unable to pay back the money
and they were in the looking for the help of government via taxpayer's money. Hence, after the
bankruptcy of 2008, the government has utilized huge amount of the taxpayer's money for not
letting them to shutdown and recovering them.
It is better to eliminate the companies who have taken risky decisions and utilized the taxpayer's
money for recovering themselves from the bankruptcy. ... Show more content on Helpwriting.net ...
Both the company was providing loans at the lower rates which are against the regulations. The
effect was they were bankrupt and there was misutilization of the investor's money and taxpayer's
money. In the year 2010, the company held huge amount of mortgages which is more than 50% of
the America's mortgages. The effect is that they have sanctioned the loans without following the
regulations and the result was that that they were bankrupt and government supported them huge
amount of money and other incentives.
Hence, as per the decision, the decision for eliminating is correct but doing nothing about the tax
breaks and incentives to wealthier is not ethical. This is because, if the incentives is provided to
wealthy people they will take the benefit of the same. This will help to wealthier people to generate
more money and the poor people will not be able to take the benefits. The government should make
schemes to provide loans to poor people and different which supports them and not only the
wealthier

Fannie Mae And Freddie Mac
1. During the great depression in 1934 many people didn't have jobs. Not having jobs meant that it
would be awfully hard for them to obtain a loan from banks in order to purchase homes. The
government decided to help the American people by creating the Federal Housing Administration
(FHA) which basically stepped in and allowed banks to offer mortgages to more people with the
promise that the banks would get their money back. The FHA finances itself with insurance
premiums that they charge borrowers as well as interest that they receive on reserves. They use these
funds to underwrite more loans which helps out people with their mortgages.
Two other government–sponsored enterprises are Fannie Mae and Freddie Mac. They were built by
congress to ... Show more content on Helpwriting.net ...
In my opinion, the government should take a step back and not be involved in the USA housing
market any longer. The reason behind my thinking has to do with the new president we have in the
White House. President has come out and said that he has a new tax reform plan that's supposed to
have significant changes not only to personal taxes but corporate taxes as well. Trump has said that
he wants to lower the corporate tax rate from the current 35% to 20, maybe even 15% which is great
news for corporations but not so great when it comes to Fannie Mae and Freddie Mac. The reason
that this would be bad for these enterprises is because they are under conservatorship and cutting the
corporate tax rate would force these enterprises to once again need a bailout. Being under
conservatorship means that for every quarter Fannie Mae and Freddie Mac make a profit, they have
to pay dividends to the department of treasury and at the same time they aren't allowed to rebuild
capital but instead their capital base is diminished as time passes which means that in 2018 they will
have not one penny remaining in their capital reserves. Furthermore, lower corporate tax rates mean
that Fannie Mac and Freddie Mac will have "significant deferred tax asset write–downs...which, in
turn, could lead to the GSE's need an additional draw from the Treasury to cover tax–related losses"
(Housingwire). To reiterate my point once again, I believe that the government shouldn't continue its
involvement in the

Persuasive Essay : The Process Of Buying A House
Owning a house has become more important than simply having a place to live, or making a sound
real estate investment in our society. Buying a house has become an integral part of the American
dream. No matter if you are male or female, young or old, rich or poor, what culture or country you
are from, everyone has a dream about it; in other words, every one of us wants to own a place that
we can live in and create memories in that will last a life time. For a first–time homebuyer, that
dream can quickly turn into a nightmare. The whole home buying process can quickly overwhelm
the average individual. You're entering into what could be the biggest purchase of your life with no
experience to fall back on. The good news is a little preparation can go a long way and help you
approach this decision with confidence. Luckily for you, I have taken the liberty of putting together
a guide for the first–time homebuyer. Throughout this guide I will take you step by step through the
daunting process of buying a home. Step 1: Make sure you're ready to buy. Buying a home will most
likely be the single largest investment of money made in your entire life. With that being said, it's
not a decision that you should rush into. Ask yourself: is it really time for me to buy a home? The
first thing you'll need to determine is what your long–term goals are and then how home ownership
fits in with those plans. Some people see home ownership as a major milestone in the process of
becoming an adult.

Essay on Solving the Foreclosure Crisis
The current foreclosure crisis that our nation is experiencing has become a great hardship on many
people in America. People that have lost their jobs due to cut backs, people with families for whom
they need to provide shelter, people who are otherwise very responsible but have been put in a
position from which they cannot escape, these are the people that are suffering. Normally if one
could not afford to make payments on their mortgage, there would be ways for them to refinance
their mortgage in order to adjust some of the payments. With this current foreclosure problem, this
seems almost impossible. Not only are people becoming unable to afford payments on their
mortgages but also they are unable to get themselves any help because as ... Show more content on
Helpwriting.net ...
With foreclosure comes the reduced value of homes and their communities. With foreclosure comes
the inability of lender companies to get back the money that they invested. With foreclosure comes
an increasing pressure on the economy that needs to be stopped now. President Obama is currently
working on a solution to this crisis, in the hopes that some type of government solution will be able
to help those that are about to be foreclosed. This is probably the best route to take when dealing
with issues that affect the economy so strongly. What the President has planned is a good start: to
help people refinance their homes by giving money to Fannie Mae and Freddie Mac, by allowing
people to redefine their payments to no more than thirty–one percent of their income so that they
can again afford to be responsible, and by providing incentives to lender businesses that are not run
by the government. Overall this should be a good plan for solving the current foreclosure crisis,
however there is one problem that seems like it will only get worse as time goes on: commercial
lenders. These businesses, despite being offered incentives probably will not be too keen on helping
out the suffering working class. Their business is to make money, and although there are going to be
incentives given by the government, they come with a cost to the companies: sacrificing the way
that they do business. In order for these companies to qualify for the

Subprime Mortgages And The Mortgage Crisis
Mortgage securities are crucial when it comes to the availability and cost of housing in the United
States. This paper will analyze the mortgage securities market, and how the market functions. It will
also focus on the subprime mortgages created from 2000 to 2006. Suggestions will be presented that
would protect against the types of problems experienced in the mortgage securities market from
2006 through 2009.
Mortgage securities are considered an ownership interest in mortgage loans made by mortgage
companies, commercial banks and other private entities to finance the borrower purchase home or
other property. Mortgage securities were created when the servicers pool loans for sale to investors.
The investors receive payments of principal and interest when mortgage loans are paid off by
homeowners.
Investors in the secondary market often purchase mortgage securities after they are issued. Large
institutions make investments in mortgage securities when they are issues. Other dealers in a
secondary market sometimes redistribute securities.
Mortgage securities are issued by the Government National Mortgage Association (Ginnie Mae), or
by government–sponsored enterprises (GSEs) such as the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (Freddie Mac,
2002).
Mortgage securities are often priced at a higher yield that corporate or Treasury bonds. The
opportunities for profit are also greater. Mortgage

The 2008 Housing Crisis: A Brief Overview of Causes Essay...
The 2008 Housing Crisis: A Brief Overview of Causes
In 2007, the U.S. fell into a deep financial recession. One of the main causes of this was the bursting
of the housing bubble, which lead to a housing crisis. What is a housing bubble? A housing bubble is
defined as "a temporary condition caused by unjustified speculation in the housing market that leads
to a rapid increase in real estate prices" (businessdictionary.com 2014). When the bubble bursts, the
result is a quick decline in home prices (businessdictionary.com 2014).
In the U.S., a housing bubble began to emerge just after the turn of the 21st century. In these years,
the economy was in great shape, interest rates were low, and consumers were ready to buy, which
drove up real ... Show more content on Helpwriting.net ...
Credit cards were not common during this period. First appearing in 1950, these were used mainly
by the wealthy for convenience instead of carrying cash or a checkbook (Durkin & Price, 2000, p.
624).
During this time period, homeownership typically required a 20 percent down payment (Melicher &
Norton, 2014, 168). Lending institutions were very careful about whom they lent money to, and
credit standards were high (Melicher & Norton, 2014, 168). Melicher & Norton (2014) called this
the "save now, spend later" philosophy, and it would change in the coming years (p. 168).
Attitudes about spending changed drastically. At this point, more people had access to credit cards
because credit card companies stopped limiting their customer base to the wealthy, and began
issuing cards to people with moderate to low incomes (Garon, 2012, CNN World). This gave
Americans a way to purchase goods and services immediately, even if they didn't have the cash on
hand. The seven to eight percent savings rate maintained in the United States from the 1960s to the
1980s plummeted to less than two percent, and remained so until the first decade of the 21st century
(Melicher & Norton, 2014, p. 168).
Lending institutions also saw a change. In the 1990s, the federal government desired more people to
own homes in the United States and lenders were urged to make home loans more attainable for a
wider consumer base (Melicher & Norton, 2014, p. 168).

The Note On The Banking Crisis
The Banking Crisis The Banking Crisis, 2010
Although there are multiple opinions on the causes of the banking crisis, there is one thing on which
there is general agreement. If banking were still practiced as it was by George Bailey in the movie It
's a Wonderful Life, the crisis would not have happened.
To understand why the crisis occurred, it is useful to understand the chain of events that contributed
to it and the role each played. This chain transformed the slightly stodgy, conservative banks of
George Bailey 's day to the high–stakes world of Wall Street, where large fortunes could be made
with financial innovation.
The first step in the chain dates back to 1938, when the Federal National Mortgage Association
(Fannie Mae) was ... Show more content on Helpwriting.net ...
The act encouraged banks to lend to low– and moderate–income neighborhoods. While this was an
admirable goal, some believe that to meet quotas established by this act, banks were forced to
engage in imprudent lending. In the 1980s, coming off a recession, Congress enacted several laws
designed to promote free enterprise by reducing regulations. One of these laws was the Alternative
Mortgage Transaction Parity Act of 1982, an act that permitted the creation of adjustable rate
mortgages, balloon mortgages, and negative amortization mortgages. These would be the types of
mortgages that would create what became the subprime crisis, as buyers who did not qualify for
standard mortgages, at prime interest rates, would be attracted to these higher–interest–rate
mortgages and eventually default on them.
The Tax Reform Act of 1986 eliminated the tax deduction for interest paid on credit cards, but
retained the deduction for interest on mortgages. This act made home equity loans highly attractive
to many consumers. Believing that their homes would continue to rise in value, homeowners took
out home equity loans to finance such purchases as cars and home improvement, increasing the
amount of debt owed on their homes and leading to an unhealthy amount of personal debt in the
financial system. In 1970, debt was 60 percent of domestic personal income. Debt increased to 134
percent of domestic personal income by mid–2008.
In 1999,

The Crisis Of 2008 : Is It All The Feds Fault?
I chose to do House of Cards because I felt like it gave me, albeit a little dramatically, a nice
overview of everything that happened in 2008. Not being old enough to remember what happened, I
decided that instead od focusing on a more micro topic, I would choose one that gave me a broad
view to educate myself more on everything that caused the crash, and how we can, at least try, to
prevent it in the future.
How our economy collapsed
Is it all the feds fault?
The dot–com bubble in 2000 was the start to the, still current, historically low interest rates – all
thanks to the Federal Reserve. Along with many other reasons, this aided the financial crisis of
2008.
Subprime loans
Since interest rates were so low, since mortgage and ... Show more content on Helpwriting.net ...
After an urban report in 1997 found that local lenders seemed more than willing to serve
creditworthy low to moderate income and minority applicants. Upon that alligation in 1997, Fannie
and Freddie modified their systems, which led the way for vaste numbers of sub–prime and
nontraditional mortgages. The GSEs argued that if Congress constrained the size of their mortgage
portfolios, they could not afford to adequately subsidize affordable housing. By 2007, Fannie and
Freddie were required to show that 55 percent of their mortgage purchases were LMI loans and,
within that goal, 38 percent of all purchases were to come from underserved areas (usually inner
cities) and 25 percent were to be loans to low–income and very–low–income borrowers. Meeting
these goals almost certainly required Fannie and Freddie to purchase loans with low down payments
and other deficiencies that would mark them as sub–prime or Alt–A. From 2005 to 2007, Fannie and
Freddie bought approximately $1 trillion in sub–prime and Alt–A loans. This amounted to about 40
percent of their mortgage purchases during that period. Moreover, Freddie purchased an ever–
increasing percentage of Alt–A and sub–prime loans for each year between 2004 and 2007. It is
impossible to forecast the total losses the GSEs will realize from a $1.6 trillion portfolio of junk
loans, but if default rates on these loans continue at the unprecedented

Fannie Mae Fannie Freddie Mortgage Finance System
Fannie and Freddie remain two of the largest financial institutions in the world, responsible for a
combined $5 trillion in mortgage assets. The primary function of Fannie Mae and Freddie Mac is to
provide liquidity to the nation's mortgage finance system. Fannie and Freddie purchase home loans
made by private firms (provided the loans meet strict size, credit, and underwriting standards),
package those loans into mortgage–backed securities, and guarantee the timely payment of principal
and interest on those securities to outside investors. Fannie and Freddie also hold some home loans
and mortgage securities in their own investment portfolios.
In 2008 Fannie and Freddie lost a combined $47 billion in their single–family mortgage businesses,
forcing the companies to dig deep into their capital reserves. By late summer in 2008–about a year
after the start of the housing crisis–Wall Street firms had all but abandoned the U.S. mortgage
market, while pension funds and other major investors throughout the world continued to hold large
amounts of Fannie and Freddie securities. After the housing market collapsed, Fannie and Freddie
needed a $200 billion bailout. If Fannie and Freddie were allowed to fail, experts agreed that the
housing market would collapse even further, paralyzing the entire financial system. The Bush
administration in September 2008 responded by placing Fannie Mae and Freddie Mac into
government conservatorship, where they remain today.
The improved finances at

Review: Good to Great Essay
Running head: Good to Great Book Review |
In partial fulfillment for the requirement for
DEPARTMENT OF EDUCATIONAL LEADERSHIP AND COUNSELING
BY
TIFFANY TURNER–BANKS
11/12/2011
Jim Collins and his research team have done a wonderful job identifying what it takes for a
company to go from good to great. I found this book extremely interesting and would like to share
several of my thoughts. The study looks at companies that appeared on the Fortune 500 from the
years of 1965 to 1995, looking for those that, for 15 years, either tracked or underperformed the
stock market, followed by a transition, and subsequently returning at least 3 times the stock market
for at least 15 years. The eleven companies included in the ... Show more content on Helpwriting.net
...
Rather they demonstrated personal humility and professional will revealing an aggressive resolve to
do what was best for the company, he or she plays an important role in the success of their
organization through talent, knowledge, skills, and good work habits. The lower levels included
effective leader, competent manager, contributing team member, and highly capable individual. The
traits of Level 5 leaders include, building "enduring greatness" into their organizations, setting their
successors up for success, talking about the company and others, but declining to discuss
themselves, ordinary people producing extraordinary results, most likely to come from within the
company, not outside of it, quick to give credit outside themselves when there was success, while at
the same time taking personal responsibility when things went badly and distinctive in their
approach to the people they wanted in the company. Most companies would think the first step in
becoming a great would be to create a vision and a strategy, but this has not been proven true. The
first step a company should take is determining who the right employees are, and which position in
the company is right for them. In chapter three is states" If executives get the right people on the
bus, the right people in the right seats and the wrong people off the bus, then we'll figure out how to
take it someplace great." Level 5 leaders wanted top players as well top effort.

John Vogel's Thinking Outside The Housing Bubble
As we now know, the U.S. economy, the middle class, and its job growth was damaged by the
overwhelming collapse of Wall Street, which was triggered by the downfall of the housing market
and sub–prime loan defaults. One of the main things that need to be addressed in our economy today
is the housing market and making sure that our banks and credit unions are not allowing people who
do not have the necessary income to pay their mortgage disbursements. In an article entitled
Thinking outside the Housing Bubble, the author John Vogel remarks how the economy is generally
supported by the housing market. Vogel states:
On the other hand, if we view the problem as a credit bubble, we might be able to protect ourselves
and speed up the recovery ... Show more content on Helpwriting.net ...
The Federal Government needs to make sure to enforce strict guidelines on who can and cannot be
accepted for a home loan, and not allow big investors to borrow excessive money at low interest
rates to inflate the investor's financial advantage. If the government starts allowing lower standards
on mortgages, we are going to end up in the same catastrophe once again. In an article written by
U.S. News and World Reports entitled Should the Federal Government Provide Support to the
Mortgage Market?, the Federal government and the President attempted to get involved with the
housing market. The passage implicated that Obama wanted to do away with federally funded
conglomerates Fannie Mae and Freddie Mac and implement another type of government assisted
program ("Should the Federal Government"). The program would prevent the mistakes made by
Fannie and Freddie which created the original "housing bubble burst" ("Should the Federal
Government"). One of the Senate bills suggests the government create "a new agency, the Federal
Mortgage Insurance Corporation to replace Fannie and Freddie" ("Should the Federal

The Financial Crisis : Rescue Efforts
The Financial Crisis: Rescue Efforts Throughout the early 2000's, relaxed lending regulations and
lowered interest rates sparked the growth of the securitization of subprime mortgages. In order to
increase profit and revenue, a number of financial institutions became heavily involved in the
process of securitizing the loans. When house prices began to fall in 2006, homeowner
delinquencies and foreclosures increased causing many institutions to become overleveraged. As a
result, the destabilization of financial institutions and the economy ensued, provoking the great
recession in 2007. In an effort to promote economic stability the United States government
intervened and provided financial assistance to institutions with the greatest ... Show more content
on Helpwriting.net ...
Consequently, these losses impacted the health of financial markets across the United States and the
world. On October 9th 2007, the DJIA closed at a record high of 14,164 before tumbling to below
11,000 in July 2008 (Kosakowski, 2008). As the crisis worsened, the DJIA continued to fall reaching
a low of 6,547 in March of 2009. Not only did the DJIA feel the impact of the crisis but the LIBOR
did as well. During the middle of 2007, the LIBOR was rallying at a high of 5.3195, however, over
the next year the rate would continue to drop until it hit record lows. At the beginning of January
2009 the LIBOR came in below one and continued to hover around .3 and lower over the next few
years (Fedprimerate, n.d.). In corresponded with the LIBOR, the Federal Funds rate also fell into a
downward spiral from the crisis. Before the crisis was fully realized, the Federal Funds rate was
4.25 in December 2007. As the effects of the crisis grew the rate dropped to .25 by the end of the
next year and stayed consistently low over the next few years (Federal Reserve, 2015). Therefore,
the financial crisis destabilized the health of financial markets, resulting in the drastic lowering of
the DJIA, LIBOR and Federal Funds rate. Relief Efforts In an effort to cushion the effects of the
crisis the United States government intervened to help maintain consumer

Congress is continuously attempting to decide if Fannie Mae should be privatized or owned by the
government. One thing the government should focus on is reducing the monopoly characteristics in
Fannie Mae. With government intervention, Fannie Mae should be broken up into many smaller
companies. This would spread the risk among the financial market and Fannie Mae would have to
compete against other companies to stay in business. If unfortunate events lead to another economic
crisis, the financial pressure would be placed on more than one company and investors would not
have to rely on Fannie Mae to stay afloat (Reiss, David, 951–952). This idea was recently discussed
among two senators, Bob Corker and Mark Warner who consider splitting Fannie's single–family
business from their multifamily business. They think the single–family businesses could then be
split again into smaller companies (www.money.cnn.com). Problem Number 2 at Fannie Mae
Decrease in Stock Price One of the main problems that Fannie Mae faced during the financial crisis
was the dramatic drop of their stock prices. An article published by CNN during the financial crisis
said, "Shares of mortgage financing giants Fannie Mae and Freddie Mac both plummeted Monday
after an analyst with Lehman Brothers wrote in a report that the two companies may need to raise
billions of dollars if accounting rules are changed" (www.money.cnn.com). In 2007, Fannie Mae's
stock prices were at the lowest level they had seen in

Federal National Mortgage Association ( Freddie Mac )
In 2008 two government sponsored enterprise (GSE), Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), received the
second–largest bailout in the United States, totaling $187 billion. The bailout of Fannie Mae and
Freddie Mac drew attention to the problems with "too big to fail" (TBTF) entities and government
guarantees. The bailout highlighted the lack of market discipline and encouraged moral hazard.
The erosion of the prerequisites of market discipline by GSEs creates moral hazard. According Tony
Fiennes (2016), market discipline is the way in which market participants influence a financial
institution to act in the best interest of shareholders, through monitoring its risk profile and financial
position (Fiennes,1). Fiennes (2013) states that three conditions must be present for market
discipline to exist and be effective. Market participants must have access to relevant information and
have incentives to monitor corporations. Additionally, the market must have a competitive
environment so that investors can decide on the best investment (Fiennes, 1). Moral hazard is the
idea that, under certain circumstances, individuals will alter their behavior and take on more risk
(Pettinger,1). This paper will examine how market discipline is destroyed in the mortgage industry
by Fannie Mae 's and Freddie Mac 's "too big to fail" size and government backing.
History of the U.S. Mortgage Industry
To understand how

An Asset Price Bubble
1. Literature Review. (No project plan)
Over the past decade, the media and the number of well–known press constantly claim that the
prices of house in US is realistically the best evidence of the existence of an asset price bubble in the
housing market during the early 2000s. The first effort here we can look at is a survey by McCarthy
and Peach (2004) which shows that the level of home prices relative to household income and the
level of home prices relative to rent are commonly used to support claims of an asset price bubble.
On the other hand, Holcombe and Powell (2009) listed 3 basic views as opposed to the existence of
house price "bubbles": the first one claimed that the existence of "bubbles" is expectedly the results
of "real" ... Show more content on Helpwriting.net ...
As a result, this decision made homes more affordable which boosted the demand for houses and
levelled up prices of housing. But could American household afford to pay for their own house all at
once? Randall and Benjamin (2009) stated that approximately 70% of American homes are owned
by their own households as for the majority of them this represents the most of their net worth
income. In 1 order to take ownership of their homes, taking out a loan is the best option to pay for
mortgage.
1.2 Subprime lending and Subprime mortgage.
During house price "bubbles", subprime loans were introduced to people with low ability to pay off
their mortgage, especially to households with low income. Unfortunately, these loans were
distributed unevenly across the country (Silje Pileberg, 2014). His article pointed out that this loan
was specifically for borrowers with low credit scores (FICO scores less than 640, for example).
However, the system seemed not to work fairly just as Pileberg (2014) described. A recent research
by Barth (2009) demonstrated that 31 out of 32 types of available mortgage products were chosen
by prime borrowers from January 1999 through July 2007. This is because the difference between
prime and subprime lending becomes artificial due to the fact that lender can define on its own
which borrowers are subprime. The subprime lending eventually grew rapidly. Barth (2009) showed
that subprime home mortgage originations went up

The role of umbilical cord is to connect baby with the placenta. Through this connection, the
umbilical vein provides nutrient–rich, oxygenated blood from the placenta on the fetus. After the
birth, doctors cut the cord and the baby becomes independent from the mother(Wang & Zhao,
2010). In contrast with the birth procedures, when the Fannie Mae became independent (private),
the cord was not cut creating a plethora of problems. Nevertheless, it is an oversimplification to
accuse exclusively government and GSEs', as Petter J; Wallison (2010) does, disregarding all the
other factors. A brief historical review would allow to understand these problems and to highlight
why the GSEs became an important part of the crisis. Before 1938, depository institutions made
home loans with their deposits and held the liquidity risk, the market risk, and the credit risk on their
portfolios. Yet, the baneful results of the Great Depression led the US government agency to
intervene in the mortgage market so as to beget home mortgage lending (Dodd, 2007). A corollary
of the new legislation was the creation of Fannie Mae in 1938; as a ... Show more content on
Helpwriting.net ...
This corporation was created not only to enhance the competition in the secondary mortgage market
(Acharya, Richardson et al. 2011), but also to securitize mortgages, as Dodd (2007) mentions. The
process of pooling mortgages and selling mortgage–backed securities (MBS) was developed,
initially, by Ginnie Mae to reduce debt from the federal budget; the concept of securitization is
discussed analytically later. The following years, MBS and securitization assisted GSEs to provide
long–term funding in the US secondary mortgage market eliminating liquidity risk from originators
while bearing both the credit and the interest rate risk (Dodd, 2007, Wall et al., 2005). The
securitization could obliterate the interest rate risk from housing enterprises, as

The Burst Of The Housing Bubble
Imagine starting off with a young family, relatively average income and a dream to own a home
meant for the magazines. This dream became a reality in the new millennium when interest rates in
the United States were at an all time low. Suddenly that colonial style home, with the white picket
fence was just at the tips of consumers' fingertips. Mortgages were being handed out as if they were
an everyday commodity with minimal screening, therefore the American dream eventually faulted
and came back down to a shaky reality. After housing prices in the United States skyrocketed,
Americans and foreign investors alike rode the benefits. However, most parties involved did not
anticipate the impending bubble and could not have foreseen the outcomes of its sudden burst. The
burst of the housing bubble contributed to a financial crisis and recession. It was one of the worst
economic downturns since the Great Depression and affected many sectors of the economy. Several
factors such as government policy, brokerage incentives, and securitization all played key roles in
the bubble's burst. A better understanding of the housing bubble is achieved through analyzing it, a
comparison with that of Canada, and the effects of the financial crisis throughout the world. Political
Environment in America Community Reinvestment Act In 1977 the American government initiated
the Community Reinvestment Act (CRA), a program that encouraged home ownership for lower–
income communities in the United

Shares of Fannie Mae (FNMA) stock opened at $59.55 on January 3, 2007. This was the first
trading day of that year. By January 2, 2009, the stock had imploded to the price of $0.75 per share
(performance.morningstar.com, 2017). At this time, the stock still had not bottomed. This means that
the stock still had quite a drop left until it finally had an upward trend in price. Similarly, Freddie
Mac (FMCC) had went from $67.84 per share on January 3, 2007 to a mere $0.70 per share by the
time the market opened on January 2, 2009. Keep in mind that during this timeframe, these stocks
had not gone through any forward or reverse splits. Forward and reverse splits are ways companies
can artificially change the stock price by increasing or decreasing the amount of its total shares with
the amount of the investor's original investment remaining the same (Frankle, 2017). Today, FNMA
and FMCC are both trading around $3 per share. To emphasize how devastating this drop was, let us
say that you bought 10,000 shares of FNMA at $59.55 per share, totaling $595,500. If you held onto
those shares since that time you would have around $30,000 of that original $595,500 left. That's
almost a whopping –95% return on your investment after 10 years! The stock market is breaking all
time highs while FNMA and FMCC performances have been lackluster for its shareholders in
comparison. We will look at the reasons for this performance, compare FNMA and FMCC with
other tickers to support this claim, and

Essay On Fannie Mae
Threats and Barriers to Enter The barriers to enter seems to be on the medium scope of the analysis
and this is because to enter the mortgage market there are many regulations set by government and
other institutions to guarantee the clarity and transparency of the loans. Also, to enter this specific
market there is the need for high capital investment which in todays economic is hard to achieve.
Supplier Power Also the supplier power is medium, and the major supplier is The United State
Federal Reserve which is by law the main money printing in case of crisis. This capability by the
Federal Reserve makes them the main supplier. Buyer Power On this part of the porter's five forces
analysis the buyer power has two faces; first, individuals have a low buyer power, ... Show more
Fannie Mae is far for being fully self sufficient because of its reliance on government subsidiaries.
There are two main issues I found, and these are: First, the capital minimum issues which
deteriorates through the 2008 economic recession the country faced. This recession led to huge
financial losses primarily affecting banks and lender institutions in the U.S., FNMA was heavily
affected. Several economists suggest that FNMA should become more self sufficient by
implementing a series of incentive to investors that at the long run will benefit the company itself by
reestablishing and raising capital on its own without relying on government subsidiaries and the
Federal Reserve. Second, The total risk requirement for FNMA of 8% vs. the actual market risk of
11% to 14.5%. The low risk requirement plus the Rd of 2% combine still lower than 11% market
requirement, this imply that the company have issues when it comes to raising capital requirements.
Also, the company has a 50% risk weighting on assets. With a company with such high risk it
implies that 50% of its assets are trap on debt

Fannie Mae
Table of Contents
Introduction.....................................................................................................3
History...........................................................................................................3
Business Method and Philosophy...........................................................................4
Corporate Growth and Diversity............................................................................6
Conclusion......................................................................................................7
References......................................................................................................8
Figure Chart 1................................................................................................10 Fannie Mae Fannie
Mae is a leading mortgage company and one of the most financially successful businesses within its
industry. Given the salient features of the organization that has culminated into its current standing,
this report offers a brief but concise overview of the corporation. The organization began as a part of
Roosevelt's New Deal, a program ... Show more content on Helpwriting.net ...
A community credit union is a financial cooperative operating to lend money to its members. The
constituents of a mutual organization put money into a collective, where it may then be disbursed to
members in need of loans, at agreeable rates and with good terms. By eliminating the need to turn a
profit, mutual organizations are able to give lower rates on loans than traditional banking
organizations. The sub–prime lenders are considered, in some instances, as a last resort since they
tend to give loans to people with a very low credit scores or an otherwise extremely high risk of
default. This type of lender offers loans at exorbitant interest rates as a way of covering losses from
the high default rate they experience with their borrowers. Fannie Mae does not hold onto all of the
purchased mortgages. It will take the individual loans and package them up with hundreds of others
and market them as mortgage–backed securities (MBS) that it then sells to investors (for example,
insurance companies, pension funds). Fannie Mae provides a guarantee to these investors that they
will receive timely principal and interest payments, no matter what happens with the underlying
mortgages. If there are large numbers of defaults, Fannie Mae will have to make the investors
whole, utilizing tax dollars. Investors can also buy shares

Fannie Mae Essay
I want to study the case of Fannie Mae and Freddie Mac and the danger these two could have caused
to the U.S. mortgage market and the U.S. economy as a whole, if they would have failed. Fannie
Mae and Freddie Mac purchased mortgages from financial institutions, creating a liquid, secondary
market for mortgages, to which financial institutions could sell them into, in turn freeing up the
necessary funds to make additional mortgages. In 1968 and 1970 Fannie Mae and Freddie Mac were
chartered as government–sponsored enterprises (GSE) by the U.S. government but are in fact
investor–owned companies whose shares trade publicly. Fannie and Freddie's GSE status had its
privileges, such as the 'implicit guarantee' that the federal government would step ... Show more
Was Fannie and Freddie's implied government backing working in the best interest of the
companies, their management and their investors or the U.S. homeowners, as was the intention
according to their mission? It was their government–sponsored monopoly on a large part of the U.S.
secondary mortgage market and the government's implicit guarantee to prevent these firms from
filing for bankruptcy that contributed to the collapse of the mortgage market. Although, Fannie Mae
and Freddie Mac had positive influences on the mortgage market, the consequences of being able to
function as an 'implied government–backed monopoly' outweighed the benefits that these
organizations provided. Although, there were critics, consisting of their rivals and as well as some
public authorities, who raised concerns about the risks these organizations were taking on, the
companies continued to grow and take on risk under their congressional charters and implied federal
backing. Why were these companies supported by the U.S.

Essay about Fannie Mae Case
Fannie Mae case.
Federal regulators noted a growing string of high profile scandals at major U.S. corporations in
recent years. The number of fraud cases investigated by the Securities and Exchange Commission
jumped 41 percent in the last three years (112 cases in 2001 compare to 79 cases investigated in
1998), resulting in tens of millions of dollars in fines to settle the charges.
I have decided to take a closer look at Fannie May. This company operates in the residential
mortgage finance industry. It facilitates the flow of mortgage capital to increase the availability of
homeownership for low, moderate, and middle–income Americans. Its lender customers are part of
the primary mortgage market, where mortgages are originated and ... Show more content on
Helpwriting.net ...
The effects on Fannie Mae, a highly politically connected company, could be enormous. The
company holds over $1 trillion in assets, and purchases more mortgage loans than any other lender
in the U.S.
When the accounting errors first emerged Fannie Mae estimated that there would be an adjustment
of about $9 billion in its reported earnings over the contested period. That number has since
increased to over $11 billion but may increase again as further irregularities discovered with
insurance related issues. No estimate of these additional potential revisions is currently available.
On December 21, 2004, Franklin D. Raines stepped down as Chairman and Chief Executive Officer
and J. Timothy Howard resigned as Chief Financial Officer. Raines' departure, at age 55, was
structured as an early retirement. Under his employment agreement and the terms of the Executive
Pension Plan, Raines is entitled to receive 60 percent of his "High–Three Total Compensation",
which is his highest total compensation for three consecutive years during the last 10 years. Upon
early retirement, this number is slightly reduced leaving him with estimated annual benefits of
$1,085,462. Furthermore, the company's Stock Compensation Plan of 1993 allows all options to
become immediately exercisable and fully vested upon early retirement. The 2003

The American Dream
For generations homeownership has been viewed as one of the cornerstones of the American dream.
Nevertheless this American dream has almost exclusively been available to white Americans.
However, over the past 25 years this dream has become a reality for more and more Americans as
the rise of the subprime mortgage market has allowed the majority of Americans to become
homeowners. In 2005, at the peak of the housing bubble, 69.2% of Americans seemed to have
achieved the American dream of owning their homes. Three years later, the housing bubble popped
and the American economy entered the most severe economic downturn since the Great Depression.
The downturn was largely caused by the implosion of the subprime mortgage market whose growth
was driven, in part, by the belief that homeownership is a right that all Americans are entitled to as
part of the American dream. The perpetuation of this belief is dangerous to the United States
economy because homeownership has for so long been unobtainable for the majority of non–white
Americans, as one of the only paths to this American dream for many minorities is through high–
risk home loans that threaten the stability of the economy. Homeownership first became attainable
for many Americans in the 1950's when New Deal legislation compounded the effects of post World
War II social reform programs and an increase in home construction promoted homeownership
among white Americans. For the first three decades of the 20th century,

A Note On Subprime Loans
Recent mayhem in the American economy attributed to a weakening of business regulation. In the
absence of oversight, lending became a wildcat enterprise. Mortgage brokers easily deceived home
buyers by promoting subprime loans, and then they passed on bundled documents to unwary
investors. These subprime loans were offered at a rate above prime to individuals who did not
qualify for prime rate loans. The loans were made to people who had no other way to access funds,
and little understanding of the mechanics of the loan. A scholarly document on subprime lending by
Hanif NuMan warns, "Servicing prime and alternative– A (not subprime) loans, the automated
underwriting systems were designed to the specifications of banks and financial institutions, and
utilized by loan originators to originate more loans as well as develop a database for the respective
entities" (NuMan). Subprime loans by and large were issued without regard to what would happen if
the borrower could not repay the loan. Subprime loans commonly have adjustable rates that have
monthly payments that will dramatically increase two years after receiving the loan. Subprime loans
were usually classified as those where the borrower had a FICO score below 640. Subprime loans
can be based on credit scores alone. On the homeowner's home loan application subprime loans
would have the option to use a stated income or even no income or asset verification at all. Special
terms usually accompany subprime loans, for example,

How's The Realt Estate Market in San Diego, California
How's the Real Estate Market One question always asks by people "How's the real estate market?" it
is significant that real estate agent and other real estate professional not provide a general response.
They should response with full knowledge about the market. As professional it is not acceptable for
real estate agent to say it is a seller's market, or the banks are not offering loan right now, etc. A
regular person may accept those answers, but prospector buyer may need to know why the market is
down, or it is good time to invest in real estate, or why it is a seller's market or why not buyer
market? I will clarify these matters in real estate economic relations, so the prospector buyer can
better appreciate why the markets are in ... Show more content on Helpwriting.net ...
The study concludes that real estate is playing a significant role in major business cycles. The past
indication is consistent with land assumption is a major factor in business cycles.
The business cycles effects in real estate have not been a pure market activity, but have been
subjective by substantial government fiscal and monetary interventions.
.
We are recognize tendencies in the mortgage interest rates, national home price trends, new housing
build tendencies and many more economic indicators that impact the real estate markets. It will help
the real estate professional to retain active real estate information, but to always keep in mind that
this is a local business. There are many forces manipulating your local market that will have little or
no influence in other national real estate market. But these factors that can have great effect on local
real estate's market include the local weather trends, aging of the population, general stock market
and investment health, etc. Things that effect discretionary income have more of an effect on this
type of market
Perfect competition indicates on the real estate market in which no one supplier can impact prices,
obstacles to enter and exit are slight, all suppliers offer the same goods, there are a great number of
suppliers and buyers, and information on pricing and process is willingly available. Systems of
imperfect competition include monopoly, oligopoly,

Simultaneously, The Community Reinvestment Act (Cra) Of
Simultaneously, the Community Reinvestment Act (CRA) of 1977 was forcing banks "to make
loans to low–income borrowers, especially minorities and particularly African Americans, with a
focus on home loans...In order to make acquisitions, open branches, and generally grow its business,
a bank must have a satisfactory CRA rating" (Allison, 2013, pp. 55–6). This essentially forced banks
to make riskier loans than they otherwise would have. The situation in the early 1990s through 2007
was loan originators making riskier loans to lower income people under CRA guidelines and
enforcement, and GSEs needing to meet government mandated quotas of holding such loans. This
inevitably led to loan originators like Countrywide using "the 'originate and ... Show more content
on Helpwriting.net ...
When these mortgages failed in unprecedented numbers in 2008...they weakened all financial
institutions and caused the financial crisis. In conjunction with the aforementioned weakening of the
ratings and the lowering of loan loss reserves by the SEC, both misleading investors and analysts,
this is not a healthy financial situation. Ethically, these actions by government agencies created a
short term versus long term paradox in which marketplace actors, including the government itself,
had to participate. As Albert Mohler says, "the government is, like it or not, one of the actors in this
economic system." Cafferky states that "This tension refers to the fact that organizational leaders
must at the same time make decisions that solve present problems or address the current issues and
make decisions that affect themselves and the company in the long run" (2015, p. 65).
Fundamentally, these housing policies, and reactions to them, were motivated by egoism and
pragmatism. It is a noble goal to try to increase the homeownership rate, especially among the most
vulnerable in society. A home provides a sense of pride, accomplishment, and legitimacy in a
community. Personally, after living in apartments my whole adult life I have a strong desire for a
home, a "place of my own," and am tempted to feel the opposites of pride, accomplishment, and
legitimacy. However, when government ignores the "mutual interdependence with one another"
(Cafferky, 2015,

Fannie Mae Effect
There are many research institutions that are quick to point the finger and blame one specific entity
or event for the events that occurred during the economic decline in 2008; however, the entire
situation cannot be put onto the shoulders of one company, or the faults of one industry. There were
several causes that played into the financial crisis, but two causes stand out as the pre–dominant
elements of the collapse of major financial establishments: manipulation of the housing market by
two government–funded companies, and the greed of wealthy Wall Street bankers and investors who
knowingly took advantage of the system. The Federal National Mortgage Association, referred to as
"Fannie Mae", was founded as a government sponsored entity ... Show more content on
Helpwriting.net ...
Following a cut in the discount rate (the rate at which the Federal Reserve lends to depository
institutions) in August of that year, the Federal Open Market Committee began to ease monetary
policy in September 2007, reducing the target for the federal funds rate by 50 basis points. As
indications of economic weakness proliferated, the Committee continued to respond, bringing down
its target for the federal funds rate by a cumulative 325 basis points by the spring of 2008. In
historical comparison, this policy response stands out as exceptionally rapid and proactive. In taking
these actions, we aimed both to cushion the direct effects of the financial turbulence on the economy
and to reduce the virulence of the so–called adverse feedback loop, in which economic weakness
and financial stress become mutually reinforcing. (Bernanke, "The Crisis and the Policy

Loan Agencies And The Federal Housing Authority
In the year 2000, the stock market crashed whichshifted thepeople's money away from the stock
market and into the housing market. Many people were buying homes, which led to banks offering
more loans, including subprimed loans. Most loans, specifically, subprimed loans began going into
default once the credit markets froze in the summer 2007. Things began to deteriorate rapidly. The
offering of subprimed loans stopped completely and interest rates for other types of borrowing such
as corporate loans and consumer loans rose dramatically. Since the interest rates of loans were so
high, home owners were not able to afford to make payments, which caused them to be evicted from
their homes. In 2013, the government introduced new laws and ... Show more content on
Helpwriting.net ...
In the new system, Fannie Mae has also allowed buyers to mortgage homes for 3 percent down, if
the buyer has good credit and does not have enough money to close the deal.
The Federal Housing Authority has put a similar plan together called the "Back to Work Program"
which can help the buyer return to the housing market in as little as one year if the buyer is able to
meet certain guidelines. The guidelines included in the "Back to Work Program" are: the buyer must
pay their bills on time, had a 20 percent reduction in income, and a minimum credit score of 620.
The "Back to Work Program", has strict guidelines to make sure that the buyer is responsible, they
must pay their bills on time and cannot miss one payment, or else they will be ineligible for the
program. The 20 percent reduction in income must be demonstrated to be in the result of loss of
employment and the reduction in income must be for a duration of 6 months. The Federal Housing
Authority primarily requires the boomerang buyerthat is purchasing a home to have an hour long
credit counseling session with the Department of Housing and Urban Development, after the session
is completed a plan is created for the buyer.
Another option for

Rise and Fall Housing Market
The Rise and Fall of the Housing Market
Edward Maher
University of Maryland University College
ECON201
August 18, 2011
Introduction
The collapse of the housing market had far and wide ranging effects in the economy of the United
States. While the effects were felt throughout the country, California, Florida, New York, Michigan,
Illinois were dealt devastating blows to their respective economy. Throughout the country,
foreclosures rose to staggering numbers and jobs lost were in the millions. This research paper will
concentrate on the causes and consequences of the housing crisis and will attempt to determine if
there is any fault for not controlling the crisis.
Causes of the Housing Crisis The term bubble has been used ... Show more content on
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Between 2004 and 2006, the Federal Reserve Board raised interest rates from 1% and capping out at
to 5.25%. Even with interest rates on the rise, the housing bubble continued to grow. Why did the
bubble continue to grow when typically interest rates increase homeownerships typically declines as
well? Economists look at the lending practices before and after the bubble. Prior to the bubble
standard typically included, "documentation of credit histories of prospective borrowers, their
current income and assets, evidence of job stability and pay, and related factors that in theory help a
lender assess a potential borrower's ability to pay for a mortgage." During the 2000's lending
practices eased with the government continuing to push their policy on continuing to grow
homeownership numbers. To continue homeownership lenders developed new innovative loans such
as, "piggy back loans (80/20), adjustable rate mortgages, stated income loans, negative amortization
mortgages, and multi–layered risked." These loans gave homeowners many options as with piggy
back loans, allowed consumers to purchase a home without having to put down a down payment,
however they would have a first and second mortgage. Many consumers also opted for adjustable
rate mortgages such as interest only loans. These loans allowed the consumer to purchase a home
that would most likely be out of their monetary range, with

Essay On Subprime Lending

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Essay On Subprime Lending