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Working Paper
Contract Choice in the Interwar US Residential Mortgage Market
This paper studies mortgage contract choices in US history using a first-of-its-kind sample of residential loans from 1930 and 1940, linked to the decennial censuses. Contract choices reflected borrowers' reactions to the risks posed by different contracts. The majority of borrowers chose contracts with the longest available terms, despite required frequent amortization, likely in order to avoid refinancing risk and to maximize leverage. In contrast, the most creditworthy borrowers with high socioeconomic status preferred short-term contracts, confident that they could refinance at will. The ...