...National Home Mortgage Finance Corporation was created in 1977 by virtue of Presidential Decree 1267, with the mandate of increasing the availability of affordable housing loans to finance the Filipino homebuyer acquisition of housing units through the development and operation of a secondary market for home mortgages. Consistent with this mandate NHMFC bought mortgages originated by private financial institutions, and eventually sold them back to the public through the issuance of mortgage backed financial instruments. However, the financial crisis which hit the country in 1984 up to the early part of 1986 caused the collapse of a relatively successful home-financing program of the government. Since a sizeable portion of NHMFC funds came from the financial market, in addition to funds coming from contributions of PAG-IBIG members, the 30% to 40% interest rates in the financial market made it impossible for NHMFC (whose lending rate was pegged at 9%) to operate viably. With the assumption into office of the Aquino Administration in 1986, there was already a felt need to reorganize the government housing agencies and define their new mandates. Executive Order No. 90 on December 17, 1986, gave fresh mandates to the five housing agencies, NHMFC included. As the major government home mortgage institution, NHMFC was tasked to operate a viable home mortgage market, utilizing long-term funds principally provided by the Social Security System (SSS), the Government Services...
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...The 2008 Subprime Mortgage Crash and response by the Federal Government Philip J. Scanlon University of Redlands Conditions leading the Subprime Mortgage Crash Many factors contributed to the subprime mortgage crisis, a disruptive economic downturn that its severity can be compared to the Great Depression. Only federal intervention prevented a possible collapse of the world economic system. Ironically, it can be said that federal intervention in the mortgage industry led to the 2008 collapse. By backing risky mortgages, the government created a new systemic financial contagion that began in the housing market, moved through financial and investment markets, and created a loss of confidence in the financial system on which our economy is based. The following conditions created the crisis: 1. For the government, home ownership kept neighborhoods safe and clean because neighbors, in protecting their property, also protected neighborhoods. Government backed loans were offered to otherwise at risk lenders home ownership to strengthen communities, especially low income communities. 2. The government encouraged lenders to extend riskier loans to those more economically disadvantaged and therefore less likely to honor debt obligations. By guaranteeing the loans, the government allayed concerned bankers and other lenders. Fannie Mae and Freddie Mac, backed by the federal government, allowed financial institutes to sell mortgages as secure investments, creating a new financial...
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...the United States. The goal of the program is to have homeowners take on a realistic proportion of their negative equity position by restructuring to affordable payments, while building a savings program that will help accelerate their principal reduction. In addition, this program will result in a market-supported level of homeowner debt in the shortest possible time with the least amount of loss to the mortgage note holder and least amount of negative credit impact to the homeowner. The even greater societal good of this program is that, if a commitment to place the vast majority of all distress homes into this program, our nations economic outlook will have a stronger foundation. Quick stats • Over 10,000,000 or 20% of all homes with mortgages in the United States have a value that is less than what is owed on the property. o Total exposure to potential losses for banks could exceed $1.5 trillion. • The average home that is overleveraged has a mortgage of $220,000 but has a value of $170,000. • The average home that has a 1st and a 2nd mortgage with a value of $225,000 but has mortgage obligations totaling $309,000. • There are over 5,500,000 homes that are in some stage of delinquency or foreclosure. Below is an example of a home that represents the average property in the US that is underwater (they owe more than the home is worth) with only a 1st mortgage. Current payment: $1,403.19 at 6...
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...The Thai rice mortgage scheme continues to receive a fair amount of media bashing even after completing its one-year anniversary on 7 October 2012. The debate on its impacts on Thailand and the rest of the world continues to take center stage at a majority of rice conferences in the region. The media and rice gurus have all ganged up on this scheme because nobody expected this from Thailand. This is the country that remained open for business during the 2007 rice crisis when India and Vietnam banned exports and provided some stability to a market that was chaotic and getting out of control. Despite all the negative publicity and criticism, Thai policymakers remain unruffled and publicly vow to continue with the program. Questions come to mind: Is this the only country with such a program? Does it really create so much uncertainty in the global rice market? To answer the first question, let me say that Thailand is not the only country with a price support program. As a matter of fact, most of the rice-growing countries in Asia have some form of price support program for farmers. These have different names and somewhat different operational mechanisms but all of them are designed to provide a guaranteed floor price for farmers. The only difference is that some countries religiously implement these programs and procure all the rice offered by farmers at the announced support price whereas others procure only the amount needed for a strategic reserve. The critical aspect of these...
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...Federal Government Housing Policy Park University EC301 A crucial role is played by the federal government in supporting the construction of housing financially and offering ownership as well as rental support for households with lower income since the 1930s. In the recent period, numerous programs are being funded by the Congress in order to meet up to the housing requirements for the population that is poor and susceptible. The plans are mainly controlled by the Department of Housing and Urban Development (HUD). The contemporary housing assistance plans involve the comparatively flexible grants for the state as well as the local governments. This is done so as to assist the homeless people, build up reasonably priced housing and offer support to the first-time buyers. This was also done to encourage community development as well as more planned, direct support programs that would assist in providing low-priced apartments and even rental vouchers to the deprived families, managed through quasi-public, local public and the private intermediaries (McCarty & Et. Al., “Overview of Federal Housing Assistance Programs and Policy”). The main objective of the paper is to analyze the housing policies adopted by the federal government related to the mortgage and funding system. With this concern, the discussion of the paper will intend to identify the strategies implemented by the federal government persuade lenders and low-income borrowers in dealing with highly...
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...and there were number foreclosure. Millions American were out of work. It nearly 10 years for America to regain from Depression after World War II brought jobs with industry regain recover. In 2007, there were loans were introduce it was part of economic factor. It had been 70 years since the last depression until the Second Depression (The Great Recession) hit for America in 2007 from a mortgage loan called subprime. The following will explain the background of the subprime loans. How the government had to intervene with subprime loan. Lastly, the policies taken place with primes and different programs. The Subprime loans beginnings started in 1992, where Congress wanted to affordable housing, work on plan with Fannie and Freddie. Congress wanted the Department of Housing and Urban Development to look at their regulations. The chairperson for Fannie had a trillion dollar commenting to finance affordable homes. Homeownership had become an economic factor over the years in the mortgage market. Majority of home have loan through financial institutes. Yet, these subprime mortgage loans were given to individuals who barley sustained income and had failed credit. The purpose of the loan was suppose have a better opportunity of have homeownership. It was unfortunate subprime loans were aim toward minorities or low income areas. Lenders saw this qualities as a high risk offer the subprime loan, whereas prime loan. There subprime loan were offer to people who were not...
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...* On Sept. 8, 2008, the U.S. Treasury seized control of mortgage giants Fannie Mae and Freddie Mac and pledged a $200 billion cash injection to help the companies cope with mortgage default losses. * About a week later the government bailed out American International Group Inc with $85 billion. * The Fed refused to save Lehman Brothers and the company was forced to file for bankruptcy. Some of the largest financial institutions were on the verge of collapse as the mortgage market melted down. As the crisis hit the global market, the credit freeze spread. * The Treasury and the Federal Reserve began working on a $700 billion bailout plan. * President George W. Bush signed the bailout plan into law Oct. 3. * Weeks later, on Oct. 29, the Fed cut the key interest rate to 1 percent. What was expected? The government claimed the bailout was necessary to provide stability in the economy and prevent disruption in the financial system. The interest rate cut aimed to revive the economy, help free up credit and make loans cheaper to consumers and businesses. What happened The financial markets remained in turmoil for several months. Credit remains tight to this day, although it loosened significantly compared to when lending nearly came to a halt during the collapse period. Mortgage rates fell significantly after the interest rate cut and amid expectations that the Fed would start buying mortgage-backed securities. QE1 begins Nov. 25, 2008 - March...
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...Government Regulation of the Mortgage Industry The residential mortgage industry has come under deep scrutiny after the market crash and recession that occurred in the United States from approximately 2007 through 2011. The causes of the market collapse however, started over a decade earlier. The development of new mortgage products and new methods in the way those mortgage products were invested, outpaced the regulatory standards the Federal government had previously established. Understanding the role of government previous to and post the mortgage industry collapse will be the focus of this market examination. The mortgage industry is regulated by several government intuitions and regulations. The regulations are split between the protection of the consumer in lending decisions and the regulation of the bank in the lending practices. The agencies that regulate the industry are the FDIC, FTC, CFPB, and the OCC. These agencies regulate and give oversight to the industry. The laws or acts that regulate the industry are mainly the TILA, ECOA, RESPA, Regulation Z, and the Patriot Act. The department of justice enforces all mortgage industry laws. The Original Market Failure The market prosperity of the 1990’s brought new investors and capital into the mortgage industry. Investors were ager to find new vehicles for investment and the banking industry saw an opportunity to expand the lending programs that were available to the residential lending market. A mortgage was previously...
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...and its collapse in the U.S. to everyone from home buyers, Wall Street, mortgage brokers, mortgage underwriters, investment banks, rating agencies, investors, low mortgage interest rates, low short-term interest rates, and relaxed standards for mortgage loans. Predatory lending was just one of many factors along this transaction chain. Predatory lending consists of loaning money to consumers in the hope and expectation that they will default and the lender will be able to take the collateral (homes.) We will discuss if the government failed to protect its citizens thru public policy and what role (if any) investments in mortgage backed securities played in the market crash of 2008 as well. While economist continue to debate who or what is at fault. The market crash clearly devastated the U.S. economy. We will also discuss how such devastation is considered to be one of the worst market failures in history. The events leading up to the crash are easier to identify after a crash, the signs were in the forefront and ignored by most people, firms, banks, and the government. Together we will embark on a journey to discover what role predatory lending, mortgage backed securities, and relaxed regulations played in the housing market crash of 2008 and to clarify if one or more of these events or a combination of them all can be considered Market Failure. Keywords: Market Failure, Predatory Lending; Mortgage Backed Securities; Housing Crisis; Public Policy ABSTRACT Six...
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...articles and present a summary of what measures the US government took to protect these financial institutions. Provide examples. Explain and critically analyse both the shareholder and stakeholder models of corporate social responsibility. Can the US government’s actions be justified from either (or both) of these models? Consider both short and long-term consequences of this government intervention. Conclude whether the action taken by the US government is best for society?’ The Global Financial Crisis of the last few years has caused widespread problems for the US government, who were forced to spend billions of (taxpayer) dollars bailing out many of the world’s largest top banks. While a controversial decision, the US government acted on the belief that these institutions were ‘too big to fail’ and their collapse would have far reaching consequences that could have lead to a much dire situation. Throughout this essay, the causes and effects that lead to the GFC and the need for a bank bailout, along with what exactly it entailed will be presented. Then, the US governments’ response in bailing out the banks will be analysed using both a Stakeholder and Shareholder model of Corporate Social Responsibility. Their decision will attempt to be justified against these models by examining both the long and short term effects of the government intervention and conclude whether or not the action taken by the US government was in the best interests of society at large. The...
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...risk and returns. Third is an apparent lack of appreciation for the principles of supply and demand. The principle states that excessive supply will reduce the price and demand for a product to the advantage of the buyer, while a lack of supply will increase demand and price of a product to the advantage of the seller. Causes Economists stress the importance of tracing the root causes of the financial crisis in order to provide a systemic solution to the present financial crisis. Most references present the cause of the financial crisis to be the “subprime mortgages.” However, subprime mortgages by itself did not cause the housing bubble to implode; many other factors contributed to the implosion. Traditionally, a lending institution, such as bank, would grant a loan based on the capability of the borrower to pay and on his/her ability to guarantee the loan with a fixed asset or collateral. The borrower mortgages the fixed asset to the lending entity, who in turn gains the right to “foreclose” a mortgaged asset and to...
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...r addressed to t Permissions Department, Joh Wiley & Son Inc., 111 Rive Street, Hobok NJ 07030the hn ns, er ken, 5774, (201)74 48-6011, fax (20 01)748-6008, we ebsite http://www w.wiley.com/go/ /permissions. To order book or for custom service, pleas call 1(800)-CA ks mer se ALL-WILEY (2 225-5945). Printed in the United States of America. e o ISBN 978- 0-470-56516-2 The Financial Crisis: 2007-2009 Objectives Understand the major influences that led to the 2007 2009 Financial Crises Describe the role that agency cost issues played in the financing of mortgages to developing mortgage backed securities and other financially engineered securities based on mortgages Describe the timeline of events that unfolded during the financial crisis Explain how financial managers must consider the risk, not only the return potential, of their activities Discuss the role of government intervention in the context of economy theory and practice INTRODUCTION How did the...
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...In an effort to assist homeowners, the Obama administration rolled out several Programs that would enable homeowners to modify their existing loans. The Department of Treasury and Housing and Urban Development created a program that would assist troubled homeowner during these challenging economic times. The Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) were created to help modify and refinance loans that became unbearable to manage. The big three claim to have helped countless homeowners modify and refinance their current loans, yet homeowners have openly stated that they have been given the runaround. What is happening to the federal bailout money? Is it really being used for its initial intent? Claim 1 Bank of America claims to have helped tens of thousands of homeowners into mortgage modifications and refinances every month. The three lenders received $24 million in incentives from the government and get $1000 for each completed modification. . Rebuttal The Obama administration singled out three of the nation’s largest mortgage servicers for impeding its foreclosure efforts by failing to help homeowners modify their loans. The administration will withhold incentive payments to Wells Fargo, Bank of America and JPMorgan Chase & Co. which it says has don’t little work with homeowners to lower monthly mortgage payments through the governments Home Affordable Modification Plan, according to the Department of Housing and Urban...
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...to University MBA/MS Program [list one] Capstone Mentor: [name] For University Use Date Received: ______________________________________________ Reviewed by: _______________________________________________ Approved/Disapproved: ______________________________________________ Signature: ______________________________________________ Date: ______________________________________________ Comments: ______________________________________________ ______________________________________________ _______________________________________________ _______________________________________________ Abstract The need to encourage house or homeownership has been in the government’s strategic plan since 1934, however, the current financial policies and practices in the housing finance and the mortgage market has characterized by minimum flow of capital in the secondary mortgage market, confusion on the main control authority and various ill practices. This fact has necessitated various changes in the house and homeownership financial. This study collected both primary and secondary data, and found out that the government must set the right policies that will empower house and home consumers to circumvent biased practices and practice informed decision making, these sentiments. There must be improvement in the foreclosure processing and mortgage servicing, notably,...
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...leading up to the crisis were characterized by a highly excessive rise in asset prices, combined with a boom in economic demand, which inflicted a clear hardship for businesses and families. To further explain my research, this paper will focus on the following: What caused the great recession, Effects of the recent recession, Types of Businesses that survived the recession, Companies that hired during the recession, Companies that choose shared-worked programs over layoffs, Various states that participates in the work shared programs, and the Advantages of the work share program. WHAT CAUSED THE GREAT RECESSION The Great Recession actually began in December 2007, which is long before most people ever realized what was to soon transpire. Although there are many speculated factors or causes that led to the recession, the American people strongly believe that the following groups are responsible for the Great Recession of 2008: Government, Mortgage Companies, Banking Institutions, Rating Companies, and AIG. The Government and the Great Recession. Politicians and the banks wanted deregulation in the banking and investment industries. During The Great Depression of the 1930s, regulation called the Glass-Steagall Act went into effect that separated banking from investment. In 1999, this act was repealed with bankers, investment firms and politicians...
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