Mortgage Lending Channels, 1870-1940: The Life Insurance-Mortgage Company Connection

The American mortgage market experienced a burst of financial innovation between 1870 and 1890 when several new types of intermediaries arose to facilitate the flow of mortgage credit from the Northeast and Europe to areas of settlement in the South and West. ' But progress toward a fully integrated national mortgage market stalled when most of the new institutions failed dur-ing the mortgage crisis of the 1890s. The most important survivors were a few life insurance companies that had already become the nation's largest interre-gional lenders. Other large life insurance companies established interregional lending operations soon after 1900, and the industry remained the primary source of long-distance mortgage credit in the United States until the 1950s. This paper traces the historical process that brought life insurance companies to their position of dominance in the interregional mortgage market and ex-plains why no other intermediary served the same function. In order to lend interregionally, intermediaries had to employ loan agents who could make and enforce mortgage contracts in distant markets. But thes