The Historical Origins of Americas Mortgage Laws

Title: The Historical Origins of Americas Mortgage Laws

Date: 10/22/2012

Author(s): Andra Ghent, Ph.D.

Executive Summary:

U.S. states vary dramatically in their mortgage laws. The laws across states differ in the legal theory underlying the mortgage contract and in how they balance the rights of creditors with those of borrowers. Moreover, the differences across states arose relatively early in America's history. In a popular 19th century American treatise on mortgage law, Jones (1879, ch. 30) observes:

"An examination of the statutes of the several states in relation to the foreclosure of mortgages can hardly fail to surprise one at the great diversity of systems in use, and at the difference in detail between those which are based on the same general principles. "Despite at least four distinct attempts over the last century to create a uniform mortgage code, mortgage today continue to be governed by a very diverse set of state laws.

To better understand the variation in foreclosure laws across states, this paper traces the history of mortgage laws in the United States. The paper is largely descriptive but, to the extent possible, I try to explain why the laws differ across U.S. states. I document when states enacted the various statutes that now govern real estate security instruments (i.e., mortgages or deeds of trust) therein. I explore the historical forces that led states to follow either title or lien theory, or to adopt a nonjudicial foreclosure procedure, that led to differences in redemption periods across states and that led some to restrict deficiency judgments."