How Do American Mortgages Work? Part 6: The Federal Agencies

Since the housing market is so massive in the United States the government had to be regulating the market in some way. With some agencies created in the midst of the Great Depression and some after the housing bubble burst. These three primary agencies are there to help the consumer and the lender whether it’s regulating the market or insuring less risk onto the lenders, they are there to provide an efficient mortgage market in America.

After the housing bubble burst, the United States government wanted to make sure nothing of this severity ever happened again. President Obama and the Congress signed in the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010 that created the Consumer Financial Protection Bureau (CFPB). The goal of the organisation is to watch out for American consumers in the market for consumer financial products and services. Since this agency was only focused on the consumer rather than on monetary policy or bank safety, it puts all the agencies focus on protecting the consumer from unfair processes and illegal activity from products and …

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How Do American Mortgages Work? Part 2: How the Secondary Mortgage Market was Created

Like the housing bubble in 2008, there was a growing popularity in the residential housing market which therefore created a housing bubble throughout the 1920’s. Before the crash, there were four common financial institutions to obtain a mortgage from: commercial banks, life insurance companies, mutual savings banks, and thrifts. These would typically have 5 year balloon loans or 10 year amortization loans with families having a hybrid of the two loans.

The Great Depression started by a stock market crash in 1929, there was a huge economic downfall that lasts for 10 years spread throughout the Western world filled with great disparity and no work. By 1933, the economy fell 27%, unemployment reached 25%, and wages fell 42%. The Great Depression was not just affecting Americans but the banks as well. Laws preventing banks to invest their client’s deposits were not in existent yet so a majority of the banks’ money were in investments. When the stock market crashed the banks’ money went along with it. With the Economic downfall left little to no income for most of the families, …

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Everything old is new again, buying on layaway

I remember getting a new coat when I was about eleven, we went to a shop in Swords village, next to a place that was called ‘Savages’ (in fact I think the clothes shop was owned by them too) and I tried on a coat and my mother paid part of the money for it on ‘layaway‘ and then we went back the following fortnight and paid for the rest and picked it up, in the mean time they made an adjustment to it too.

Will we see a return to some of the ideas from the past as the credit market contracts? Perhaps we will, layaway does have several advantages for both sides of the transaction.

Seller side advantage: The seller sells a product and gets cashflow into their business, if the buyer pulls out later there is normally a charge and the item can be re-sold. So if the person doesn’t go ahead then the …

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