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Short-term residential mortgage contracts in American economic history

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  • Rose, Jonathan

Abstract

Short-term contracts were a staple of the American residential mortgage market until the Great Depression, after which policymakers pushed for longer terms in order to eliminate refinancing risk. Using a first-of-its-kind data set on mortgages outstanding in 1930, this paper suggests that short-term contracts had remained popular until the Depression because of their appeal to a class of well-off sophisticated borrowers who were undeterred by refinancing risk, and who valued flexible amortization. In contrast, typical wage earners preferred longer terms in order to eliminate refinancing risk, even as they took on the burden of regular amortization payments.

Suggested Citation

  • Rose, Jonathan, 2021. "Short-term residential mortgage contracts in American economic history," Explorations in Economic History, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:exehis:v:79:y:2021:i:c:s0014498320300590
    DOI: 10.1016/j.eeh.2020.101363
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    Cited by:

    1. Quincy, Sarah, 2022. "Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus," Journal of Urban Economics, Elsevier, vol. 132(C).

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    More about this item

    Keywords

    Residential mortgages; Optimal contracts;

    JEL classification:

    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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