Housing and Economic Recovery Act of 2008 Law and Legal Definition

The Housing and Economic Recovery Act of 2008 is a U.S. federal law that was designed primarily to address the subprime mortgage crisis of the 2008. It is commonly referred to as the HERA. The legislation includes several initiatives to reform government sponsored enterprise (GSE) regulation and modernize the Federal Housing Administration (FHA).

HERA authorized the Federal Housing Administration to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers if lenders write-down principal loan balances to 90 percent of current appraisal value. This Act aimed to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding.

HERAalso authorized states to refinance subprime loans using mortgage revenue bonds. Enactment of the Act led to the government conservatorship of Fannie Mae and Freddie Mac. The HERA created the Federal Housing Finance Agency. This new agency had used its newfound authority to put Fannie Mae and Freddie Mac under conservatorship in 2008.

Some provisions of HERA were modified by the American Recovery and Reinvestment Act of 2009.