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Housing and Economic Recovery Act (HERA)


The Housing and Economic Recovery Act (HERA) is a U.S. federal law passed in 2008 designed to stabilize the faltering housing market and improve overall economic growth. It included provisions to prevent mortgage lenders from offering high-risk loans, helped struggling homeowners avoid foreclosure, and strengthened the regulation of government-sponsored enterprises like Freddie Mac and Fannie Mae. HERA also established the Federal Housing Finance Agency (FHFA) to oversee these enterprises.


The phonetics of the keyword: Housing and Economic Recovery Act (HERA) would be:”Housing and Economic Recovery Act” – HOU-sing ənd e-kə-NAH-mik ri-KUH-vuh-ree AKT”HERA” – HE-ruh

Key Takeaways

<ol><li>HERA Helps Stabilize Housing Market: The Housing and Economic Recovery Act (HERA) of 2008 was designed to address the subprime mortgage crisis in the United States by stabilizing the struggling housing market. It created new regulatory measures and provided more funding for housing assistance.</li><li>Creation of FHFA: HERA established the Federal Housing Finance Agency (FHFA) to oversee the operations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. This shows that the Act is not just a reactionary measure to the crisis, but also an effort to prevent future financial crises in housing.</li><li>Help for Homeowners: HERA attempted to assist homeowners struggling with their mortgage payments. The act facilitated the refinancing of mortgages for approximately 400,000 homeowners and also created a new tax credit for first-time home buyers, thus trying to stimulate the housing market.</li></ol>


The Housing and Economic Recovery Act (HERA) is a crucial piece of legislation in the field of business and finance because it was created to address the 2008 financial crisis with specific attention to the housing market collapse. Signed into law in July 2008, HERA aimed to safeguard homeowners from unfair lending practices and to protect the overall economy by preventing future failures of government-sponsored entities. It created the Federal Housing Finance Agency (FHFA) to regulate Fannie Mae, Freddie Mac, and the Federal Home Loan banks. HERA also expanded the Federal Housing Administration’s (FHA) authority to guarantee refinance loans for struggling homeowners, thereby providing an opportunity for them to avoid foreclosure. Thus, the importance of HERA lies in its efforts to stabilize the economy, provide relief to homeowners, and avoid future financial crises.


The Housing and Economic Recovery Act (HERA) was enacted by the U.S. Congress in 2008 during a significant period of housing market instability. The primary purpose of HERA was to provide broad-based relief and assistance to individual homeowners, while also aiming to bolster the overall housing market and minimize the potential for a similar crisis in the future. This was to be achieved by introducing a series of changes and improvements designed to instill greater levels of supervision, regulation, and oversight of entities related to the housing market, such as Fannie Mae and Freddie Mac.HERA also established the Federal Housing Finance Agency (FHFA) to regulate Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks. This new regulatory body was empowered to set and enforce capital standards, oversee the prudential operations, and, if need be, act as a conservator or receiver of these organizations. Additionally, the Act implemented measures to improve the FHA loan program, thereby increasing accessibility to more secure loans for many homeowners. Thus, through HERA, the government aimed not only at resolving the immediate crisis but also at arresting the possible recurrence of such a situation in the future.


1. Fannie Mae and Freddie Mac Conservatorship: One of the real-world examples of the Housing and Economic Recovery Act (HERA) took place in 2008. HERA granted the Federal Housing Finance Agency (FHFA) the authority to place Fannie Mae and Freddie Mac into conservatorship, in response to the 2008 financial crisis. This move was aimed at stabilizing the U.S mortgage market, as these institutions had faced severe financial distress due to the collapse of the housing bubble.2. Neighborhood Stabilization Program: Under the provisions of HERA, the Neighborhood Stabilization Program (NSP) was established and funded through the Department of Housing and Urban Development (HUD). This program focused on the purchase and redevelopment of foreclosed and abandoned homes. For instance, in Detroit, Michigan, thousands of foreclosed homes were acquired and rehabilitated under this program, transforming blighted neighborhoods and stimulating economic recovery.3. Enforcement of HECM Program: The Home Equity Conversion Mortgage (HECM) program for seniors was also enforced as a result of the HERA. This program helps senior citizens to convert their home equity into cash while they still reside in the property and retain ownership. In a practical context, a homeowner in Florida used this program to get a reverse mortgage which helped him maintain a decent lifestyle after retirement. This is considered a real-life example of measures included in HERA aimed at protecting homeowners, particularly the elderly.

Frequently Asked Questions(FAQ)

What is the Housing and Economic Recovery Act (HERA)?

The Housing and Economic Recovery Act (HERA) is a federal law enacted in 2008 in response to the late-2000s recession and subprime mortgage crisis. This law aimed to prevent home foreclosures through making modifications to tax and housing laws.

When was the HERA established?

The Housing and Economic Recovery Act was signed into law by President George W. Bush on July 30, 2008.

What are the key provisions of the HERA?

Key provisions of HERA include reforming regulation and oversight for the Government Sponsored Enterprises (GSEs), authorizing the Federal Housing Administration (FHA) to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers, enhancing housing assistance programs, and providing a tax credit to first-time homebuyers.

Who is eligible for the benefits under HERA?

The majority of HERA’s benefits focus on assisting homeowners who are experiencing financial hardships. Additionally, HERA created tax incentives for first-time home buyers and created provisions to assist veterans and members of the military.

How did HERA affect Government Sponsored Enterprises (GSEs)?

HERA established a new regulatory agency, the Federal Housing Finance Agency, to oversee the GSEs which include Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The intention was to reduce risk to taxpayers and ensure the soundness of these institutions.

What is the impact of HERA?

HERA played a crucial role in stabilizing the housing market during the 2008 financial crisis, mainly through its loan modification programs and measures to strengthen the regulation and supervision of GSEs.

Where can I find more information about HERA?

For more information about HERA, you can visit the official website of U.S. Department of Housing and Urban Development or reach out to financial advisers who specialize in mortgage and housing policies.

Related Finance Terms

  • Federal Housing Finance Agency (FHFA)
  • Ginnie Mae (GNMA)
  • Fannie Mae (FNMA)
  • Freddie Mac (FHLMC)
  • Mortgage-Backed Securities (MBS)

Sources for More Information

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