Housing and Economic Recovery Act (HERA)

An act created in 2008 specifically to address the subprime mortgage crisis. It allowed the Federal Housing Administration (FHA) to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers, if lenders agreed to write down principle loan balances to 90% of current appraisal value. The intention of the act was to restore faith in Fannie Mae and Freddie Mac through strengthened regulations and capital injections. This act allowed the U.S. government to take control of both Fannie Mae and Freddie Mac under conservatorship. Some provisions have since been amended in 2009 by the American Recovery and Reinvestment Act.