Skip to main content
×
Home
    • Aa
    • Aa

Repairing a Mortgage Crisis: HOLC Lending and Its Impact on Local Housing Markets

  • Charles Courtemanche (a1) and Kenneth Snowden (a1)
Abstract

Between 1933 and 1936 the Home Owners’ Loan Corporation purchased more than a million delinquent mortgages from private lenders and refinanced those loans for the borrowers. Its primary goal was to break the cycle of foreclosure, forced property sales and decreases in home values that was affecting local housing markets throughout the nation. We find that the volume of HOLC lending was related to measures of distress in local (county-level) housing markets and that these interventions increased 1940 median home values and homeownership rates, but not new home building.

“[A] tremendous surge of residential building in the [last] decade… was matched by an ever-increasing supply of homes sold on easy terms [and only]… a small decline in prices was necessary to wipe out this equity. Unfortunately, deflationary processes are never satisfied with small declines in values. They feed upon themselves and produce results out of all proportion to their causes… In the field of real estate finance, particularly, we have depended so much upon credit that our whole value structure can be thrown out of balance by relatively slight shocks. When such a delicate structure is once disorganized, it is a tremendous task to get it into a position where it can again function normally.”1

Henry Hoagland, 1935

Copyright
References
Hide All
Bernanke Ben. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” American Economic Review 73, no. 3 (1983): 257–76.
Bernanke Ben, and Gertler Mark. “Inside the Black Box: The Credit Channel of Monetary Policy Transmission.” The Journal of Economic Perspectives 9, no. 4 (1995): 2748.
Bernanke Ben, Gertler Mark, and Gilchrist Simon. “The Financial Accelerator and the Flight to Quality.” The Review of Economics and Statistics 78, no. 1 (1996): 115.
Federal Deposit Insurance Corporation. Federal Deposit Insurance Corporation Data on Banks in the United States, 1920–1936. Ann Arbor, MI: ICPSR 00007, 2001.
Federal Home Loan Bank Board. Annual Report of the Federal Home Loan Bank Board. Washington, DC: GPO, 1934–1940.
Fiorio C. V. “Confidence Intervals for Kernel Density Estimation.” The Stata Journal 4, no. 2 (2004): 168–79.
Fishback Price, Kantor Shawn, and Wallis John. “Can the New Deal's Three R's Be Rehabilitated? A Program-by-Program, County-by-County Analysis.” Explorations in Economic History 40, no. 3 (2003): 278307.
Fishback Price, Flores Lagunes Alfonso, Horrace William C., Kantor Shawn, and Treber Jaret. “The Influence of the Home Owners' Loan Corporation on Housing Markets During the 1930s.” NBER Working Paper No. 15824, Cambridge, MA, March 2010.
Grebler Leo, Blank David M., and Winnick Louis. Capital Formation in Residential Real Estate: Trends and Prospects. Princeton, NJ: Princeton University Press, 1956.
Gries John M., and Ford James, eds. Home Finance and Taxation, Report of the President's Conference on Home Building and Homeownership. Washington, DC: National Capital Press, Inc., 1932.
Haines Michael. Historical, Demographic, Economic, and Social Data: The United States, 1790–2000. Computerized data files from ICPSR 0003, 2008.
Harriss C. Lowell. History and Policies of the Home Owners' Loan Corporation. New York, NY: National Bureau of Economic Research, Inc., 1951.
Hoagland Henry. “The Relation of the Work of the Federal Home Loan Bank Board to Home Security and Betterment.” Proceedings of the Academy of Political Science 16, no. 2 (1935): 4552.
Mishkin Frederic. “The Household Balance Sheet and the Great Depression.” The Journal of Economic History 38, no. 4 (1978): 918–37.
New York Times, various issues.
Rose Jonathan D. “The Incredible HOLC? Mortgage Relief During the Great Depression.” Unpublished Manuscript, 2010.
Snowden Kenneth. “Building and Loan Associations in the United States, 1880–1893: The Origins of Localization in the Residential Mortgage Market.” Research in Economics 51 (1997): 227–50.
Snowden Kenneth. “The Transition from Building and Loan to Savings and Loan.” In Finance, Intermediaries, and Economic Development, edited byEngerman S., Hoffman P., Rosenthal J., and Sokoloff K., 157206. Cambridge, UK: Cambridge University Press, 2003.
Snowden Kenneth. “The Anatomy of a Residential Mortgage Crisis: A Look Back to the 1930s.” NBER Working Paper No. 16244, Cambridge, MA, July 2010.
Tough Rosalind. “The Life Cycle of the Home Owners' Loan Corporation.” Land Economics 27, no. 4 (1951): 324–31.
U.S. Bureau of the Census. Census of Housing. Volume 2. General Characteristics. Washington, DC: GPO, 1943.
U.S. Congress. Senate. Operations of the Home Owners' Loan Corporation.” U.S. Senate Document No. 145, 73rd Cong., 2nd sess., S. Doc. 145.
U.S. Housing and Home Finance Agency. Final Report to the Congress of the United States Relating to the Home Owners' Loan Corporation, 1933–1951. Washington, DC: GPO, 1952.
Wheelock David. “The Federal Response to Home Mortgage Distress: Lessons from the Great Depression.” Federal Reserve Bank of St. Louis Review 90, no. 3 (2008): 133–48.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 5
Total number of PDF views: 30 *
Loading metrics...

Abstract views

Total abstract views: 131 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 22nd October 2017. This data will be updated every 24 hours.