The foundations of U.S. real estate lending were built through major federal reforms designed to stabilize the housing market, protect consumers, and expand access to homeownership. Beginning in the 1930s, the government introduced agencies and programs that reshaped mortgage financing. The creation of the FHA in 1934 revolutionized lending by insuring loans and establishing the 30-year fully amortized mortgage, while New Deal reforms also brought the FDIC and FSLIC to safeguard deposits. Fannie Mae (1938), later joined by Ginnie Mae (1968) and Freddie Mac (1970), helped form the secondary mortgage market by purchasing and pooling loans, increasing liquidity for lenders, and broadening borrower access.
Post–World War II policies further supported veterans through VA loan guarantees. Over time, regulations such as the Home Mortgage Disclosure Act and the Dodd-Frank Act added transparency and consumer protections, ensuring lenders served their communities fairly and verified a borrower’s ability to repay. Together, these developments created the modern mortgage system and lending market structure still used today.
- The Federal Housing Administration (FHA) was created in 1934 and expanded housing opportunity by insuring certain types of loans against losses from default, and creating the 30-year fully amortized loan.
- To solve some of the problems plaguing the mortgage financing industry, the government created the Federal Housing Administration (FHA) in 1934. This agency made mortgage financing more available by insuring certain types of loans for lenders, protecting them against losses from default.
- In 1933, President Franklin Roosevelt reformed the banking industry and established two federal agencies to protect consumers: the Federal Deposit Insurance Corporation (FDIC) and the Federal Savings and Loan Insurance Corporation (FSLIC).
- The Federal National Mortgage Association (FNMA or Fannie Mae) was established in 1938. Originally, Fannie Mae made money available by purchasing FHA loans from individual lenders, grouping them together, and selling them as mortgage-backed securities to investors.
- In 1968, Fannie Mae split into two entities: the Government National Mortgage Association (GNMA or Ginnie Mae), which took over the sale of the government loan market, FHA, VA, and farm housing loans; and Fannie Mae, which became a private entity.
- In 1970, the U.S. Congress chartered the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac.
- The primary lending market consists of lenders who provide financing for the purchase, or refinancing, of homes or other properties. Once the loans are acquired and closed, these lenders sell the mortgages to a secondary market and use the capital from those sales to lend to new borrowers.
- Mortgage bankers pool a collection of loans that have similar characteristics, such as loan type, loan term, and interest rate. Then, they sell the pool to an investor on the secondary market.
- The Federal Housing Administration (FHA) was created in 1934 and expanded housing opportunity by insuring certain types of loans against losses from default, and creating the 30-year fully amortized loan.
- At the conclusion of World War II, the government instituted programs within the U.S. Department of Veterans Affairs (VA) to guarantee mortgage loans made by private lenders to veterans.
- The Home Mortgage Disclosure Act (HMDA) requires financial institutions to collect and publish loan mortgage data that the government uses to determine if an institution serves the needs of its local community, and to identify possible discriminatory lending patterns.
- The Dodd-Frank Wall Street Reform and Consumer Protection Act was established in response to the financial services crisis. Updates in 2014 to Regulation Z required lenders to make a good faith reasonable effort to determine a borrower's ability to repay.
Information sourced from theCEShop.com and provided on this blog as a helpful guide to U.S. lending history.
