Covered Farm Mortgage Bonds in the United States During the Late Nineteenth Century
2010; Cambridge University Press; Volume: 70; Issue: 4 Linguagem: Inglês
10.1017/s0022050710000720
ISSN1471-6372
Autores Tópico(s)Banking stability, regulation, efficiency
ResumoCovered mortgage bonds have been used successfully in Europe for two centuries, but failed in the United States when introduced as farm mortgage debentures in the 1880s. Using firm-level data and a sample of loans made by one Kansas mortgage company, I find that debenture programs grew out of established loan brokerage operations and were used to fund mortgages that were difficult to broker because of size, term, or risk characteristics. Debentures broadened access to the interregional mortgage market and facilitated an expansion of western farm mortgage debt before the innovation failed in the mortgage crisis of the 1890s. “[T]he availability of affordable mortgage financing is essential to turning the corner on the current housing crisis …. One option we have looked at extensively is covered bonds, which … have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions ….” Secretary of Treasury Henry Paulson July 28, 2008
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