When and why did banks start owning houses and land? When did mortgages start?
In: 3
Banks don’t usually own homes. The owners are usually people who got a loan from the bank to buy a home, called a mortgage. A mortgage is just a loan with the property used as collateral, meaning if the borrower fails to pay the loan, whoever was lending could foreclose on the home and become the owner. Mortgages started in English feudal times, where Lords would mortgage their estates in order to convert their property into money they could spend. In the United States, mortgages happened as early as the 1700s. In the United States, mortgages started to become widespread in the 1930s as a way to allow people to buy homes that they didn’t have the money to buy all at once. The government also guaranteed bank funds and mortgage loans. Before that, only about 40% of people owned the home they lived in (that figure is now 64% but it peaked at 70% in 2004). Widespread mortgages loans actually started with insurance companies, not banks, but later the industry was mostly taken over by banks. Usually banks only own homes when people stop paying their mortgages and the bank forecloses. But banks don’t usually want to own homes, since there are costs and risks associated with that ownership and banks would rather focus on getting interest from their loans. Because of those costs and risks, even if banks want to own homes, they will separate the business of home ownership (or property management) from banking.
Latest Answers