Federal Home Loan Bank Act

DEFINITION of 'Federal Home Loan Bank Act'

An act passed by the Hoover administration in 1932 that was designed to encourage home ownership by providing a source of low-cost funds for member banks to extend mortgage loans. The Federal Home Loan Bank Act was the first in a series of bills that sought to make home ownership an achievable goal for more Americans.

BREAKING DOWN 'Federal Home Loan Bank Act'

Proponents of these measures argue that home ownership is an essential part of the American dream and that home ownership results in stronger local communities and a higher overall quality of living. However, critics claim that this long tradition of federal subsidies for mortgage loans distorted the housing market, culminating in overly lax lending standards and unnaturally high housing prices.