Under the leadership of Ferdinand St. Germain, Chairman of the House Subcommittee on Financial Institutions, and Senator William Proxmire, Chair of the Senate Banking Committee, on March 31, 1980, Congress enacted the Depository Institution Deregulation and Monetary Control Act of 1980. When signing the legislation into law, President Carter declared that the financial system is “hampered by a wide range of outdated, unfair, and unworkable regulations. Especially unfair are interest ceilings that prohibit the small saver from receiving fair market return on deposits.”
DIDMCA has nine titles covered an extensive assortment of subject matters from reporting and reserve requirements to foreign control of United States financial institutions. DIDMCA established the Depository Institution Deregulation Committee to provide regulatory oversight in phasing-out all Reg. Q interest rate ceilings, opening the door for new mortgage products with terms including higher interest rates and other feature previously prohibited by individual state laws.
Most important to the emergence of the subprime mortgage sector, the legislation revisions with respect to resident mortgage loans on real estate property provided the Legal Infrastructure of Subprime and Nontraditional Home Mortgages. As examples, DIDMCA mandates preempted all state usury ceilings and discount points secured by a first lien on residential property, effectively eliminating individual state ceilings on home mortgage interest rates.
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