DEFINITION of 'Housing And Economic Recovery Act (HERA)'
This act was created to address the subprime mortgage crisis of 2008. The Housing and Economic Recovery Act (HERA) allowed the Federal Housing Administration (FHA) to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers. In order to participate, lenders were required to write down the balances on principal loans up to 90% of their current appraised value.
BREAKING DOWN 'Housing And Economic Recovery Act (HERA)'
The HERA was ultimately intended to renew public faith in Fannie Mae and Freddie Mac. It allowed states to refinance subprime loans with mortgage revenue bonds, and created the Federal Housing Finance Agency (FHFA). This new agency had used its newfound authority to put Fannie Mae and Freddie Mac under conservatorship in 2008.