...The US has a unique mortgage product, and its design was almost an accident. The US is the only country in the world where consumers have easy access to a long-term, fixed-rate, low-down-payment mortgage with no prepayment penalties. As recently as 2002 or so, the American mortgage system was the envy of the world, and many countries sought to emulate it. Mortgages were funded principally through two channels: savings-and-loan (S&L) societies and mortgage bankers. Banks, of course, also made mortgages, and their terms were similar to those issued by S&Ls and life insurance companies. It took a cataclysm to change the structure of the mortgage industry and the terms of mortgage products. That cataclysm was, of course, the Great Depression. The FHA was created to provide insurance for what were, at the time, high loan-to-value ratio mortgages. In any event, the reinvention of Fannie Mae and the invention of Freddie Mac helped bring about a brilliant innovation: the mortgage-backed security...
