Us Mortgage History – Then And Now

Mortgages are those transactions that have been a part of the economic scenario since the beginning of trade and commerce. Even before the invention of money in the era when the barter system was prevalent, mortgage transactions used to exist and thrive the world over. Today is no different! However, the formal acceptance of these transactions into the legal format happened years later. Here is a short history of how the legally accepted form of mortgage actually came into being and how it has shaped the US economy.

Let’s start at the beginning of the story. You see, mortgage was a term that was coined for convenience actually. A mortgage was originally a long-term loan that was designed to make home ownership more affordable and it somewhat continues to fulfill that purpose even today. After the World War II, the US Government embarked upon a mission to increase the economic activity in the country, especially through the home construction industry. To achieve this end, war veterans who were returning from the battle were encouraged to buy the new homes that were being built in the suburbs. And to make it easier for them to purchase these properties, the facility of mortgage was developed.

Various special legislations were penned down by the government during this time to create savings and surplus funds in the economy and the commercial banks were urged to offer loans to those who require them the housing loan industry thrived and as a result the economy started picking up pace. These banks were known as Savings and Loans or S&Ls. These specialized banks were created to promote affordable homeownership for which the government insured deposits on savings accounts, thus encouraging people to save their money, despite federally-regulated low interest rates. People used these savings accounts, even though the interest earned was very low due to the government backing. Another thing that the US government ensured was the profitability of the S&Ls by regulating them in such a manner so that paid lower interest rates on deposits than they charged on the mortgages.

These funds were then used by these S&Ls to lend through 30-year mortgages that carried higher interest rates. But even so, the length of the loans allowed homeowners to afford the monthly payment, thus making home ownership possible for the masses. And that is how the whole concept of legally accepted mortgages came into existence.

Ever since then, this concept has evolved many folds. There are now many types of mortgages, including conventional 15-year and 30-year fixed interest mortgages, variable-rate mortgages, and interest-only loans. All different kinds of mortgages carry their own set of rules and regulations that the parties to the contract need to adhere to. Such is the importance of mortgages today in the US economy that the US subprime mortgage crisis was one of the first indicators of the 2007–2010 financial crisis that shook the world in the last few years. The system is an indispensible part of modern day economics.

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About The Author

Miranda Jones is an expert mortgage broker in California and New York who also likes to write many informative articles to help the common people understand what this financial transaction entails along with its many salient features. She recommends as the best name to trust for these matters.

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