Click below to explore our interactive timeline on the legislation surrounding the mortgage market of the United States. Scroll left to right to gain a brief picture of the timeline, and click into one or more sections to learn about the specifics of a particular policy.
- June 27, 1934
- April 11, 1968
- May 29, 1968
- December 31, 1975
- October 12, 1977
- October 15, 1982
- October 3, 1984
- August 9, 1989
- September 23, 1994
- July 4, 2007
- July 30, 2008
- July 21, 2010
In response to the housing crisis of the Great Depression, the National Housing Act established the Federal Housing Administration (FHA), which sought to revive lending for housing construction, home purchases, and home improvements. In order to stabilize the mortgage market, the FHA provided federal guarantees of repayment to banks, mortgage companies, and other lenders that complied with federal standards. To increase the flow of capital into housing, the FHA also encouraged the development of a secondary mortgage market, in which financial institutions could sell mortgages to investors. In implementing this legislation, the FHA also adopted rules that entrenched patterns of racial discrimination in the housing market. From the 1930s through the 1950s, the FHA's Underwriting Manuals institutionalized the practice of redlining, which evaluated African American neighborhoods as being too risky to qualify for FHA mortgages. In 1965, the FHA became a part of the Department of Housing and Urban Development (HUD), where it remains today.
Passed as Title VII of the Civil Rights Act of 1968, the Fair Housing Act prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, and national origin. The Fair Housing Act marked the first time the federal government declared it illegal for private individuals to discriminate based on race in the sale or rental of a home. Congress amended this legislation to include gender and disability protections in 1974 and 1988, respectively. Despite the historic precedent of the Fair Housing Act, housing in the United States would continue to be characterized by significant segregation across racial lines.
The Truth in Lending Act (TILA) sought to protect consumers in their transactions with lenders and creditors in the mortgage, auto loan, and other consumer credit industries. Before TILA was enacted, lenders were able to present loan information in a variety of ways. TILA standardized the manner in which mortgage lenders, and retailers that sold on credit, calculated and disclosed interest rates. This legislation had the goal of ensuring the informed use of consumer credit. TILA mandates that all consumer lenders must provide a Truth in Lending disclosure statement to borrowers. This statement must include information on the amount of the loan, finance charges, the annual percentage rate, the payment schedule, and the total repayment amount over the lifetime of the loan. TILA grants borrowers the right to rescission – a “cooling off” period that allows consumers to cancel their transaction within three days of loan consummation. The legislation also creates a number of ways for consumers to bring enforcement actions through the courts. TILA does not tell lenders how much interest they may charge or whether they should grant a consumer a loan. Congress has amended the act numerous times since its enactment in 1968. In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act transferred rulemaking authority for TILA from the Federal Reserve Board to the Consumer Financial Protection Bureau.
The Equal Credit Opportunity Act’s (ECOA) prohibited creditors from discriminating against applicants based on race, sex, religion, national origin, marital status, age, or the economic status of receiving public assistance. This civil rights law ultimately increased access to credit for women and people of color. Policymakers and consumer advocates used ECOA to combat predatory lending discrimination in the early 2000s against lenders that preyed on African-American and low-income communities. ECOA applies to any person or entity that participates in a credit decision, including banks, credit unions, retailers, and finance companies. The law covers a variety of loans, such as car loans, credit cards, mortgages, student loans, and small business loans. In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act transferred rulemaking authority for ECOA, known as Regulation B, from the Federal Reserve Board to the Consumer Financial Protection Bureau.
The Home Mortgage Disclosure Act of 1975 (HMDA) required certain financial institutions to provide mortgage data to the public. HMDA was enacted in response to public concern over credit shortages in certain urban neighborhoods in the 1970s. HMDA required public disclosure of mortgage information that could (1) assist in determining whether financial institutions were serving the housing credit needs of their communities; (2) aid public officials distributing public-sector investments; and (3) help identify discriminatory lending patterns. Financial institutions must report HMDA data to their respective regulator if these institutions fulfill certain criteria, such as having assets above a specific threshold. Institutions covered by HMDA are required to maintain a Loan Application Register (LAR). Each time an individual applies for a mortgage from an institution covered by HMDA, the institution must make an entry into LAR, noting information such as the date of application, loan amount, race of the borrower, and other characteristics. In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act added new data collection requirements to HMDA and transferred rulemaking authority for HMDA, known as Regulation C, from the Federal Reserve Board to the Consumer Financial Protection Bureau.
Passed as Title VIII of the Housing and Community Development Act of 1977, the Community Reinvestment Act (CRA) sought to encourage lending institutions to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congressional sponsors designed CRA to help combat the practice of redlining, through which lenders refuse to grant loans to borrowers residing in certain neighborhoods. In the United States, redlined areas often contained high concentrations of minority communities. The CRA applies to all lending institutions that receive FDIC deposit insurance—in effect requiring that in exchange for federal insurance, banks must serve the full community in which they are located. Three regulators enforce the CRA: the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System. These regulators supervise banks with CRA obligations and assign ratings to each bank based on how well the bank fulfills its obligations to low- and moderate-income communities. The relevant regulator then uses a bank’s CRA score in its evaluation for future approval of bank mergers, charters, acquisitions, branch openings, or deposit facilities.
As Title VIII of the Garn-St. Germain Depository Institutions Act, the Alternative Mortgage Transactions Parity Act of 1982 (AMTPA) sought to increase access to the housing market for borrowers with poor credit. AMPTA preempted state laws in order to lift the restrictions on non-conventional mortgages in the United States. Before AMPTA, many states prohibited banks from writing home loans other than conventional fixed-rate mortgages. With the dramatic rise in interest rates during the 1970s, these state restrictions on home mortgages increasingly prevented low-income borrowers from becoming homeowners. To make homeownership more accessible, AMPTA allowed alternative mortgage transactions to enter the mortgage market. These mortgages included adjustable-rate mortgages, balloon-payment mortgages, and interest-only mortgages. By introducing new types of mortgages to the market, AMPTA contributed to the growth of the mortgage market in the 1980s, but also added increased layers of risk.
Congress enacted The Secondary Mortgage Market Enhancement Act of 1984 (SMMEA) with the goal of meeting growing consumer demand for mortgage credit. SMMEA declared mortgage backed securities (MBS) to be legal investments equivalent to Treasury securities and other federal government bonds for federally chartered financial institutions. The act also preempted state investment laws, so that MBS could be purchased by state-chartered financial institutions. By allowing financial institutions to invest in MBS, SMMEA strengthened the secondary mortgage market. As MBS became increasingly available and the economic foundations of the mortgage market remained strong, MBS continued to attract investors. SMMEA expanded the pool of mortgage credit, thereby allowing more Americans to purchase homes.
Following the savings and loans crisis of the 1980s, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). FIRREA reformed the savings and loans industry by restructuring its regulatory system, establishing stricter capital maintenance requirements, and creating new civil penalties for fraud within federally insured banks. Among its many actions, FIRREA abolished the Federal Home Loan Bank Board and established in its place the Federal Housing Finance Board (FHFB). FIRREA charged the FHFB with overseeing the eleven Federal Home Loan Banks, which represent the largest collective source of home mortgage credit in the United States. Additionally, FIRREA tasked Freddie Mac and Fannie Mae with additional responsibilities to support mortgages for low- and moderate-income families. FIRREA also authorized state housing finances agencies and non-profit entities to purchase mortgage-related assets.
The Home Ownership and Equity Protection Act of 1994 (HOEPA) was an attempt to address predatory practices in the home loan industry by providing borrowers with protections against loans with excessive fees and interest rates. HOEPA amended the Truth in Lending Act to establish new disclosure requirements and protections on certain closed-end mortgages that had rates or fees above a certain threshold. HOEPA defined a loan to be “high-cost” if a loan had an annual percentage rate 10% above the yield on a Treasury security with comparable maturity or had its total fees and points exceed $400, or 8% of the loan. From these triggers, HOEPA established protective provisions for high-cost home loans, including additional disclosure for borrowers, prohibition of prepayment penalties, prohibition of negative amortization, and the requirement that lenders determine a consumer’s ability to repay. The legislation further granted the Federal Reserve the power to adjust and enforce these triggers, as well as “discretionary regulatory authority.”
The Residential Mortgage Fraud Act established Article 20A of Chapter 14 of North Carolina General Statutes. This legislation defined residential mortgage fraud and declared such action a felony in North Carolina. By establishing mortgage fraud as a per se violation, this act sought to deter fraudulent behavior within the North Carolina mortgage market. Mortgage fraud is a major component of predatory lending behavior. Article 20A defined mortgage fraud as when a person knowingly makes or attempts to make a misstatement, misrepresentation, or omission within the mortgage lending process, so that a mortgage lender, mortgage broker, or borrower relies on this misinformation. This regulation applies to all mortgage lenders, including non-bank mortgage originators, brokers, and real estate professionals, as well as loan applicants. The North Carolina Commissioner of Banks, North Carolina Attorney General, and other parties may refer suspected violations of the law to the proper district attorney for prosecution.
Congress enacted The Housing and Economic Recovery Act of 2008 (HERA) as one set of measures to address the subprime mortgage crisis in 2008. HERA had the objective of restoring public confidence in Fannie Mae and Freddie Mac by strengthening regulations and supplying large amounts of credit to the mortgage market. The statute created a new regulator, the Federal Housing Finance Agency (FHFA), which put Fannie Mae and Freddie Mac under conservatorship the same year. HERA was composed of subtitle acts, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and the Federal Housing Administration (FHA) Modernization Act of 2008. The SAFE Act required all states to institute a mortgage loan originator licensing and registration system by August 2009. States were able to operate their own systems compliant with strict federal standards, or states could participate in the National Mortgage Licensing System and Registry. The SAFE Act intended to set a baseline of oversight and promote uniformity among licensing standards nationwide, as over the previous twenty years, licensing standards differed from state to state. The FHA Modernization Act of 2008 increased the FHA loan limit from 95% to 110% of area median home price. The act also required a 3.5% down payment on any FHA loan, while prohibiting seller-funded down payments. Lastly, HERA permitted the FHA to guarantee up to $300 billion of 30-year fixed-rate refinance loans up to 90% of appraised value for distressed borrowers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) remains the most well-known legislation enacted in the wake of the 2008 Financial Crisis, and reformed nearly all aspects of financial sector regulation. Among its many provisions, Dodd-Frank established the Consumer Financial Protection Bureau (CFPB) as a new federal agency. The CFPB has the responsibility of protecting consumers against predatory lending and helping borrowers make informed credit transactions. Title XIV of Dodd-Frank, known as the Mortgage Reform and Anti-Predatory Lending Act, focused on standardizing data collection for loan underwriting, while imposing obligations on mortgage originators to lend more carefully to borrowers. This section established national underwriting standards for residential loans, such as the ability to repay rule, and amended the Truth in Lending Act (TILA) to transfer rule-making authority regarding TILA from the Federal Reserve Board to the CFPB.