The History of Mortgages

The History of MortgagesMost of us don’t think of what the word mortgage means as what it does for us. Believe it or not, the term ‘mortgage’ has been around for a long time, dating back to approximately 1190.

It was after the conquest of 1066 in England that a group of persons formed the basis of English aristocracy. They began subletting the king’s land which led to the feudal system.

By 1190 people were granted mortgages to purchase property. With English common law a creditor was protected by being given an interest in his debtor’s property. With this law, a mortgage was a conditional sale. The creditor held the title to the property and the debtor could, if the debt wasn’t paid, sell the property to recover his money.

English brought the system of mortgages with them when they moved to America. The system changed into various forms. For many years, to buy property required a 50% down payment with a five-year term and interest.

Then comes the Great Downheartedness. Lenders ran out of money to lend and borrowers ran out of money to pay. The home mortgage system collapsed with thousands of foreclosures. To help stimulate the economy, President Roosevelt introduced new laws making it easier for people to buy. This was followed by the introduction of the Federal Housing Administration (FHA) in 1934.

FHA was created insure mortgage lenders against losses from default. Now that the risk had been taken away from them, lenders were more willing to give people mortgages. The FHA also established the 30-year fixed-rate loan program, providing homeowners lower payments and more constancy. The system worked until lenders felt they didn’t always have enough money to lend. More money was needed.

The requiring banks start to give loans on creditors qualifying the FHA. FHA began lengthening terms of loans from the traditional five to seven year loans up to 15-year and 30-year loans.

FHA also began getting involved in the quality of a home’s building by setting quality standards. The loan wouldn’t outlast the building.

Federal National Mortgage Association of FNMA was establishment the rule of FHA in 1938 with better known as Fannie Mae. FNMA was established by the government. The institution bought FHA-insured loans and sold them as securities on the market. This helped give banks more money to lend. FNMA also presented more efficient mortgage and fair lending practices.

After World War II

In 1944, the Veterans Administration was given the right to guarantee mortgage loans made by private lenders to veterans. Enabled veterans and active military personnel were now able to buy homes without making a down payment. This made the demand for housing and mortgages skyrocket.

Then, throughout North America, as baby boomers entered the workforce, including women, double-income families became the norm. They wanted larger, more expensive homes to fit their income and lifestyles. More mortgages were needed. In 1970, the government then charted the Federal Home Loan Mortgage Corporation (FHLMC) or Freddie Mac. This organization increased the supply of mortgage funds available to commercial banks, savings and loan institutions, credit unions and other mortgage lenders.

So in 1970, U.S. Congress chartered the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac, to increase. They supply of mortgage funds available to commercial banks, savings and loan institutions, credit unions and other mortgage lenders. Thus making more funds available to more Americans

The idea of mortgages has comes a long way with government institutions and private alike seeking ways to make it easier and easier for people to buy and succeed in repayment of their mortgage. While most of us don’t contemplate the meaning of a mortgage, we often forget how the concept of each individual having the opportunity to own their own property is somewhat new and has only become easier and easier as time passes.

Bank Mortgage Systems

Bank Mortgage SystemsThe Banks and the Mortgage
Over the past period licensed mortgage brokers have skilled boom times. Mortgage Choice, RAMS, Wizard and others delayed to meet the demand for credit from the proliferation of non-bank credit providers; until recently. There’s no escaping the brutal reality of the credit crisis: it’s hitting the non-bank sector hardest.
According to the Mortgage & Finance Association of Australia (MFAA) the market share of non-bank mortgage originators has declined from a peak of 15 per cent to about 4 per cent; effectively bringing an abrupt halt to the trend from the late 1990s. The appeal of buying into a branded, non-bank franchise may be waning.

Mortgage Brokers
Mortgage brokers often work in what are referred to as a franchise environment. This is distinct from a being an “independent”. A franchisor has a lot of controls placed on the mortgage brokers. Consumers do trust brands but the franchisees are disadvantaged by not being able to operate freely in their markets. Commission structures are often stacked in favor of the franchise group; the agreement terms are onerous.
The promises made to mortgage brokers who seek to take buy a franchise or to work within a franchise environment is that leads will be provided. Mortgage brokers however, thrive on good quality leads. More often than not however, the quality of leads is minimal. They are usually web-generated and often when you follow them up they don’t know why you are calling.
Other mortgage brokers join “aggregator” groups. In the market as it stands today, mortgage brokers need to be “approved” by banks before making mortgage applications on behalf of clients. Independent brokers need to achieve volume hurdles to get access to banks and other lenders. These groups manage a lot of the compliance, professional indemnity and training services and enable smaller firms to gain access.

Small businesses Stability Mortgage
It is useful to understand that many experienced brokers won’t go into franchises; they don’t need the training. On the other hand, franchising is a resilient business model and offers many small businesses stability, systems, buying power and brand strength that could give them an edge over independent retailers and service businesses.

Online Mortgage Lender
Shopping for a mortgage lender online may seem like a scary prospect, but understanding a few basic facts will make you feel much more comfortable. When exploring the website in your search, be sure to look for a physical address and telephone number where you can contact a live human. Do not fill out an online application which asks for your Social Security number. Although you will eventually be providing this information to your online lender, you will want to make sure you are comfortable with the person on the other end of the internet connection or phone line before you do. Websites that advertise that they will let the lenders compete to get your business are actually lead providers that sell your contact information to multiple brokers. The idea that several lenders will be bidding for your loan is only true in the advertisements, it is not reality.