NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The New Deal and the Origins of the Modern American Real Estate Loan Contract

Jonathan Rose, Kenneth A. Snowden

NBER Working Paper No. 18388
Issued in September 2012
NBER Program(s):   DAE

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.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published:

Users who downloaded this paper also downloaded these:
Gorton w18397 Some Reflections on the Recent Financial Crisis
Brunnermeier and Oehmke w18398 Bubbles, Financial Crises, and Systemic Risk
Shavell w10094 On the Writing and the Interpretation of Contracts
Brown, Dimmock, and Weisbenner w18389 The Supply of and Demand for Charitable Donations to Higher Education
Lindert and Williamson w18396 American Incomes 1774-1860
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us