Download Fannie Mae and Freddie Mac: Turning the American Dream into by Oonagh McDonald PDF

By Oonagh McDonald

The goal of this e-book is to ascertain the position of Fannie Mae and Freddie Mac within the monetary obstacle. to start with, it is going to clarify their function in public coverage and within the provision of personal loan financing for housing, as envisaged initially and as a consequence. the purpose should not to check this through the many years because the institution of Fannie Mae within the 30s, yet to focus on their function within the 90s due to political judgements, concentrating on loan lending. Politicians discovered it more straightforward to encourage/oblige them to conform, partially due to political appointees in senior govt and board positions. it's worthy the event and abilities which the appointees delivered to those roles and the consequences of attainable loss of suitable adventure in operating those associations, in addition to alterations within the legislative framework and the ways that this affected financial institution lending. the previous could clarify the accounting scandals at either firms in 2004 and 2005. regardless of such very public difficulties, those govt backed organisations have been in a position to interact in broad lobbying all through such a lot of this decade. the results of a majority of these elements, together with the inability of oversight of those associations and the political force to extend domestic possession, regardless of the charges, could be obvious because the seeds of the following monetary predicament. e lobbying, which had an effect at the mild contact oversight. the end result for the banking zone, for the various people who took out mortgages, and particularly for politicians and public coverage could be spelt out and the teachings to be learnt, from following expedient and possibly self-serving political goals.

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The costs of the program continued to rise: the seller-assisted loans have claim rates that are three times those of other FHA single-family loans. 4bn higher in 2009 without them. 6bn. The report adds that of the one million seller-assisted loans insured between 1998 and 2009, about 500,000 are still active, and an additional 145,000 were paid-off but re-entered the MMI as stream-lined refinance loans. Of these, 14,000, nearly one in ten, have already gone to claim. The effect of this program was dire and will continue to be so.

Apart from the increasing sophistication of the much larger numbers of community organizations, the NCRC argues that as banks became regional and national in scope, they recognized the importance of maintaining their local community lending and investing capacity. Not all of the lending went into meeting housing needs, and not all of the monies “committed” may have been actually lent, as some of the agreements cover several years. The preface to the report notes that banks increasingly entered into unilateral agreements, presumably, and if for no other reason, to avoid public criticism; but it also describes the fluctuation in dollar amounts, which it relates to mergers and acquisitions.

A conditional approval may also be given for a merger or an acquisition, but a bank is required to take steps to remedy the deficiency and improve its rating. The public and community organizations also participate in the process. That is one reason why banks are concerned with the CRA ratings, since delays in planned mergers and acquisitions are costly and may prevent the bank from developing an effective competition strategy. Perhaps because of these and other strategies, based on the Federal Financial Institutions Examination Council (FFIEC) between January 1997 and November 1999, about 20% of all banks received an “outstanding” CRA rating, 79% received a “satisfactory” rating and 1% were advised of their “need to improve” rating.

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