The building of Chicago’s communities necessitated cooperation between the banking, building and lending industries. The Great Chicago Fire of 1871 was financed by Eastern insurance companies through their Chicago offices. These insurance companies insisted on building code changes after the fire. State banks and lending institutions supported recurring building developments before 1970 through long-term mortgages, real estate bonds and other lending instruments. New institutions and associations were created to adjust to changing times.
Insurance companies worked with Chicago’s City Council to change building codes and government departments after the fire. Wooden buildings were banned within the city’s limits. Lumberyards, unsafe buildings and hazardous industries were likewise banned. The fire department and the water department were improved and upgraded.
State banks and other lending institutions backed Chicago’s real estate booms. State banks financed the boom cycles of the 1800s. The building boom of 1922-1928 was funded through the sale of real estate bonds. In 1934, long term mortgages, replacing the 5-year balloon loan, were initiated during the New Deal to assist business and individual borrowers during the Great Depression. Despite these efforts, the Great Depression and WWII caused serious disruptions in real estate development.
The Mortgage Bankers’ Association of America (MBAA), created in 1914, was initially reluctant to enter the expanding home loan arena. Because commercial banks or savings and loans controlled this market, MBAA didn’t see how it could benefit them. When Veterans’ Administration loans were established in 1944, the association expanded to include commercial banks and savings and loans.
The Federal Housing Administration (FHA) assists Chicago through evaluations of property, mortgage insurance and well-defined standards. Evaluations are done in cooperation with the Home Owners’ Loan Corporation (HOLC), National Association of Real Estate Boards, FHA mortgage insurance and FHA standards. These organizations assist in developing Chicago’s communities and surrounding suburbs.