How the US Mortgage Industry Works and Why It Has Triggered Major Crises

The United States mortgage industry is a major part of its financial system. Federal institutions such as Ginnie Mae, Fannie Mae and Freddie Mac were created to support mortgage lending, housing construction and home ownership. The sector has also played a central role in several financial crises. Weak lending practices contributed to the mortgage crisis of the 1930s, the savings and loan crisis of the 1980s and 1990s, and the 2007 subprime mortgage crash that led to widespread foreclosures. A typical US mortgage loan involves a promissory note and a separate mortgage or security document. While these documents are usually transferred together, the holder of the note generally has the right to foreclose if they are separated.

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