Did people still have to pay the mortgage when their house was bombed during the war?

Answer 1

Nobody HAS to pay the mortgage, but you owe it until it is paid. It doesn't just go away until it is paid in full. The bank gave out the actual money, and had nothing to do with the destruction of the house, so why should they say "just forget it"? The homeowner signed a note and promised to pay the money. To make sure he did, the bank took a lien on the house, and could take the house back if he did not, and sell it to somebody else to get their money. The bank doesn't just create this money out of thin air. The bank borrows the money, in those days frequently from the money other people put into the bank in savings accounts. Should people not be able to get their money out of their savings accounts because the bank loaned it out, and the borrower did not repay it?

In the US its normal for the bank to require the borrower to keep a homeowners insurance policy on the house, showing the bank as a named insured on the policy. If the house burns down, the bank is repaid first and the homeowner gets any amount of insurance after the bank is repaid. But the insurance companies ALL exclude "acts of war" as something they will cover. So if the Germans fly over and bomb your house, the insurance company will not pay, and you still owe the bank. Not keeping an insurance policy in force on the house is sufficient reason for the bank to foreclose, even if you've made all the loan payments.

See, these are REALLY good reasons not to go to war. Or to not let somebody like Hitler get to be big and powerful enough to cause a war. You have to nip it in the bud.

In practice what probably happened on most wartime home losses is that if there was a mortgage on the house, the borrower stopped paying when the house was destroyed. Probably the bank foreclosed and got the house lot, which eventually they would have been able to sell and get a small part of their depositors money back. Ordinarily this is very bad for the borrowers credit rating, but the credit bureaus were not as sophisticated as they are today, and they certainly weren't computerized. And since there were probably thousands of these people who had to default on their home loans, there probably was not much of a problem for them to find a lender willing to overlook it when they eventually went to try to get a loan on another house.

But just because your house burns down, or blows up, whether its a gas line or an enemy bomb, if you signed a note to get the bank to loan you the money to buy the place, you still owe the money. And if it was an act of war that caused it to be destroyed your homeowners insurance will not pay.