The Anatomy of a Residential Mortgage Crisis: a Look Back to the 1930s
33 Pages Posted: 2 Aug 2010 Last revised: 9 Aug 2010
Date Written: July 2010
Looking back to the 1930s provides the opportunity to examine one severe mortgage crisis as we live through another. This paper examines the development of the residential mortgage market during the 1920s, the institutional disruptions that occurred in the 1930s and the policy response of federal and state governments. The crisis reshaped the structure and development of the residential mortgage market and led to a postwar system in which portfolio lenders dominated both local and interregional markets. Some pre-1930 innovations--mortgage insurance and high-leverage, affordable loans--were written into federal programs and became part of the new system. But early experiments and proposals for securitization did not survive the 1930s and the implementation of this innovation was delayed for forty years.
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