This book is an economic history of the Home Owners’ Loan Corporation (HOLC). The HOLC was government corporation created under the New Deal to refinance home mortgage loans in danger of foreclosure, passed at the beginning of the Roosevelt administration in 1933 with overwhelming support from Congress and a broad set of interest groups. The challenge for HOLC officials was to design a program that could deliver relief to loan borrowers while still securing the voluntary participation of lenders and not imposing unjustifiably large costs on taxpayers. Ultimately, the HOLC was effective in purc ... More

This book is an economic history of the Home Owners’ Loan Corporation (HOLC). The HOLC was government corporation created under the New Deal to refinance home mortgage loans in danger of foreclosure, passed at the beginning of the Roosevelt administration in 1933 with overwhelming support from Congress and a broad set of interest groups. The challenge for HOLC officials was to design a program that could deliver relief to loan borrowers while still securing the voluntary participation of lenders and not imposing unjustifiably large costs on taxpayers. Ultimately, the HOLC was effective in purchasing a large number of loans because it often paid lenders all or nearly all of the debts they were owed. At the same time, the HOLC delivered relief to borrowers by implementing relatively liberal loan terms and patient servicing practices but typically only small or no debt relief. The relief provided by the HOLC was broadly effective at helping borrowers avoid foreclosure and by doing so the intervention helped prevent declines in house prices and home ownership in some local markets. However, the program did not reverse all of the damage from the foreclosure crisis of the 1930s, and the HOLC ultimately foreclosed on 19 percent of its own loans. Financially, the HOLC’s loan refinancing program was responsible for a modest loss to US taxpayers, equal to about 2 percent of the value of its loan portfolio, once all of its explicit and implicit costs are taken into account.