Liberty Street Economics

« | Main | »

July 6, 2012

Historical Echoes: The Creation of the Contemporary U.S. Mortgage

Megan Cohen, New York Fed Research Library

Residential mortgages, as they are known in the United States, are fairly modern creatures. Their origins lie in medieval England, but they have contemporary roots in the Great Depression.


    
Before the mid-1930s, prospective homebuyers confronted difficult borrowing terms for a mortgage, such as a loan limit of 50 percent of the property’s market value, a five- to seven-year repayment schedule, as well as a balloon payment consisting of the entire principal due at completion.

    
In reaction to the declining state of the housing market during the Great Depression, Congress passed the National Housing Act of 1934. The Act resulted in the creation of the Federal Housing Administration and ushered in a dramatic change in American mortgages and housing. The Federal Housing Administration helped create a more favorable set of borrowing terms for U.S. homebuyers—including the elderly, lower-income households, and veterans—as well as the contemporary U.S. mortgage, with a fixed interest rate and thirty-year amortization schedule.

    
The past few years have brought monumental upheaval to the U.S. mortgage market. The Federal Reserve Bank of New York, though its Regional and Community Outreach function, has created an information resource on mortgage and foreclosure data in the New York City metropolitan area. Visit the Regional Mortgage Briefs site to review an extensive set of analytics on mortgage and foreclosure issues in a variety of regions in New York and northern New Jersey.

Disclaimer
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines

 

We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.

Archives