TY  - JOUR
AU  - Rose, Jonathan
AU  - Snowden, Kenneth A
TI  - The New Deal and the Origins of the Modern American Real Estate Loan Contract
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18388
PY  - 2012
Y2  - September 2012
DO  - 10.3386/w18388
UR  - http://www.nber.org/papers/w18388
L1  - http://www.nber.org/papers/w18388.pdf
N1  - Author contact info:
Jonathan Rose
Federal Reserve Bank of Chicago
230 South LaSalle St
Chicago, Illi 60604
United States
Tel: 3123225654
E-Mail: jonathan.rose@chi.frb.org

Kenneth A. Snowden
Bryan School of Business and Economics
P.O. Box 26165
University of North Carolina at Greensboro
Greensboro, NC 27402
Tel: 336/334-4870
Fax: 336/334-4089
E-Mail: snowden@uncg.edu
M1  - published as Jonathan Rose, Kenneth Snowden. "The New Deal and the Origins of the Modern American Real Estate Loan Contract," in Price Fishback, organizer, "The Microeconomics of New Deal Policy" Elsevier, Explorations in Economic History, 50(4) (2013)

AB  - 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.
ER  -