In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers... In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.  In 2001, the independent research company Graham Fisher & Company stated that HUD’s 1995 "National Homeownership Strategy: Partners in the American Dream", a 100-page affordable housing advocacy document, promoted "the relaxation of credit
This act benefits buyers and lenders because it allows the buyers who are looking for housing even low income families to find housing within their budget. While the lenders get their money without having to inflate prices. Also, financial corruption from banks and wall street had influenced the creation of The Great Recession. There was predatory lending in the mortgage markets and banks had knowingly loaned millions of checks on mortgages . This led to a tremendous Economic crash as stated in (document e ).
It bought Federal Housing Administration (FHA) mortgages and included them in its books. In 1968, it became a Government-Sponsored Enterprise (GSE). This meant that whereas the stockholders owned it, the U.S. government guaranteed its loans. That turned
Economic imbalances resulting from World War I was the main cause for the Great Depression. Consumers were unable to buy all the goods produced causing manufacturers to close businesses. Closing businesses resulted in a rise of unemployment, however, President Franklin D. Roosevelt created the New Deal as an effort to alleviate poverty and unemployment. President Roosevelt believed that it was essential for the government to protect the less fortunate and improve society . One of Roosevelt 's New Deal program, the Works Progress Administration (WPA), employed masses of people, saving them for poverty and despair.
(2003) stated that securitization is a process of packaging and transfer financial promises into form where it can be easily transfer to other investors. The value of financial promises is depends on the willingness and the ability of inndividual or company in term of making promises either good promise or bad promise. Securitization will become loans backed by general credit of the borrower and can become a securitization backed by legal obligations in term of forfeoture in certain asset and forcing in payment. In addition, according to Fabozzi & Kothari (2008) stated that securitization is also known as secured lending or asset based lending where there has a
Asset securitization is a transformation of illiquid assets which includes residential mortgages, loans or other credit exposures into a security, or a process whereby the interests are packaged, underwritten with classes sold in the form of asset-backed securities. There are few steps involved in the process through a bank or company (originator) pooled of loans or assets and sold it to the third party, typically a special purpose vehicle (SPV). In turn, SPV will transfer the pooling assets (also knowns as asset-backed security) to a trust, and it will issues securities, certificates, notes, or interests to investors. Asset securitization techniques are being sought by a number of Asian countries to promote home ownership, financing the growth
According to Two presidents and the great depression it says, “The FERA (Federal Emergency Relief Administration) was created to funnel money to the states so they could rapidly create jobs for the unemployed.” Roosevelt put together this program in order too help create more jobs, and get money trafficked through states again. Not only this, but according to Two presidents and the great depression, “The AAA (Agricultural Adjustment Act) addressed farm problems by paying farmers to hold part of their land out of production and having the government buy the surplus at a fair price. This law saved millions of farmers from bankruptcy.” This act helped too raise more crops and it helps so that farmers didnt go bankrupt due to the busnisses they sell too are
Apart from a small company and academic institution which have limited funds, even a large corporation with can use its patent portfolio for acquiring additional capital. The UK’s statutory definition of securitisation is “(a) transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched having the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures, and (b) the subordination of tranches determines the losses during the on-going life of the transaction or scheme.” The concept of securitisation is that the debtor-business entities securitising their assets, the patented innovations, by selling the stream of future cash flows to the SPV which are normally the royalty stream securitisation firms in exchange for its present value. Afterward, the SPV will issue securities which are backed with the predictable revenue streams from the originator in the market with the goal of selling them to the investors. Thereupon, the patent-backed securitisation provides the institutions or companies with the essential cash promptly which is vital in order to carry on and expand its research and development while enabling the companies to maintain control over the intellectual property as well as acquire capital without losing equity. Accordingly, the significant financing gaps between the earlier stages of the research in creating the invention and the later stages of the finished innovation based on the patent are bridged by the use of securitization as a raising funds tool.
ICICI Prudential Banking and Financial Services Fund enables you to take advantage of the opportunities in the banking and financial services sector in India. You can create wealth by investing in mutual fund schemes and see your money grow with time. References: