The New Deal and the Origins of the Modern American Real Estate Loan Contract / Jonathan Rose, Kenneth A. Snowden.

Format:

Book

Author/Creator:

Rose, Jonathan.

Contributor:

National Bureau of Economic Research.

Snowden, Kenneth A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18388.

NBER working paper series no. w18388

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

The introduction of the direct reduction (fully-amortized) loan contract to the U.S. residential mortgage market is an important instance of financial innovation. We describe the adoption of this contract within the building and loan (B&L) industry beginning in the 1880s and culminating in the 1930s. A long chain of complementary innovations at B&Ls gradually reduced the costs of adoption, leading to moderate use by the 1920s. The poor performance of traditional contracts during the crisis of the 1930s then radically altered the adoption calculus. At this point a new system of federal savings and loan charters incorporated many of the innovations that had been adopted within the small segment of the B&L industry that had introduced direct reduction lending by the 1920s. The B&L transition in mortgage contracts occurred primarily in the conventional loan market because B&Ls, unlike other lenders, generally avoided the use of the new FHA insurance program.

Notes:

Print version record

September 2012.