Question

What was the relationship between Housing and Urban Development (HUD) and Fannie Mae and Freddie Mac?

According to Thomas Sowell, was the housing boom and bust a national phenomenon?

What Act in 1977 directed federal financial supervisory agencies to encourage private institutions to meet the credit needs of the communities they served?

What act in 1995 eliminated regulatory discretion and established “objective” standards and show that they the required loans to LMI borrowers?

After HUD brought legal action against banks with lower approval rates for minorities than whites, what three standards did banks loosen?

What happened after the Office of Federal Housing Enterprise Oversight turned up accounting irregularities at Fannie Mae?

Answer 1

In 1968, HUD became a regulatory body for Fannie Mac and by 1970, it was the the monitoring body for financial safety of Fannie Mae and Freddie Mac. The Office of Federal Housing Enterprise Oversight (OFHEO) within HUD were entrusted with the responsibility of ensuring that Fannie Mae and Freddie Mac were adequately capitalized and financially operating safely. HUD enforced the Fannie Mae and Freddie Mac performance for meeting the housing goals, reviewing new program requests , discrimination prohibition in the Fannie Mae and Freddie Mac’ mortgage purchase activities and establishing a public use database on the mortgage purchases by Fannie Mae and Freddie Mac

According to Sowell, the housing boom and bust was not a national phenomenon. According to him, such housing boom and bust have high degree of localized variability in housing price and a result of failed housing loans.

The Community Reinvestment Act of 1977 - directs federal financial supervisory agencies to encourage private institutions to meet the credit needs of the communities they served.

As soon as HUD brought legal action against banks with lower approval rate for minorities vis-a-vis whites, the three standards that the bank loosened are - (1) Requirement of larger down payment (2) Higher loan rate (3) Higher closing cost and refusal to lend on property over a certain age.

Post revealation of accounting irregularities by $ 11 bn at Fannie Mae by Office of Federal Housing Enterprise Oversight, Congress has toughened the oversight of Fannie Mae and Freddie Mac. The CEO Timothy Howard and controller Leanne Spencer were held for poor accounting.