Was the US Federal Government’s 1932 intervention



Was the US Federal Government’s 1932 intervention in the market for home ownership desirable? How did the creation of Fannie Mae in 1938, Ginnie Mae in 1968, and Freddie Mac in 1970 expand homeownership and shape lending practices at banks and other mortgage-lending firms?

  1. Why did the US Congress enact the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Depository Institution Deregulation and Monetary Control Act, and the Housing and Community Development Act? Was the legislation effective in expanding homeownership? Did the government’s promotion of subprime mortgages and high loan-to-value (LTV) subprime mortgages create additional risks for lenders and the holders of mortgage-backed securities (MBSs) or collateralized debt obligations (CDOs)?
  2. Did subprime mortgage loans contribute to the housing bubble? Why did the bubble burst? What were the consequences of the housing bust to borrowers, loan originators, and MBS and CDO holders? Did subprime mortgages contribute to the US financial crisis of 2008?Was the US Federal Government’s 1932 intervention
  3. How did Federal legislation concerning mortgage loans affect Countrywide Financial Corporation’s (CFC) business strategy? Did the government’s encouragement of subprime mortgages have an impact on the company’s number of loan originations between 1990 and 2007?
  4. What effect did the housing boom and the growth in origination of subprime mortgages have on CFC’s financial performance? Evaluate the financial rations presented in case Exhibit 8 and calculate compounded annual growth rates for items in CFC’s Statement of Operations? Did the company’s growth rate vary significantly between 2003 and 2007? Did CFC retain most of the loans originated for investment? What is your overall assessment of CFC’s finaWas the US Federal Government’s 1932 intervention ncial performance between 2003 and 2007?
  5. Was CFC pursuing an ethical strategy? Were all of the CFC’s business practices ethical? Were CFS’s compensation practices ethical and in the best interest of shareholders? Did its lending practices harm borrowers? Is there anything unethical about its VIP loan program? To what extent, if any, were unethical strategies or business behavior a problem at CFC? To what extent, if any, was CFS’s CEO involved in unethical behavior?
  6. 7. what reconditions would you make to Bank of America executives to ensure that lending practices at its subsidiaries will promote homeownership in a manner that is in the interest of borrowers, investors in the secondary mortgage market, and the company’s own long-term financial interests?