Final answer:
Changes after January 1, 2001, made it easier and less expensive for banks to grant home loans by reducing regulations, allowing the securitization of loans, and consequently leading to more risky lending practices.
Step-by-step explanation:
The Federal Housing Administration (FHA) has undergone various changes since its inception to improve access to homeownership and regulate the health of the home loan system. After January 1, 2001, changes in bank regulations by the federal government made it cheaper and easier for banks to make home loans.
This involved reducing restrictions on lenders and allowing financial institutions to securitize mortgage loans and sell them as bonds, separating the lender's financial interests from the borrower's ability to repay.
The intention was to stimulate the housing sector of the economy, but it also led to risky subprime loans contributing to the financial crisis. The FHA traditionally evaluated loans based on location, often engaging in practices such as redlining, which resulted in discrimination against minorities.