Financing Mortgages In the Days of Old

653 21st St. Ogden, UT c.1900

I had the opportunity to review some very old title work at the Weber County building last month.  One of the curious things I discovered while I was there was an absence of trust deeds and mortgage company names in the register.

The books I reviewed dated back to the mid and late1800's during Ogden's growth and maturing into a major population and economic center.  I watched the registers witnessed as land was subdivided, sold, improved and sold again.

The most captivating part came as I saw what happened when new homes were constructed.  Here is an example:

In 1907, 459 20th Street was a vacant lot owned by Albert Richter of Ogden.  It appears that Mr. Richter constructed a home on the lot and then, on September 10, 1908, sold it to James and Charles Moore, brothers, for the princely sum of $3,300.  However, rather than going to the bank and getting a loan, inscribed in the book was this note: "$3,000 payable at 8% in 10 years" with Mr. Richter being the Grantor.  What we find out is that the Moore Brothers purchased the property with $300 down payment and seller financing the rest after Mr. Richter built the home with his own cash.

Some fast work with our mortgage calculator reveals that the house payment was $36.40 a month.  But wait...adjust that for inflation over the past 103 years and that would be paying about $850 today. The home's sale price of $3,300 would be about $79,000 today...about what you would expect to pay for the home as it was originally when it did not have a bathroom, laundry, or electrical like it does now.

Anyway,  the early 20th century was an interesting time to be in the land and housing market.  Most of the transactions were done with cash or through seller financing.   Bank mortgages like we know today didn't come onto the scene until the Great Depression and FDR's New Deal.

So, what does this all mean?  If the mortgage market lacks Federal support through Fannie and Freddie Mac and other government contrivances, the private mortgage market will tend to gravitate back to a shorter termed mortgages and they will be less available.  Is this a bad thing?  Well, it depends on your perspective. But, it is the natural course of action in the absence of a fluid and confident marketplace for mortgage bonds.

Fannie and Freddie Mac are on their way out.  If new market mechanisms can take their place, we may still see 30-year mortgages continue; however, the proof is in the pudding.  Let's watch and see how things play out.  These changes to the way we do financing are so significant that they may take place over the course of a decade or more.