Prudential has been in the commercial mortgage lending business for more than 125 years a staying power more important now than ever.

Prior to the 1970's it was the Savings and Loan that quickly became the primary source for residential mortgages, taking in deposits from the local community and loaning out those deposits in the form of mortgages. As long as the cost of funds remained stable, the Savings and Loan prospered by lending out its deposits at rates slightly higher than what it had to pay its depositors. The Savings and Loan held its mortgage loans (referred to as portfolioing) until such time as they were paid off.

During the 1980s, defaults on FHA mortgage loans increased due to weak real estate markets and other factors so that by the early 1990s FHA had accumulated a sizeable inventory of loans - approximately 2,400 multifamily and 110,000 single family mortgage loans. The large inventory of mostly troubled loans consumed a disproportionate amount of FHA staff time, detracting from the agency's ability to manage its insured portfolio. To remedy the situation, in March 1994 Congress and the Administration initiated a program to sell FHA's stock of non-performing loans. On December 1, 2001 HUD established a formal Office of Asset Sales.

If you wanted a residential home loan, you visited a Commercial Bank. As an outgrowth of the depression, the Federal Housing Administration (FHA) was created to offer government insured home loans but with limitations on the amount that could be borrowed. After World War II, the Veterans Administration (VA) began playing a larger role in offering government insured loans, while at the same time, a budding industry began to take hold - the Savings and Loan.

When inflation began to play an ominous role in the economy, several things happened! First, the Savings and Loan found itself in the unenviable position of having to pay out more to attract depositors than it earned from interest received on its portfolio of fixed rate mortgages. The Adjustable Rate Mortgage (ARM) was created to solve this imbalance, ensuring that mortgages held in portfolio would always earn the Savings and Loan enough to pay its depositors and net a profit.