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It was only in the 1930’s that mortgages first started to emerge. It wasn't banks with this new idea; it was insurance companies. These daring insurance companies did it, not in the interest of making money through fees and interest charges, but in the hopes of gaining ownership of properties if the borrower failed to make the payments on the mortgage amount. They would in sense as companies do today repossess the property.
The Federal Housing Administration (FHA) played a critical role in how the mortgage idea emerged. In order to help pull the country out of its economic depression, the FHA initiated a new type of mortgage aimed at the people who couldn't get mortgages under the existing programs. At that time, only four in 10 families owned the homes that they lived in. Mortgage loan terms were limited to 50 percent of the property's market value, and the repayment schedule was spread over three to five years and ended with a balloon payment. An 80 percent mortgage loan at that time meant your down payment was 80 percent -- not the amount you financed! Since that time mortgage lenders have become much cleverer in the way they offer mortgages, making sure that there is a mortgage offer that will suit everyone's needs. As the house prices go up the mortgage lenders have to allow more equity to be mortgaged.
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