Some have asserted that the distinction between objective and subjective justification is a development of Lutheran theology that occurred only after the time of the Reformation. Martin Luther, however, had explicitly taught that all have been forgiven whether or not they believe it and yet that those who refuse to believe thereby forfeit the benefits of forgiveness:
Even he who does not believe that he is free and his sins forgiven shall also learn, in due time, how assuredly his sins were forgiven, even though he did not believe it. St. Paul says in Rom. 3[:3]: “Their faithlessness nullify the faithfulness of God.” We are not talking here either about people’s belief or disbelief regarding the efficacy of the keys. We realize that few believe. We are speaking of what the keys accomplish and give. He who does not accept what the keys give receives, of course, nothing. But this is not the key’s fault. Many do not believe the gospel, but this does not mean that the gospel is not true or effective. A king gives you a castle. If you do not accept it, then it is not the king’s fault, nor is he guilty of a lie. But you have deceived yourself and the fault is yours. The king certainly gave it.
Well, you say, here you yourself teach that the key fails. For the keys do not accomplish their purpose when some do not believe nor accept. Well, friend, if you call this failing, then God fails in all his words and works. For few accept what he constantly speaks and does for all. This means doing violence to the proper meaning of words. I do not call it a failure or a mistake if I say or do something, and somebody else despises or ignores it. But so they understand, teach, and observe concerning the pope’s wrong key: The key itself can err, even though a person would like to accept and rely on it. For it is a conditionalis clavis, a conditional, a vacillating key which does not direct us to God’s Word, but to our own repentance. It does not say candidly and boldly that you are to believe that I most certainly loose you. But it says that if you are repentant and pious, I loose you, if not, then I fail. That is the clavis errans, the erring key. It cannot with any assurance say that I know for certain that I have loosed you before God, whether you believe it or not, as St. Peter’s key can say.
Luther, M., The Keys (1999, c1958), Luther's Works, vol. 40: Church and Ministry II (J. J. Pelikan, H. C. Oswald & H. T. Lehmann, Ed.), Philadelphia: Fortress Press, pp. 366-367, hyperlink added.
Until the first president of the Lutheran Church—Missouri Synod read that treatise, also called On the Keys, he did not understand the gospel of the kingdom (C. F. W. Walther, The Proper Distinction between Law and Gospel).
As he pointed out, the unconditional good news announced by Luther — that the Lamb of God takes away the sin of the world — is diametrically opposed to the conditional "gospels" taught by the denominations — that a sinner cannot have assurance of forgiveness without first either choosing Christ or determining whether one is among the few for whom he died. The schism arose because, not satisfied with the Agapē motif proclaimed by Luther in its simplicity, Calvin, Arminius, and others mixed in seemingly reasonable elements of the spiritual Erōs philosophy, the ancient Greek version of the lie that man must reach up to God. There is good news: God came down to rescue those who do not have the strength to make the right decision or to find evidence of their election (Rom. 5:6-8).