Garn–St. Germain Depository Institutions Act Explained

Shorttitle:Garn–St Germain Depository Institutions Act
Longtitle:An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans.
Nickname:Alternative Mortgage Transaction Parity Act of 1982
Enacted By:97th
Effective Date:October 15, 1982
Public Law Url:http://www.gpo.gov/fdsys/pkg/STATUTE-96/pdf/STATUTE-96-Pg1469.pdf
Cite Public Law:97-320
Title Amended:12 U.S.C.: Banks and Banking
Sections Amended: § 226
Leghisturl:http://thomas.loc.gov/cgi-bin/bdquery/z?d097:HR06267:@@@R
Introducedin:House
Introducedby:Fernand St Germain (D–RI)
Introduceddate:May 4, 1982
Committees:House Banking, Finance, and Urban Affairs, Senate Banking, Housing, and Urban Affairs
Passedbody1:House
Passeddate1:May 20, 1982
Passedvote1:272-91
Passedbody2:Senate
Passeddate2:September 24, 1982
Passedvote2:passed voice vote, in lieu of
Conferencedate:September 30, 1982
Passedbody3:Senate
Passeddate3:September 30, 1982
Passedvote3:agreed voice vote
Passedbody4:House
Passeddate4:October 1, 1982
Passedvote4:agreed voice vote
Signedpresident:Ronald Reagan
Signeddate:October 15, 1982

The Garn–St Germain Depository Institutions Act of 1982 (enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the act was a mitigating or contributing factor in the savings and loan crisis of the late 1980s.[1]

The bill, whose full title was "An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans," was a Reagan Administration initiative.[2]

The bill is named after its sponsors, Congressman Fernand St Germain, Democrat of Rhode Island, and Senator Jake Garn, Republican of Utah. The bill had broad support in Congress, with co-sponsors including Charles Schumer and Steny Hoyer.[3] The bill passed overwhelmingly, by a margin of 272–91 in the House.[4]

An important consumer change was to allow anyone to place real estate, consisting of one to four dwelling units, into their own trust without triggering the due-on-sale clause. The due-on-sale clause allows lenders to foreclose on a current loan upon transfer to another. This greatly facilitates the use of trusts to pass property to heirs and minors. It may also protect the property of wealthy or risky owners against the possibility of future lawsuits or creditors, because the trust owns the property, not the individuals at risk. The bill states "... a lender may not exercise its option pursuant to a due-on-sale clause upon ... a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property[.]" (The Garn st Germain Depository Institutions Act of 1982, (U.S.C.) 1701j-3(d)(8).)[5]

Title VIII of the act, Alternative Mortgage Transactions, allowed banks to provide adjustable-rate mortgage loans.[6]

The bill's passage is considered an important shift in the Democratic Party's positioning on economic regulation, as the party had historically defended New Deal era financial regulations, but had now come to favor financial deregulation. According to a 2022 study, this shift happened as a consequence of the congressional reforms of the 1970s, which undermined parochial and Southern populist interests within the Democratic Party. These parochial and populist interests favored a decentralized banking system. The party subsequently pursued deregulatory reforms that it perceived as beneficial to savers and consumers.[7]

See also

Related legislation

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Notes and References

  1. Book: Leibold , Arthur . Barth . James R. . Trimbath . Susanne . Yago . Glenn . Some Hope for the Future After a Failed National Policy for Thrifts . The Savings and Loan Crisis: Lessons from a Regulatory Failure . . 1-4020-7871-4 . 58–59 . 2004 . registration . https://archive.org/details/savingsloancrisi00jame/page/58 . (further references: Book: Strunk . Case . Where Deregulation Went Wrong: A Look at the Causes Behind the Savings and Loan Failures in the 1980s . U.S. League of Savings Institutions . 14–16 . 978-0-929097-32-9 . 1988 .)
  2. Reagan, Ronald. "Remarks on Signing the Garn–St Germain Depository Institutions Act of 1982" (1982-10-15).
  3. http://thomas.loc.gov/cgi-bin/bdquery/z?d097:HR06267:@@@P H.R. 6267, Cosponsors
  4. http://thomas.loc.gov/cgi-bin/bdquery/z?d097:HR06267:@@@R H.R. 6267, Major Actions
  5. Web site: My Analysis of the Garn st Germain Act and the Federal Regulations .
  6. Full text
  7. Barton . Richard . 2022 . Upending the New Deal Regulatory Regime: Democratic Party Position Change on Financial Regulation . Perspectives on Politics . 22 . 2 . 391–408 . en . 10.1017/S153759272200113X . 252061496 . 1537-5927. free .