Lesson9_Origination

Primarily purchased non conforming loans texas tech

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Unformatted text preview: d in 1930's Purchased FHA Loans on Secondary Market Made Quasi Private Corporation in 1968 due to Vietnam War Started Purchasing Conforming Loans in 1970 (3 C's) Freddie Mac (FHLMC) Established in 1970 Goal to Create Market Competitor w/ Fannie Mae for Conforming Loans Major Accomplishments Standardization in Forms and Practices: Increased liquidity and stability of mortgage markets Role in "Subprime" Housing Crisis Only Purchased Low Risk Conforming Loans on Sec Market Was Over Leveraged, Not Enough Reserves 20 Subprime Housing Crisis Federal Reserve Lowers Interest Rates to 1% Expensive to Save, Cheap to Borrow Explosion of Private Mortg Backed Securities FNMA and FHLMC Dominate Conforming Market Wall Street Creates Demand for Subprime Loans House Prices Begin to Fall in 2005 Previous Borrowers Could Not Refinance Risky Loans 4 5% of Conforming Default, 20% of Subprime Default Widespread Uncertainty Creates 2008 Panic Texas Tech University 7 Real Estate Fundamentals Dr. Eriksen Lesson 9: Origination and Sec. Markets Government Responses to Crisis Fed Lowered Interest Rates, Increased Lending Overnight Borrowing from $57m $847b Lower Rates Increase Cost of Saving...
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