That is why—with how the current economy is going—home loans are a blessing for many people. However, not many know exactly how home loans came to be. If you ask anyone right now, the chances of them knowing where it came from, who established it, why it was established in the first place, and when it was established is quite remote. Indeed, treasured as home loans may be, their origin is pitifully taken for granted.

In an attempt to remedy this, here is a brief discussion of home loans and its historical side.

Even in the olden days of yore, the financial predicament of people can be summed to be much the same as today. Real estate was painfully expensive and the only way to get a house was to borrow the money to buy one. This was how things were done as far back as 1190.

Jolly old England is where the earliest records of mortgage were found. Back then, English common law protected creditors by implementing a law that would give them an interest in the debtor’s property. The mortgage was therefore, a conditional sale in accordance with this law. While the creditor does indeed posses the title of the property, in the event that the debt is not paid, the debtor could sell the property to recover his money. Sounds familiar somehow, yes?

Now when it comes to the popular word “mortgage” itself, the history there has some intriguing points of interest. The “mort” part is actually from the Latin word “morte”, which means death, while “gage” is from a sense of that word that means a pledge to forfeit something of value if a debt is not repaid.

So essentially, when getting a mortgage, you are getting a “Dead Pledge”. Confused? Don’t be. Simply speaking, the pledge is dead in a sense for two eventualities. If the debt is not paid, the property of the borrower is forfeited or is “dead”. If the debt is settled, the pledge itself is “dead” or is concluded. That clears things up, doesn’t it?

As the 16^th century jurist Sir Edward Coke put it, “It seemeth that the cause why it is called mortgage is, for that it is doubtful whether the Feoffor will pay at the day limited such summe or not, and if he doth not pay, then the Land which is put in pledge upon condition for the payment of the money, is taken from him forever, and so dead to him upon condition. And if he doth pay the money, then the pledge is dead as to the Tenant.”

If the old style of English speaking makes little sense to you, you are not alone. However, the gist of it is as already mentioned before that.

The system was brought over to America by the early settlers and was proliferated every which way. It became so widespread, that by the 1900’s mortgages was readily available. However, not everybody could get a mortgage. A 50% down payment was required to get a five year mortgage. Obviously, only the most prolific savers can afford something like that.

This practice actually continued up until the Great Depression. With lenders having no money to lend and borrowers having no money to pay, the whole system succumbed to the inevitable and collapsed. Fortunately, this was remedied upon the election of President Franklin D. Roosevelt.

By establishing the Federal National Mortgage Association (FNMA) A.K.A. “Fannie Mae”, he made getting a home loan much more consumer friendly and made it the standard of which modern mortgages are based on even today.