Thursday, July 12, 2012

Learn Something New Every Day ...

This, in a USA Today story about the 30-year mortgage rate hitting a new record low, caught my eye (emphasis mine):

Mortgage buyer Freddie Mac says the average rate on 30-year loans fell to 3.56%. That's down from 3.62% last week and the lowest since long-term mortgages began in the 1950s.

My immediate assumption was that this was a typo, and that the author meant "since the government started keeping track of long-term mortgage rates in the 1950s."

So I checked. And I was wrong.

Apparently the usual mortgage, up until the New Deal, was a 3- to 5-year affair with at least 50% down, interest payments over the term, and the principal as a balloon payment at the end.

The Federal Housing Administration, created in 1934, initially stretched that out to 15 years, with lower down payments and payment of the principal built into the term of the loan rather than as a big smack at the end.

Then in the 1950s, they stretched that 15 years out to 20, even 30 years.

On the one hand, I marvel that anyone was able to buy a damn house before 1930 -- although apparently four of every ten Americans did.

On the other hand, I marvel that something that's only been around for 60 years or so -- my parents were adults and my older brothers were born or about to be born when long-term mortgages came into being! -- is for all intents and purposes portrayed as an immutable, inalienable entitlement, part of "the American Dream" from the get-go. When George Washington returned from the French and Indian Wars, the first thing he did was call Countrywide Financial's toll-free number to get an adjustable rate mortgage on Mount Vernon with 20% down, and if we can't all do the same thing on our 19th birthdays, the terrorists have won, etc.

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