FHCE 3100 Lecture 19Current LectureChapter 12: Being a better consumer of housing and vehicles  *Test Q: What percentage of us are overweight/obese 69% *Test Q: What happened to the rate of obese/overweight children in US DOUBLE  *Test Q: What happened to the rate of obese/overweight teens in US? Quadrupled *Know how the housing market collapsed in 2006. What the government did/what consumers did/legislation Expenditures Housing and transportation are the two largest expenditures for most consumers Homeownership stats The national homeownership rate is 64.4% One of the major ways homeownership was made available:  New Mortgage Products and credit guidelines opened the market to populations that previously would not have qualified to buy a house Discrimination Fair Housing Act prohibits discrimination on the basis of: Race or color Sex Religion  National origin  Familial status  Disability  Black Jack, MO Olivia Shelltrack and Fondray Loving, don’t meet the local definition of “family” They are not married so they cannot live in the house they just purchased with their 3 biological children  *Discrimination present here, can’t discriminate on familial status  The town lost in court Home ownership propaganda… Consumers were told home ownership will totally do all of these things… President Hoover: “change the very physical, mental and moral fiber of one’s own children” These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. George Bush’s HUD secretary: “save babies, save children, save families, save America”  Roosevelt: a country of home owners is “unconquerable”  And maybe these slide  Create social and financial stability  Live by the same people = a social neighborhood  Having mortgage to pay may make you take your job seriously/be financially responsible  Create safer neighborhoods May recognize strangers Create smarter children who do better in school  Homes provide resources to enable kids to do well in school  *Note: the correlation between families who have automobiles is a stronger indicator of school success than homeownership is  20th century This was when the US government had its first home ownership promotion: the “own your own home” campaign, begun in 1922 under then Secretary of Commerce (later president) Herbert Hoover Became the first federal program explicitly aimed at encouraging home ownership. The program was largely promotional; there were no financial incentives offered During the Great Depression With the great bust of the 1930s, US home ownership dropped to 44% in 1940. The decade brought numerous government programs to support home ownership… Instrumental Programs… One was the Federal Home Loan Banks (FHL Bank) under Hoover in 1932 12 government-sponsored banks that provide stable, on-demand, low-costfunding to American financial institutions (not individuals) for home mortgage loans TEST Q Ex) Sally went to a FHL Bank to get a loan.- FALSE!!!!- She couldn’t unless she was a bank Home Owner’s Loan Corporation Roosevelt administration’s New Deal creations of the Home Owner’s Loan Corporation (1933) (dissolved with a small cumulative net profit in 1951) Its purpose was to refinance home mortgages currently in default to prevent foreclosures* *You usually get 3 months before they foreclose on it and make you homeless Foreclosure = your bank takes your house from you  The National Housing Act of 1934 Enacted June 28, 1934, also called the Capehart Act, was part of the New Deal passed during the Great Depression in order to make housing and home mortgages more affordable It created the Federal Housing Administration (FHA) Incentive is to get people to be homeowners The goals of this organization are to improve housing standards and conditions, provide an adequate home financing system through insurance of mortgage loans  Federal Savings and Loan Deposit Insurance The FSLIC was crated as part of the National Housing Act of 1934 to insure deposits in savings and loans a year after the FDIC was created to insure deposits in commercial banks  In the 1980s, its responsibilities were transferred to the Federal Deposit Insurance Corporation (FDIC)  Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is a US government corporation as an independent agency created by the US Banking Act of 1933 *Purpose was to calm consumers, encourage buying/investing Current level of protection: $250,000 for each deposit ownership category in each insured bank  *This is a great program *Insurance changes your behavior and your banks behavior  Ex) health insurance, you to go sky diving Federal Housing Authority The United States Housing Authority (USHA) was crated during 1937 within the US Department of the Interior by the Housing Act of 1937 as part of Roosevelt’s New Deal  It was designed to lend money to the states or communities for low-cost housing construction  Federal National Mortgage Association (FNMA) EXAM hard  The FNMA, commonly known as “Fannie Mae” was founded in 1938. It is a government sponsored enterprise GSE Became a publicly traded company in 1968 Purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market  *Fannie buys up banks mortgages, it became a publically traded company so it has to make money  Understand mortgage back security and how it contributed to collapse *it is basically a bond Ex) Moorman is Fannie and bought up all of our mortgages. We are paying our mortgages on time. Fannie has to make money, needs to buy more mortgages. She takes all of our mortgages and bundles them together into a mortgage backed securities or “bond” (lending money). We as investors buy these bonds because we make money when they pay theirmortgages. So, people are going to stop paying their mortgages then these bonds are worth nothing  The Federal Home Loan Mortgage Corporation (FHLMC) Also known as Freddie Mac, is a public government-sponsored enterprise