Mortgage Credit

loans with real estate as security. The simplest form is the hypothec, which existed as long ago as the seventh and sixth centuries B.C. in ancient Greece. In the slave-holding and feudal systems, mortgage credit was a variation of usurious credit and was generally not related to production.

Mortgage credit has developed as a separate sphere of credit transactions under capitalism, especially in the age of imperialism. During the period of free competition, mortgage banks gave long-term loans (for ten, 15, 25, and more years) against real-estate security, such as farmers’ lands, city lots, and residential buildings and other structures. As a rule the banks mobilized their resources by issuing mortgage bonds secured by real estate. Agricultural entrepreneurs and large-scale capitalists used mortgage credit to buy land to expand their farms and carry on capitalist production. Mortgage credit promoted the concentration of landed property and agricultural production.

Under monopoly capitalism the scale of utilization of mortgage credit is expanding (mortgage loans go primarily for the construction of residential buildings and commercial structures and for the expansion of productive capital). After World War II, mortgage credit developed in connection with the expansion of housing construction in a number of capitalist countries. In the United States in 1969, for example, loans in agriculture constituted just 7 percent of the total of mortgage credit, whereas loans for the construction of housing with one to four units accounted for 67 percent. Trade and industrial cooperatives receive loans against the security of their property (productive capacities).

In the present-day capitalist countries, mortgage credit is used extensively by the urban population, commercial and industrial corporations, and farmers. Mortgage credit is given by numerous credit and financial institutions; it is becoming an advantageous sphere for the use of capital. In the United States, commercial banks, savings and loan associations, savings banks, and insurance companies held almost 85 percent of all nonagricultural mortgage credit in 1969; the largest shares were held by savings and loan associations (35.4 percent) and life insurance companies (18.2 percent). In the structure of mortgage credit in Great Britain, housing construction is primary: in 1969 insurance societies held more than 50 percent of the loans to private individuals for housing construction, and insurance companies held 20 percent. Building societies and banks also issue loans for construction. In the Federal Republic of Germany (FRG) mortgage credit has been concentrated at mortgage, commercial, and savings banks. Unlike the practice in other countries, however, mortgage banks continue to occupy the leading position. In France special credit institutions, banks, and insurance companies also issue mortgage credit.

Under state-monopoly capitalism, mortgage credit is used extensively to expand production capacities and to renew fixed capital. In the FRG, for example, there are special shipbuilding mortgage banks that issue credits against ships under construction. After World War II the construction of large gas pipelines in the United States was financed by issuing special mortgage bonds. Through the far-reaching system of their credit and financial institutions, financial capital makes use of the accumulated monetary savings of the population and extracts high profits. Along with consumer credit, mortgage credit is one of the most highly refined forms of usury and exploitation of the working people.

Under socialism, the public ownership of the means of production rules out any mortgage credit.