Final answer:
Savings and loan associations were created for people to save for and obtain mortgages on homes. They evolved with changing regulations, leading to more flexible lending practices like subprime and NINJA loans, contributing to housing market instability.
Step-by-step explanation:
The type of bank created to encourage people to save for large purchases, such as homes, is known as a savings and loan association (S&L). These institutions came about to compete with commercial banks and specifically invested in home mortgages. The savings component was established to help individuals save money, while the loan aspect was to provide the saved funds as mortgages for people to build their homes.
However, over time, the home loan industry has evolved. The Federal Housing Administration (FHA) was created to encourage banks to offer low-cost loans for home-buying and ensure new safety standards in houses. Nonetheless, changes in government regulations have made banks more flexible, leading to the issuing of subprime loans and sometimes even riskier NINJA loans, contributing to the issue of residential segregation by facilitating "white flight" and leading to an unstable housing market.