Fannie Mae and Loan Discrimination
Fannie Mae and Loan Discrimination
The stock market crash of 1929 served a devastating blow to the national economy. Many people suddenly found themselves out of work as the nation spiraled into The Great Depression of the 1930's. Many Americans were forced to default on their mortgage loans. The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934. Its primary goals were to provide an adequate home financing system through insurance of mortgages and to stabilize the mortgage market. In 1938 Congress created Fannie Mae to refinance FHA insured mortgages. (http://www.fhatoday.com/fha.htm) Fannie Mae has developed into a dominating force in the home finance market since its introduction in 1938, undergoing some major transformations along the way. The organization was privatized in 1968, while at the same time retaining a number of connections to the government, converting it into somewhat of a governmental - private organization hybrid.
Examples of what make Fannie Mae unique to most other "private" organizations include being exempt from state and local income taxes. Furthermore, the organization is not required to register their securities with the Securities and Exchange Commission. The secretary of the Treasury is also authorized to invest up to $2.25 billion in their securities, and to approve their issuance of debt. (Wallison, Nationalizing Mortgage Risk, p.6) Since the company's "privatization" in 1968, Fannie Mae has provided $4.0 trillion in financing to millions of American families. Homeownership is considered to be one of the major components of "The American Dream." Not coincidentally, Fannie Mae's slogan is "Our business is the American Dream." The company claims responsibility for increasing the country's homeowner rates by reducing the cost of buying a home. The company has generated a great deal of capital from investors as well as government subsidies to become America's second largest corporation asset-wise. "Keeping low-cost funds flowing to mortgage lenders to lend to home buyers in all communities, at all times, under all economic conditions" (Fannie Mae, Annual Report) is what the company states is their primary objective. Whether or not this is Fannie Mae's focus at all times is debatable.
Aside from the stockholders, middle to low income loan applicants are the primary stakeholders of the company. Making housing affordable for working families is what Fannie Mae prides itself in doing. Most of these stakeholders' primary concern is the availability and affordability of mortgage loans. Fannie Mae claims...