Is A Crash Coming In The Mortgage Markets? Let's See What Historical Trends Say by Greg McKinney Mineola Texas



The American mortgage market has a long history of ups and down. As the economy rises and falls so does the mortgage market. Mortgages have enabled millions of Americans to live the American dream of owning a home but mortgages have also caused the ease of getting a mortgage to have that dream turn into a nightmare when everything does not go as planned. As economies rise and fall through good times, recessions and depressions it can really take a financial toll on families especially those who have borrowed more money than they should have to purchase a home. It’s amazing to look back at home much the mortgage industry has evolved over time.

Mortgages started way back in ancient civilization. Most historians believe before written documents were prepared, people would make a verbal agreement to pay for a piece of land over time to the sellers. Some of the earliest records of mortgages are from Rome and India. The Romans kept actual ownership of the property with the lender/owner until the debtor made all of their payments. Sound familiar? These type of lending practices really grew in English law where they expanded all types of lending.

The mortgage market in the U.S. started to increase in the late 40s and has steadily risen ever since. Except for a few dips. The debt-to-income ratio has steadily increased during this time as well. The amount of mortgage debt Americans have taken on when you compare their other assets and debt continues to rise. A very dangerous trend. The U.S. government became involved in the mortgage market and this caused mortgages to grow even faster. Mortgages in the U.S. can be traced back to the late 1700s. As banks started to grow in the 1800s mortgages and different types of loans became more commonplace such as loans to farmers. But there were many problems with mortgages during the 1800s as some farmers were charged much higher rates depending on which part of the country they were in. Most lenders during this time were giving better rates to those in the northeast to build the population of this area during that time.

 Mortgages continued to evolve during the 1900s. In the early 1900s borrowers would actually have to update their mortgages every year. Things really began to change during the great depression when the government became involved with the formation of the FHA and the FNMA and HOLC. One out of every 10 homes went into foreclosure during the depression.

 Mortgages started to take off again after the WWII when the VA Mortgage was introduced. This allowed borrowers to borrow up to 95% of the value of the homes and repay them over 30 years. In the 1960s GNMA was established to bring consistency to mortgages across the U. S. In the early 1970s FHLM was formed to help make it easier for buyers to purchase homes.

 Investors became much more involved in real estate in the 1980. Purchasing rental property and commercial property. I’m Greg McKinney from Mineola Texas and I’ve been investing in real estate since the early 1990s. I’ve seen many changes in the mortgage market over the past 3 decades.

 As the mortgage market continued to evolve it became much more complicated with many more people involved through the late 1900s. The rise of different types of mortgages and the involvement of investors in the market led to a major collapse in the market in 2008. A global economic collapse occurred but no real changes came from those difficult years in the mortgage market. As the economy has recovered, we are now seeing some of those loose lending practices again which is a recipe for disaster especially when we are looking at the current booming real estate market.

A simple rule we should all keep in mind when looking back at the history of mortgages in the U. S. is we should never borrow more to purchase a home than we can afford. Markets always rise and fall. Always put at least 20% down and your payment should never be more than 28% of your income. You are much less likely to get into financial trouble in the future if you follow these 2 simple rules.

Greg McKinney MineolaTexas

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