Federal Home Loan Bank Act

Posted in Finance, Accounting and Economics Terms, Total Reads: 250
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Definition: Federal Home Loan Bank Act

Federal Home Loan Bank Act is an act that was passed by the Hoover administration in the year of1932. It was was designed for encouraging home ownership, it was done by providing low-cost funds for the member banks to be extended as mortgage loans. The Federal Home Loan Bank Act was one of the first in a series of bills which were sought to be made to make the home ownership a realistic goal for more number of Americans.

 

The Proponents of these measures say that home ownership is very key part of every American dream and also that home ownership would result in stronger local communities & a better overall living quality. But, the critics argue that such long standing tradition by offering the federal subsidies for the mortgage loans distorts the housing market, thus culminating in standards which are overly lax lending and unnaturally very high prices of housing or real estate.

 

The Federal Home Loan Bank Act is considered one of the major reasons for the subprime crisis of 2008.

 

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