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86-754: The Stabilization Trust was founded in 2008 in response to America’s foreclosure crisis following the bursting of the housing bubble . Christopher J. Tyson serves as President and Lot Diaz of UnidosUS is the chairman of the Board of Managers. The Trust's goal is to help local community development organizations, land banks, and other mission-focused nonprofit or municipal organizations acquire, manage, rehabilitate, and sell foreclosed property to ensure homeownership and rental housing are available to low-and moderate-income families . The Stabilization Trust also provides greater access to flexible financing for neighborhood stabilization activities. The organization has often been cited in

172-415: A bubble in housing", and also said in the wake of the subprime mortgage and credit crisis in 2007, "I really didn't get it until very late in 2005 and 2006.". The mortgage and credit crisis was caused by the inability of a large number of home owners to pay their mortgages as their low introductory-rate mortgages reverted to regular interest rates. Freddie Mac CEO Richard Syron concluded, "We had

258-522: A 2012 report from the University of Michigan analyzed data from the Panel Study of Income Dynamics (PSID), which surveyed roughly 9,000 representative households in 2009 and 2011. The data seems to indicate that, while conditions are still difficult, in some ways the crisis is easing: Over the period studied, the percentage of families behind on mortgage payments fell from 2.2 to 1.9; homeowners who thought it

344-516: A bubble", and concurred with Yale economist Robert Shiller 's warning that home prices appear overvalued and that the correction could last years, with trillions of dollars of home value being lost. Greenspan warned of "large double digit declines" in home values "larger than most people expect". Problems for home owners with good credit surfaced in mid-2007, causing the United States' largest mortgage lender, Countrywide Financial , to warn that

430-587: A catastrophe? ... Their true weakness will finally reveal the abyss into which the housing market is about to plummet." The New York Times report connects the hedge fund crisis with lax lending standards: "The crisis this week from the near collapse of two hedge funds managed by Bear Stearns stems directly from the slumping housing market and the fallout from loose lending practices that showered money on people with weak, or subprime, credit, leaving many of them struggling to stay in their homes." On August 9, 2007, BNP Paribas announced that it could not fairly value

516-507: A few cities in Florida and California, where home prices soared to nose-bleed heights, could have 'hard landings'." National home sales and prices both fell dramatically in March 2007 — the steepest plunge since the 1989 Savings and Loan crisis . According to NAR data, sales were down 13% to 482,000 from the peak of 554,000 in March 2006, and the national median price fell nearly 6% to $ 217,000 from

602-406: A few percentage points to 50% or more from peak values in some markets, and although this cooling had not yet affected all areas of the U.S., some warned that it still could, and that the correction would be "nasty" and "severe". Chief economist Mark Zandi of the economic research firm Moody's Economy.com predicted a "crash" of double-digit depreciation in some U.S. cities by 2007–2009. In

688-705: A handful of political and economic analysts, such as Jeffery Robert Hunn in a March 3, 2003, editorial. Hunn wrote: [W]e can profit from the collapse of the credit bubble and the subsequent stock market divestment [(decline)]. However, real estate has not yet joined in a decline of prices fed by selling (and foreclosing). Unless you have a very specific reason to believe that real estate will outperform all other investments for several years, you may deem this prime time to liquidate investment property (for use in more lucrative markets). An August 2008 article in The New York Times r eported that in mid-2004 Richard F. Syron ,

774-508: A housing bubble, particularly at its peak from 2004 to 2006, with some rejecting the "house bubble" label in 2008. The chief economist of Freddie Mac and the director of Joint Center for Housing Studies (JCHS) disputed the existence of a national housing bubble and expressed doubt that any significant decline in home prices was possible, citing consistently rising prices since the Great Depression , an anticipated increased demand from

860-623: A lengthy article in The Washington Post titled, "What Went Wrong". In their investigation, the authors claim that Greenspan vehemently opposed any regulation of financial instruments known as derivatives . They further claim that Greenspan actively sought to undermine the office of the Commodity Futures Trading Commission , specifically under the leadership of Brooksley E. Born , when the Commission sought to initiate

946-452: A paper he presented to a Federal Reserve Board economic symposium in August 2007, Yale University economist Robert Shiller warned, "The examples we have of past cycles indicate that major declines in real home prices—even 50 percent declines in some places—are entirely possible going forward from today or from the not-too-distant future." To better understand how the mortgage crisis played out,

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1032-500: A peak of $ 230,200 in July 2006. John A. Kilpatrick from Greenfield Advisors was cited by Bloomberg News on June 14, 2007, on the linkage between increased foreclosures and localized housing price declines: "Living in an area with multiple foreclosures can result in a 10 percent to 20 percent decrease in property values". He went on to say, "In some cases that can wipe out the equity of homeowners or leave them owing more on their mortgage than

1118-408: A position of negative equity —a mortgage debt higher than the value of the property. The underlying causes of the housing bubble are complex. Factors include tax policy (exemption of housing from capital gains), historically low interest rates, lax lending standards, failure of regulators to intervene, and speculative fever . This bubble may be related to the stock market or dot-com bubble of

1204-406: A proposal asserted that a government bailout of subprime borrowers was not in the best interests of the U.S. economy because it would simply set a bad precedent, create a moral hazard , and worsen the speculation problem in the housing market. Lou Ranieri of Salomon Brothers , creator of the mortgage-backed securities market in the 1970s, warned of the future impact of mortgage defaults: "This

1290-579: A recovery in the housing sector was not expected to occur at least until 2009 because home prices were falling "almost like never before, with the exception of the Great Depression ". The impact of booming home valuations on the U.S. economy since the 2001–2002 recession was an important factor in the recovery, because a large component of consumer spending was fueled by the related refinancing boom, which allowed people to both reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as their value increased. During

1376-757: Is a non-governmental entity. The Housing and Economic Recovery Act of 2008 (HERA) authorized CDFIs certified by the CDFI Fund to become members of the Federal Home Loan Banks . The Final Rule regarding the procedures and standards to be used by the Federal Home Loan Banks to evaluate applications for membership from CDFIs were published in the Federal Register Federal Housing Finance Agency in January 2010. The Final Rule

1462-518: Is sponsored by six non-profit organizations with national reputations for innovation in community-based housing and economic development. Enterprise Community Partners , Inc., Housing Partnership Network, Local Initiatives Support Corporation (LISC), UnidosUS (formerly National Council of La Raza ), National Urban League , and NeighborWorks America . All of the organizations have been directly involved in activities to address foreclosure prevention, loss mitigation and issues facing communities across

1548-403: Is the leading edge of the storm ... If you think this is bad, imagine what it's going to be like in the middle of the crisis." In his opinion, more than $ 100 billion of home loans were likely to default when the problems seen in the subprime industry also emerge in the prime mortgage markets. Former Federal Reserve Chairman Alan Greenspan had praised the rise of the subprime mortgage industry and

1634-485: Is through Self-Help's national secondary market program, which enables conventional lenders to make more home loans to low-wealth families. Self-Help also develops commercial and residential real estate and operates retail credit unions. In response to predatory lenders increasingly targeting family wealth in poor and minority communities, Self-Help in 1999 worked with the NAACP , AARP , and other North Carolina groups to form

1720-406: Is to be implemented by the 11 Federal Home Loan Banks, each of which will evaluate membership applications independently. CDFIs are related to, but not identical with, Community Development Entities (CDEs). CDEs are also certified by the CDFI Fund at the U.S. Department of Treasury but have somewhat different qualifications. Many CDFIs have also been certified as CDEs. The primary purpose of CDEs

1806-615: Is to utilize the New Markets Tax Credit Program (NMTCs). NMTCs were created to induce equity investments in low-income communities. Traditionally, because of the NMTCs and the structure of the industry, investments in CDFIs were typically limited to larger financial institutions. Investment access to CDFIs appears to be on the rise, as CNote, a company that lets individuals invest their savings in CDFIs, recently received qualification from

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1892-479: Is wiped out. Furthermore, the holders of the mortgage debt will also have a loss." Reuters reported in October 2007 that a Merrill Lynch analyst too had warned in 2006 that companies could suffer from their subprime investments . The Economist magazine stated, "The worldwide rise in house prices is the biggest bubble in history", so any explanation needs to consider its global causes as well as those specific to

1978-625: The Baby Boom generation, and healthy levels of employment. David Lereah , former chief economist of the National Association of Realtors (NAR), distributed "Anti-Bubble Reports" in August 2005 to "respond to the irresponsible bubble accusations made by your local media and local academics". On the basis of 2006 market data that were indicating a marked decline, including lower sales, rising inventories, falling median prices and increased foreclosure rates, some economists have concluded that

2064-547: The Banking Committee held hearings and asked executives from the top five subprime mortgage companies to testify and explain their lending practices. Dodd said that "predatory lending" had endangered home ownership for millions of people. In addition, Democratic senators such as Senator Charles Schumer of New York were already proposing a federal government bailout of subprime borrowers in order to save homeowners from losing their residences. Economists have debated whether

2150-601: The Case–Shiller home price index reported the largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States . Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime , Alt-A , collateralized debt obligation (CDO), mortgage , credit , hedge fund , and foreign bank markets. In October 2007, Henry Paulson ,

2236-614: The Ford Foundation and MacArthur Foundation , among other leaders in the philanthropic community. The Ford Foundation's contribution is reportedly among the largest so-called program-related investments by a foundation. On June 24, 2021, President Biden nominated NCST president Julia Gordon to be Commissioner of the Federal Housing Administration . The Stabilization Trust serves as a bridge between financial institutions and localities by streamlining and standardizing

2322-909: The Securities and Exchange Commission to offer their CDFI-based product to non-accredited investors. CDFIs may be subject to oversight by federal financial institution regulators (e.g., banks, credit unions ) or may be "unregulated" at the federal level, and subject only to the laws of the states in which they operate. There is no mandatory rating or ranking system imposed on all CDFIs which would allow investors or others to evaluate their performance, safety, or strength. However, since 2004 approximately 100 CDFI loan funds have received voluntary ratings of their financial strength and social impact performance by Aeris, an independent rating and information service. In 2015, Standard & Poor's issued its first ratings assessments of CDFI loan funds. In 2006, there were approximately 1,250 CDFIs, consisting of: In May 2010,

2408-471: The U.S. Secretary of the Treasury , called the bursting housing bubble "the most significant risk to our economy". A bubble had the potential to affect not only on home valuations, but also mortgage markets, home builders, real estate , home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession. Concerns about

2494-501: The discount window rate, which is the lending rate between banks and the Federal Reserve Bank, by 50 basis points to 5.75% from 6.25%. The Federal Reserve Bank stated that the recent turmoil in the U.S. financial markets had raised the risk of an economic downturn. In the wake of the mortgage industry meltdown, Senator Chris Dodd , chairman of the Banking Committee , held hearings in March 2007 in which he asked executives from

2580-582: The warnings . Other cautions came as early as 2001, when the late Federal Reserve governor Edward Gramlich warned of the risks posed by subprime mortgages. In September 2003, at a hearing of the House Financial Services Committee , Congressman Ron Paul identified the housing bubble and foretold the difficulties it would cause: "Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity

2666-478: The 1990s. This bubble roughly coincides with the real-estate bubbles of the United Kingdom, Hong Kong, Spain, Poland, Hungary and South Korea. While bubbles may be identifiable in progress, bubbles can be definitively measured only in hindsight after a market correction, which began in 2005–2006 for the U.S. housing market. Former U.S. Federal Reserve Board Chairman Alan Greenspan said "We had

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2752-409: The CDFI Fund had certified 862 CDFIs, 57 Native CDFIs (serving Native Americans), and 4,230 CDEs, each of which may have multiple subsidiary investment funds. Nationwide, over 1,000 CDFIs serve economically distressed communities by providing credit, capital, and financial services that are often unavailable from mainstream financial institutions. CDFIs have loaned and invested billions of dollars in

2838-533: The CEO of Freddie Mac , received a memo from David Andrukonis, the company's former chief risk officer , warning him that Freddie Mac was financing risk-laden loans that threatened Freddie Mac's financial stability. In his memo, Mr. Andrukonis wrote that these loans "would likely pose an enormous financial and reputational risk to the company and the country". The article revealed that more than two-dozen high-ranking executives said that Mr. Syron had simply decided to ignore

2924-563: The Coalition for Responsible Lending and help enact one of the United States' first laws to curb predatory mortgage lending. In 2002, Self-Help founded the Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization that recommends solutions to predatory lending abuses. While the CDFI Fund and its certifications are limited to the United States, the UK also has about 70 CDFIs and

3010-705: The Corporation for Supportive Housing. Prior to that, Rob worked as Assistant Director and Assistant General Counsel at the Illinois Housing Development Authority and began his career as a legal aid attorney representing low income households in Illinois. Rob is a graduate of University of Iowa College of Law and Indiana University. The Trust has offices in Washington, DC, Irving, Texas, and Minneapolis, Minnesota, along with regionally based employees in

3096-489: The Stabilization Trust to simplify the buying process. The Trust has hammered out agreements with major lenders to standardize acquisitions and let recipients of federal Neighborhood Stabilization Program funding get a first look at new foreclosures. Las Vegas County also began working with the Stabilization Trust to get a "first look" at properties by receiving filtered properties in target ZIP codes via e-mail. Using

3182-502: The Stabilization Trust was key to its effort to buy homes at a deep discount. Philadelphia's stabilization program picked up steam through working with the Stabilization Trust by getting increased access to Chase bank properties. In the U.S. Banker article, Nickerson is quoted as saying, "We have working relationships with all the big players – Bank of America , Wells Fargo , Chase , Citi , Fannie , Freddie , GMAC , and others." The Stabilization Trust has received major support from

3268-574: The Steering Committee since 2010. Prior to joining NCST, Rob served as Vice President at Enterprise Community Partners, Inc. working nationally with a broad set of partners to provide thought leadership and technical assistance in the areas of community stabilization and the intersection of health care and housing. In addition, he served as a subject matter expert for their public policy work, helping to set and implement policy agendas. Rob has also worked at Bank of America as Senior Vice President in

3354-524: The Treasury , which provides funds to CDFIs through a variety of programs. The CDFI Fund and the legal concept of CDFIs were established by the Riegle Community Development and Regulatory Improvement Act of 1994. Broadly speaking, a CDFI is defined as a financial institution that: has a primary mission of community development , serves a target market, is a financing entity, provides development services, remains accountable to its community, and

3440-559: The Trust's system, in only two weeks, sellers accepted offers on an additional five houses. A Vegas County housing official said working with the trust is the sort of tweak that may move the Neighborhood Stabilization Program closer to its goals, but the rate at which this occurs depends on how many banks work with the trust, and how many houses banks release onto the trusts's lists. The Utah Center for Affordable Housing said

3526-498: The U.S. Federal Reserve Bank conducted an " open market operation " to inject U.S. $ 38 billion in temporary reserves into the system to help overcome the ill effects of a spreading credit crunch, on top of a similar move the previous day. In order to further ease the credit crunch in the U.S. credit market, at 8:15 a.m. on August 17, 2007, the chairman of the Federal Reserve Bank Ben Bernanke decided to lower

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3612-598: The U.S. housing bubble. This was shared between the public sector and the private sector . Because of the large market share of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (both of which are government-sponsored enterprises ) as well as the Federal Housing Administration , they received a substantial share of government support, even though their mortgages were more conservatively underwritten and actually performed better than those of

3698-556: The USA but also in the UK. A CDFI may be a community development bank , a community development credit union (CDCU), a community development loan fund (CDLF), a community development venture capital fund (CDVC), a microenterprise development loan fund, or a community development corporation . CDFIs are certified by the Community Development Financial Institutions Fund (CDFI Fund) at the U.S. Department of

3784-549: The United States' subprime mortgage industry collapsed due to higher-than-expected home foreclosure rates (no verifying source), with more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale. The stock of the country's largest subprime lender, New Century Financial , plunged 84% amid Justice Department investigations, before ultimately filing for Chapter 11 bankruptcy on April 2, 2007, with liabilities exceeding $ 100 million (~$ 142 million in 2023). The manager of

3870-504: The United States. The then Federal Reserve Board Chairman Alan Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing market) ... it's hard not to see that there are a lot of local bubbles"; Greenspan admitted in 2007 that froth "was a euphemism for a bubble". In early 2006, President Bush said of the U.S. housing boom: "If houses get too expensive, people will stop buying them ... Economies should cycle". Many contested any suggestion that there could be

3956-587: The bank was declared insolvent and its branches were taken over by Urban Partnership Bank . Its holding company ShoreBank Corporation, still exists and promotes its community development mission through affiliates in Oregon and Washington state, and in Michigan’s Upper Peninsula. ShoreBank’s international consulting services have offices in Chicago, Washington, D.C., and London, and projects in 30 countries around

4042-450: The corporate social responsibility group overseeing the bank’s neighborhood stabilization efforts, including its Real Estate Owned (REO) sales to NSP recipients, and several other roles during his nine-year tenure at Bank of America and LaSalle Bank in Chicago, including serving as Regional Community Impact Manager for Illinois and Michigan and Manager of LaSalle Bank’s Community Development Corporation. He previously served as Vice President at

4128-458: The correction in the U.S. housing market began in 2006. A May 2006 Fortune magazine report on the US housing bubble states: "The great housing bubble has finally started to deflate ... In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials." Among other statements,

4214-597: The country saw very little price appreciation during the "bubble period". Out of 20 largest metropolitan areas tracked by the S&;P/Case-Shiller house price index , six (Dallas, Cleveland, Detroit, Denver, Atlanta, and Charlotte) saw less than 10% price growth in inflation-adjusted terms in 2001–2006. During the same period, seven metropolitan areas (Tampa, Miami, San Diego, Los Angeles, Las Vegas, Phoenix, and Washington, D.C.) appreciated by more than 80%. However, housing bubbles did not manifest themselves in each of these areas at

4300-596: The country that are resulting from the foreclosure crisis. The Stabilization Trust has a Board of Managers composed of the executive leaders of the six sponsoring organizations. The executive leaders are: Robert Grossinger, President of the National Community Stabilization Trust, has held leadership roles in the community development and financial and legal services arena for more than 30 years. He joined NCST in May 2015 as President, where he also served on

4386-499: The early 2000s house price boom involved nationwide or local bubbles. As early as 2005, because of non-uniform price appreciation, some economists, including former Fed Chairman Alan Greenspan , argued that United States was not experiencing a nationwide housing bubble per se , but a number of local bubbles. In 2007, however, Greenspan stated that "all the froth bubbles add up to an aggregate bubble". Despite greatly relaxed lending standards and low interest rates, many regions of

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4472-399: The economy of the United States. These trends were reversed during the real estate market correction of 2006–2007. As of August 2007, D.R. Horton's and Pulte Corp's shares had fallen to 1/3 of their respective peak levels as new residential home sales fell. Some of the cities and regions that had experienced the fastest growth during 2000–2005 began to experience high foreclosure rates. It

4558-583: The financing arm of the National Community Stabilization Trust, provides specially tailored loan products to administrators of local neighborhood stabilization programs. Using philanthropic and public sources to leverage private capital for neighborhood stabilization activities, the REO Capital Fund was created to help municipalities and community-based organizations finance the acquisition, rehabilitation and interim holding of distressed properties to maximize their on-the-ground impact in neighborhoods hard hit by

4644-450: The first place and therefore did not appear to be contributing to the national bubble. This was also true of some cities in the Rust Belt such as Detroit and Cleveland , where weak local economies had produced little house price appreciation early in the decade but still saw declining values and increased foreclosures in 2007. As of January 2009 California, Michigan, Ohio and Florida were

4730-500: The foreclosure crisis. In addition, the REO Capital Fund provides short-term bridge financing of government receivables pursuant to an award of federal Neighborhood Stabilization Program (NSP) funds. Loans are underwritten and originated for local borrowers by participating locally active Community Development Financial Institutions (CDFIs), including Community Housing Capital, Enterprise Community Loan Fund, Housing Partnership Fund, LISC and Raza Development Fund. The Stabilization Trust

4816-417: The funds and three other banks closed out their positions with them. The Bear Stearns funds once had over $ 20 billion of assets, but lost billions of dollars on securities backed by subprime mortgages. H&R Block reported that it had made a quarterly loss of $ 677 million on discontinued operations, which included the subprime lender Option One, as well as writedowns, loss provisions for mortgage loans and

4902-525: The house is worth. The innocent houses that just happen to be sitting next to those properties are going to take a hit." The US Senate Banking Committee held hearings on the housing bubble and related loan practices in 2006, titled "The Housing Bubble and its Implications for the Economy" and "Calculated Risk: Assessing Non-Traditional Mortgage Products". Following the collapse of the subprime mortgage industry in March 2007, Senator Chris Dodd , Chairman of

4988-557: The impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts. In 2008 alone, the United States government allocated over $ 900 billion (~$ 1.25 trillion in 2023) to special loans and rescues related to

5074-520: The information to partner organizations, which get a first look before they go on sale publicly." Since its pilot, the Stabilization Trust has expanded its program to 115 NSP-funded local buyers representing more than 250 localities across 38 states. In Florida, Hillsborough County partnered with the Stabilization Trust to learn about foreclosed properties and to move on them before private investors know they are available. In Baltimore, St. Ambrose Housing Aid Center and Habitat for Humanity signed on with

5160-615: The losses on their $ 5 (~$ 6.95 trillion in 2023) trillion portfolio of loans and loan guarantees. On June 16, 2010, it was announced that Fannie Mae and Freddie Mac would be delisted from the New York Stock Exchange; shares now trade on the over-the-counter market. NAR chief economist David Lereah's explanation, "What Happened", from the 2006 NAR Leadership Conference Basing their statements on historic U.S. housing valuation trends, in 2005 and 2006 many economists and business writers predicted market corrections ranging from

5246-448: The lower prices achievable for mortgages in the secondary market. The unit's net asset value had fallen 21% to $ 1.1 billion as of April 30, 2007. The head of the mortgage industry consulting firm Wakefield Co. warned, "This is going to be a meltdown of unparalleled proportions. Billions will be lost." Bear Stearns pledged up to U.S. $ 3.2 billion (~$ 4.53 billion in 2023) in loans on June 22, 2007, to bail out one of its hedge funds that

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5332-466: The makeup, those six-inch hooker heels, and a " tramp stamp ." Many of these good-looking girls are not high-class assets worth 100 cents on the dollar ... [T]he point is that there are hundreds of billions of dollars of this toxic waste ... This problem [ultimately] resides in America's heartland, with millions and millions of overpriced homes. Business Week has featured predictions by financial analysts that

5418-719: The media on topics such as maximizing use of the U.S. Department of Housing and Urban Development 's (HUD) Neighborhood Stabilization Program grants. The Stabilization Trust was formed in 2008 through a collaboration of six national community development non-profit organizations: Enterprise Community Partners, Inc., Housing Partnership Network, Local Initiatives Support Corporation (LISC), UnidosUS (formerly National Council of La Raza), National Urban League, and NeighborWorks America. The Stabilization Trust piloted its REO Property Acquisition program in Minneapolis, Minnesota, and Saint Paul, Minnesota in early 2009. The organization worked with

5504-483: The most distressed communities in the United States, leveraging capital from the private sector for development activities in low wealth communities across the nation. While there are numerous organizations certified as CDFIs by the CDFI Fund, it is believed that there are thousands of financial institutions serving the needs of low-income people or communities in the United States, that either have not applied for CDFI status or have otherwise not been able to fulfill all of

5590-400: The political reasons it was being ignored. Prior to that, Robert Prechter wrote about it extensively as did Professor Shiller in his original publication of Irrational Exuberance in the year 2000. Peter Schiff also called the bubble early on and was vocal about it on television and wrote a book detailing his predictions of the fallout. The burst of the housing bubble was predicted by

5676-471: The private sector. Land prices contributed much more to the price increases than did structures. This can be seen in the building cost index in Fig. 1. An estimate of land value for a house can be derived by subtracting the replacement value of the structure, adjusted for depreciation, from the home price. Using this methodology, Davis and Palumbo calculated land values for 46 U.S. metro areas, which can be found at

5762-434: The process of transferring bank-owned foreclosed properties – commonly known as Real Estate Owned (REO) – to local government and nonprofits. The Stabilization Trust accomplishes this goal in two ways: The Stabilization Trust helps state and local programs acquire foreclosed and abandoned properties from financial institutions through its REO Property Acquisition Program by: The Stabilization Trust REO Capital Fund LLC ,

5848-549: The regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security , that triggered the economic crisis of 2008. Concerning the subprime mortgage mess, Greenspan later admitted that "I really didn't get it until very late in 2005 and 2006." On September 13, 2007, the British bank Northern Rock applied to the Bank of England for emergency funds because of liquidity problems related to

5934-654: The reports stated that people "should [not] be concerned that home prices are rising faster than family income", that "there is virtually no risk of a national housing price bubble based on the fundamental demand for housing and predictable economic factors", and that "a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms". Following reports of rapid sales declines and price depreciation in August 2006, Lereah admitted that he expected "home prices to come down 5% nationally, more in some markets, less in others. And

6020-571: The requirements for formal CDFI certification. In fiscal year 2016, CDFI program awardees originated $ 3.6 billion in loans and investments to finance more than 13,000 businesses and 33,000 affordable housing units. ShoreBank , headquartered in the South Shore neighborhood of Chicago , was founded in 1973. By 2007, it had over $ 2 billion in assets. ShoreBank had branches in Chicago’s South and West sides, Cleveland, and Detroit, but in August 2010

6106-477: The run up in asset prices and before the Great Recession, various parties described the housing market as a bubble or contested that designation. Especially in late 2004 and early 2005, numerous economic and cultural factors led several economists to argue that a housing bubble existed in the U.S. Dean Baker identified the bubble in August 2002, thereafter repeatedly warning of its nature and depth, and

6192-642: The same time. San Diego and Los Angeles had maintained consistently high appreciation rates since late 1990s, whereas the Las Vegas and Phoenix bubbles did not develop until 2003 and 2004 respectively. It was in the East Coast, the more populated part of the country where the economic real estate turmoil was the worst. Somewhat paradoxically, as the housing bubble deflates some metropolitan areas (such as Denver and Atlanta) have been experiencing high foreclosure rates, even though they did not see much house appreciation in

6278-515: The southeast, midwest, and northeast/mid-Atlantic. United States housing bubble The 2000s United States housing bubble or house price boom or 2000s housing cycle was a sharp run up and subsequent collapse of house asset prices affecting over half of the U.S. states . In many regions a real estate bubble , it was the impetus for the subprime mortgage crisis . Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2011. On December 30, 2008,

6364-462: The states with the highest foreclosure rates. By July 2008, year-to-date prices had declined in 24 of 25 U.S. metropolitan areas, with California and the southwest experiencing the greatest price falls. According to the reports, only Milwaukee had seen an increase in house prices after July 2007. Prior to the real estate market correction of 2006–2007, the unprecedented increase in house prices starting in 1997 produced numerous wide-ranging effects in

6450-503: The subprime crisis. This precipitated a bank run at Northern Rock branches across the UK by concerned customers who took out "an estimated £2bn withdrawn in just three days". Community development financial institution A community development financial institution (US) or community development finance institution (UK) - abbreviated in both cases to CDFI - is a financial institution that provides credit and financial services to underserved markets and populations, primarily in

6536-451: The subprime mortgage market meltdown would result in earnings reductions for large Wall Street investment banks trading in mortgage-backed securities , especially Bear Stearns , Lehman Brothers , Goldman Sachs , Merrill Lynch , and Morgan Stanley . The solvency of two troubled hedge funds managed by Bear Stearns was imperiled in June 2007 after Merrill Lynch sold off assets seized from

6622-424: The tools which it uses to assess credit-worthiness in an April 2005 speech. Because of these remarks, as well as his encouragement of the use of adjustable-rate mortgages, Greenspan has been criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry that triggered the economic crisis of 2008 . On October 15, 2008, Anthony Faiola, Ellen Nakashima and Jill Drew wrote

6708-473: The top five subprime mortgage companies to testify and explain their lending practices. Dodd said that "predatory lending practices" were endangering home ownership for millions of people. In addition, Democratic senators such as Senator Charles Schumer of New York were already proposing a federal government bailout of subprime borrowers like the bailout made in the savings and loan crisis, in order to save homeowners from losing their residences. Opponents of such

6794-404: The two cities to successfully transfer more than 230 foreclosed or abandoned properties within its first year. The Minnesota Post reported that the Trust "acts as a national clearinghouse to streamline communications. It serves as a single point of contact. Every day, participating institutions give the Trust a master list of properties that will come on the market soon. The Trust then forwards

6880-476: The underlying assets in three funds because of its exposure to U.S. subprime mortgage lending markets. Faced with potentially massive (though unquantifiable) exposure, the European Central Bank (ECB) immediately stepped in to ease market worries by opening lines of €96.8 billion (U.S. $ 130 billion) of low-interest credit. One day after the financial panic about a credit crunch had swept through Europe,

6966-526: The website for the Lincoln Institute for Land Policy. Housing bubbles may occur in local or global real estate markets. In their late stages, they are typically characterized by rapid increases in the valuations of real property until unsustainable levels are reached relative to incomes, price-to-rent ratios , and other economic indicators of affordability. This may be followed by decreases in home prices that result in many owners finding themselves in

7052-453: The world's largest bond fund, PIMCO , warned in June 2007 that the subprime mortgage crisis was not an isolated event and would eventually take a toll on the economy and ultimately have an impact in the form of impaired home prices. Bill Gross , a "most reputable financial guru", sarcastically and ominously criticized the credit ratings of the mortgage-based CDOs now facing collapse: AAA? You were wooed, Mr. Moody's and Mr. Poor's , by

7138-615: The world. OneUnited Bank , headquartered in Boston , Massachusetts, is the largest African-American-owned CDFI in the country, with branches in Boston, Miami, Florida , and Los Angeles, California . The Center for Community Self-Help , another leading CDFI, was founded in 1980 in Durham, North Carolina . Self-Help's home and business lending has provided low-wealth, minority, rural and female borrowers with over $ 5.24 billion in financing. Much of this

7224-456: Was "very likely or somewhat likely" that they would fall behind on payments fell from 6% to 4.6% of families. On the other hand, family's financial liquidity has decreased: "As of 2009, 18.5% of families had no liquid assets, and by 2011 this had grown to 23.4% of families." By mid-2016, the national housing price index was "about 1 percent shy of that 2006 bubble peak" in nominal terms but 20% below in inflation adjusted terms. In March 2007,

7310-474: Was collapsing because of bad bets on subprime mortgages. Peter Schiff , president of Euro Pacific Capital, argued that if the bonds in the Bear Stearns funds were auctioned on the open market, much weaker values would be plainly revealed. Schiff added, "This would force other hedge funds to similarly mark down the value of their holdings. Is it any wonder that Wall street is pulling out the stops to avoid such

7396-570: Was suggested that the weakness of the housing industry and the loss of the consumption that had been driven by the withdrawal of mortgage equity could lead to a recession, but as of mid-2007 the existence of this recession had not yet been ascertained. In March 2008, Thomson Financial reported that the " Chicago Federal Reserve Bank 's National Activity Index for February sent a signal that a recession [had] probably begun". The share prices of Fannie Mae and Freddie Mac plummeted in 2008 as investors worried that they lacked sufficient capital to cover

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