October 3, 1984 - Secondary Mortgage Market Enhancement Act

Policy Name: Secondary Mortgage Market Enhancement Act of 1984, (S. 2040)

Date: Effective October 3, 1984

Congress enacted The Secondary Mortgage Market Enhancement Act of 1984 (SMMEA) with the goal of meeting growing consumer demand for mortgage credit. SMMEA declared mortgage backed securities (MBS) to be legal investments equivalent to Treasury securities and other federal government bonds for federally chartered financial institutions. The act also preempted state investment laws, so that MBS could be purchased by state-chartered financial institutions.

By allowing financial institutions to invest in MBS, SMMEA strengthened the secondary mortgage market. As MBS became increasingly available and the economic foundations of the mortgage market remained strong, MBS continued to attract investors. SMMEA expanded the pool of mortgage credit, thereby allowing more Americans to purchase homes.