So, the response wasn't during Obama's term?

Posted on: June 28, 2023 at 09:15:24 CT

Steps to Alleviate the Crisis

The government took several steps intended to lessen the damage. One set of actions was aimed at encouraging lenders to rework payments and other terms on troubled mortgages or to refinance “underwater” mortgages (loans exceeding the market value of homes) rather than aggressively seek foreclosure. This reduced repossessions whose subsequent sale could further depress house prices. Congress also passed temporary tax credits for homebuyers that increased housing demand and eased the fall of house prices in 2009 and 2010. To buttress the funding of mortgages, the Congress greatly increased the maximum size of mortgages that FHA would insure. Because FHA loans allow for low down payments, the agency’s share of newly issued mortgages jumped from under 10 percent to over 40 percent.

The Federal Reserve, which lowered short-term interest rates to nearly 0 percent by early 2009, took additional steps to lower longer-term interest rates and stimulate economic activity (Bernanke 2012). This included buying large quantities of long-term Treasury bonds and mortgage-backed securities that funded prime mortgages. To further lower interest rates and to encourage confidence needed for economic recovery, the Federal Reserve committed itself to purchasing long-term securities until the job market substantially improved and to keeping short-term interest rates low until unemployment levels declined, so long as inflation remained low (Bernanke 2013; Yellen 2013). These moves and other housing policy actions—along with a reduced backlog of unsold homes following several years of little new construction—helped stabilize housing markets by 2012 (Duca 2014). Around that time, national house prices and home construction began rising, home construction rose off its lows, and foreclosure rates resumed falling from recession highs. By mid-2013, the percent of homes entering foreclosure had declined to pre-recession levels and the long-awaited recovery in housing activity was solidly underway.