House ownership across Britain and the US

Property ownership was a British concept to begin with. Not that people didn't own property other than the British but the association of strength and power with ownership of property was something of very British origin. In the 1700s, the power to vote resided with the wealthy land-owning aristocrats, the people who came to occupy the House of Lords in the parliamentary system later.

But as with any financial tale, this one did not have a very happy ending. These men-to-the-manor-born borrowed heavily to pay for their extravagant lifestyles, with their land and the agricultural revenues as collateral. However, come mid-1800s, as the prices of agricultural produce went down, so did the backing for these loans. As these aristocrats put their heads together to sort out finances, most of them realized that their borrowings were way more that the worth of their estates and their agricultural revenues put together. Most of the houses were acquired by the lenders and several of the rich elite had to move into rented houses, a big step down considering the opinions of those times.

That was Britain. Now the US.

Owning a house makes sense. It gives you security and ownership. However, before the great depression, only two-fifths of the US population owned their own homes. As the great depression struck, the few home owners there were, were also forced out of their homes for lack of mortgage payments. So how did this miserable situation turn around? The New Deal! Mr. Roosevelt took several steps to encourage people to invest money in house ownership. The government ensured that the money invested by the public to a bank as part of mortgage payments would be ensured by the government even if the bank went bust. A federal housing administration was setup to offer longer, larger and lower interest loans (20 to 30 years). And it also setup the 'Federal National Mortgage Association' which goes by the famous nickname - Fannie Mae - to stimulate the mortgage market.

Well all of that seems about right. What went wrong then? Well, the way it began was that these mortgages were not given out to any tom, dick and harry. They were only given to 'prime' candidates. The rest you probably know ....