- Dec 8, 2013
- 22,658
- 16,853
- 2,415
I am pretty sure everyone agrees that housing bubble caused the financial collapse of 2008. Also, MOST agree that the housing bubble began in 1997. What is less understood is this bubble resulted from government policies that reduced mortgage-lending standards to increase home ownership. One of the key players was the controversial group, Acorn (Association of Community Organizations for Reform Now).
The key moment was the 1992 Federal Housing Enterprises Financial Safety and Soundness Act (GSE ACT).
http://research.stlouisfed.org/conferences/gse/Moulton.pdf
In order to comply with this new law and it's "affordable housing REQUIREMENTS" Fannie and Freddie acquired more than 6 trillion dollars in loans over the next 16 years for single family homes. Congress's goal was to force these two government-sponsored enterprises (GSEs) to purchase loans that had been originated by banksloans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities. CRA lending by large banks increased dramatically after the affordable housing mandate was in place in 1993, growing to $6 trillion today. As Ellen Seidman, director of the federal Office of Thrift Supervision, said in a speech before the Greenlining Institute on Oct. 2, 2001, "Our record home ownership rate [increasing from 64.2% in 1994 to 68% in 2001], I'm convinced, would not have been reached without CRA and its close relative, the Fannie/Freddie requirements."
As reference see the following by Yale economist Robert Shiller: A History of Home Values, from his book Irrational Exuberance:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
It is available on the web at many locations.
The key moment was the 1992 Federal Housing Enterprises Financial Safety and Soundness Act (GSE ACT).
http://research.stlouisfed.org/conferences/gse/Moulton.pdf
In order to comply with this new law and it's "affordable housing REQUIREMENTS" Fannie and Freddie acquired more than 6 trillion dollars in loans over the next 16 years for single family homes. Congress's goal was to force these two government-sponsored enterprises (GSEs) to purchase loans that had been originated by banksloans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities. CRA lending by large banks increased dramatically after the affordable housing mandate was in place in 1993, growing to $6 trillion today. As Ellen Seidman, director of the federal Office of Thrift Supervision, said in a speech before the Greenlining Institute on Oct. 2, 2001, "Our record home ownership rate [increasing from 64.2% in 1994 to 68% in 2001], I'm convinced, would not have been reached without CRA and its close relative, the Fannie/Freddie requirements."
As reference see the following by Yale economist Robert Shiller: A History of Home Values, from his book Irrational Exuberance:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
It is available on the web at many locations.
