2.1 - Purchase & Sale Process I

Question 1

Why are mortgage markets highly regulated in the U.S.?

Answer 1

Because housing finance carries systemic-risk, consumer-protection, and macro-stability concerns; therefore markets are shaped by extensive government policy and oversight.

Question 2

How has U.S. government intervention affected home-ownership rates (rough estimate)?

Answer 2

Academic estimates suggest intervention has raised the U.S. home-ownership rate by ≈ 80 – 100 percent relative to a no-intervention baseline.

Question 3

Give two reasons often cited to justify public support of home ownership.

Answer 3

1. Positive externalities (stable neighborhoods, civic engagement).
2. Public-good aspects (social cohesion, wealth-building).

Question 4

What mortgage design exists almost uniquely in the U.S. thanks to government backing?

Answer 4

The consumer-friendly “American” mortgage — 30-year, fixed-rate, fully amortizing, prepayable at will.

Question 5

Main cost trade-off of heavy mortgage intervention

Answer 5

Significant fiscal exposure and market distortions; debate persists on the optimal level of federal support.

Question 6

How is the U.S. approach to housing finance distinct globally?

Answer 6

Relies on indirect support (GSEs, insurance, tax incentives) rather than direct public construction or ownership.

Question 7

Do many other countries have Fannie/Freddie/FHA-type institutions?

Answer 7

Very few; most nations lack equivalents to U.S. GSEs or large-scale federal mortgage insurance programs.

Question 8

What characterizes countries that achieve high ownership by direct means?

Answer 8

Greater state involvement in development—e.g., Singapore builds public housing blocks that are later sold to residents.

Question 9

Contrast U.S. vs. Singapore housing policy models.

Answer 9

U.S.: Indirect subsidies via finance/tax code.
Singapore: Government builds housing, then sells long leases to private households.

Question 10

Define “indirect government involvement” in U.S. housing.

Answer 10

Support delivered through mortgage finance, GSE guarantees, tax credits/deductions, and insurance—not via large direct outlays or building homes.

Question 11

What policy question remains debated despite high ownership gains?

Answer 11

Whether the benefits outweigh fiscal and market costs, and how much intervention is truly optimal.

Question 12

Key takeaway on regulation & consumer products

Answer 12

Heavy U.S. regulation/intervention enables unique, borrower-friendly mortgage terms unavailable in most other countries.