Role Of Housing Finance

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A mortgage is nothing more than the name given to a particular type of loan; in this case, a real estate loan. Like any other loan, it is really an IOU—that is, a promise to repay a sum of money received today at some future time. The only distinction is that it is secured by property (McDonald & Thornton, 2008). According to the laws of Ghana, a mortgage is …a contract charging an immovable property as security for the due repayment of debt and any interest accruing thereon, or for the performance of some other obligation for which it is given, in accordance with the terms of the contract (NRCD 96, section 1). In housing finance terms, a mortgage is thus a contract charging an immovable property as security for the due repayment of a debt…show more content…
In Africa, housing finance has not been given much attention, as the proportion of the population that might access this has always been small. As financial access improves, however, the role of housing finance in stimulating wider economic development becomes more significant. The relationship is quite simple: the availability of housing finance stimulates the demand for housing and triggers housing developers to build more houses. This stimulates the local economy in particular as housing construction generally involves locally produced materials and labor. More houses encourage more people to buy them. Once these houses have been bought, they need to be filled with furniture, and many of these goods can also be produced locally. As the demand for more goods increases, the supply response creates more jobs, which creates greater affordability for more loans, more production and more consumption. This virtuous circle becomes possible, largely, because of housing finance. Further, housing markets have significant forward linkages with financial markets. Mortgage debt accounts for a large proportion of household debt. Through secondary mortgage markets and securitization, the housing market also supports the efficient functioning of domestic and international financial markets (ibid). Dwight and Betrand (1997), indicated…show more content…
FOREIGN MORTGAGE MARKETS 2.7.1. THE UNITED STATES MORTGAGE MARKET Home ownership has been a key component of the American dream with various administrations attaching great importance to increasing home ownership rates. For example, Former President Clinton initiated the founding of a Partnership under the leadership of the Secretary of the Department of Housing and Urban Development (HUD) to promote home ownership. In the 1990s and early 2000s, homeownership rates increased significantly from a seasonally adjusted 64 percent in 1994 to a 69 percent all-time peak in 2004 - an increase of 12 million in homeowners. Factors cited for the increase include the economic boom of the 1990s, demographic factors (Gabriel and Rosenthal, 2005), the decline in mortgage interest rates, and the increased access to mortgage credit amid the expansion of prime and complex mortgage lending (Gramlich, 2004; Doms and Motika, 2006; Jaffee, 2008, Figure 3). Jaffee (2008) estimates that 6.6 million net homeowners were added between 2000 and 2006, of which 1.4 million are attributed to subprime lending. Prior to World War II, the homeownership rate was very stable ranging between 43 and 48

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