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The History of Mortgages in the United States


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Owning a home is part of the American Dream. But fundamentally connected to home ownership are mortgages. Because most people can pay the entire price of a home all at once, they take a mortgage-in essence a loan-that allows them to pay for the home over an extended period of time. Mortgages are crucial in the United States today, and they have a long history as well.

According to some recent scholarship, mortgages date at least as far back to the late 12th century England. In that time, under English common law, mortgages served a very similar function as they today in the United States: a debtor could take a loan from a creditor to purchase property. While the creditor officially owned the property, the debtor could sell it off if the need arose.

The history of mortgages in the United States dates back to the Puritan settlers who came from England and brought their customs and practices with them. Mortgages likely continued rather steadily until the mid- to late-19th century, when the western frontier of the United States became increasingly settled by white settlers. As more land became available for purchase, people needed money to buy the land. So, more money began to be loaned and borrowed.

When the Great Depression hit in the 1920s, however, the mortgage market collapsed: people had borrowed and lent too much money. Credit was no longer available as it had previously been. So, to save the market, the federal government under President Franklin Delano Roosevelt stepped in. It took a number of steps to make available to people. A large part of its strategy was to take the risk away from lenders by insuring payments. Also, the federal government created the mortgage government-backed company Fannie Mae to help people obtain credit more easily.

After World War II, however, the United States fortunes turned around, both literally and figuratively. Reinvigorated by its victory in the war as well as the boom its economy experienced preparing for and fighting the war, the Untied States saw a sharp increase in mortgages. WWII veterans, having returned from the war contributed to this boom, as when they returned they searched for jobs and homes to build their families. As the U. S. continued to grow throughout the period of the Cold War, an increasing number of people wanted to purchase more and more expensive homes and needed credit. As a result, the U. S. government also created the institution Freddie Mac “to increase the supply of mortgage funds. "

Through the 1980s to the present, the mortgage industry has gone up and down. At one point in the 1980s, interest rates were as high as 21%. And today, of course, many banks have closed or have had to be rescued from failure because of providing too many risky mortgages.

Although as of the current moment, the mortgage market is not a field in which people want to invest, people can still pursue investments through hard money. To find more about hard money,

Joseph Devine


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