Homeownership is a part of the American dream. As a public policy, it’s been a powerful magnet for talented immigrants. From the early promise of 40 acres and a mule for every man and women who would homestead to the Levittowns of post World War Two, America has always promised its people greater rewards.
I took a short look at some of the institutions charged with public policy that made home ownership easy and how they are still playing a big public role.
The New Deal
President Roosevelt’s New Deal created policy and institutions to encourage people to become homeowners. Facing high levels of mortgage foreclosures during the Great Depression, the Roosevelt Administration, created the Federal Housing Administration (FHA) and the Federal National Mortgage Association. Fannie Mae established the 30-year, fixed rate, fully amortized mortgage as a standard. The FHA was created to insure those mortgages, to cushion the loss and so incentivized investors to take risk. Huge capital markets are created to draw pools of money into the housing industry to fuel a politically mandated public homeownership program. Continue reading this post