Your Mortgage: A Brief History of the Loan that Changed America (1970 and beyond)
The previous post brought you up to 1970 as the history of a loan that changed the American landscape continued to change. Your mortgage is marvel of financial engineering, creating a system whereby you can borrow vast sums of money for very little money down, purchase a home you would never have been able to save enough money to own, and do so with the confidence that the money would eventually be paid in full. Mortgages are nothing short of the marvelous. Except when they are used in a way that steers it away from its intended purpose.
A Clear Commitment
The belief that home ownership has an overwhelming importance to the growth of the country is evidenced in the creation of Fannie Mae and Freddie Mac. Both agencies added to the overall stability of the industry while at the same time providing much needed liquidity and of course, confidence in the form of insurance. But those good intentions would be questioned decades later.
The Creation of Other Mortgage Products
As the industry grew, more creative products were developed and by the 1980s American home buyers were offered adjustable rate mortgages or ARMs. These products seemed simple but the underlying complications created many opportunities for predatory lending. And because the surface offering was so enticing, less experienced borrowers found themselves in loans they didn’t understand. Simply, ARMs were not fixed, offering low payments initially and readjusted payments at a later date, and often had confusing terms. Those adjusted payments were often considerably higher.
It was a noble effort in hindsight. Americans dream of home ownership and the government in the 1990s agreed. They set their sights on a 70% home ownership rate. This basically opened the door to financial ingenuity which, also in hindsight, opened the door to increased lending creativity. Even though the government had created oversight agencies to guard against many of the problems that befell the mortgage markets in 2008, the imagination of lenders, now beyond the banking system, was simply too difficult to track.
The Messy Aftermath
Fannie Mae and Freddie Mac fell into receivership with $12 trillion in outstanding mortgages. Words like foreclosure and underwater and short sale entered the American lexicon. The goal of 70% homeownership was not met but did reach a peak in 2004 at 69%. But as we all well know, it fell dramatically, leveling off to a current rate of 64%.
What we are left with is a much cleaner process that not only helps people get homes but also insists that they are qualified to see the mortgage through to the end. The American Dream does remain but it takes more effort. While it may exclude some from ownership, those that do reach high enough, work hard enough, and protect their financial well-being will realize that dream.
How can we assist you today?
On behalf of The Jones Group @ Sunriver Realty
Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate
Bryce Jones, Principal Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR
The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707
N Mobile: 541-420- 3725 | B Mobile: 541-420- 4018 | Fax: 541-593- 5123
Licensed in Oregon