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The Incredible HOLC? Mortgage Relief during the Great Depression
Author(s) -
ROSE JONATHAN D.
Publication year - 2011
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2011.00418.x
Subject(s) - principal (computer security) , loan , business , corporation , great depression , finance , balance sheet , balance (ability) , shared appreciation mortgage , depression (economics) , financial system , economics , mortgage insurance , political science , medicine , macroeconomics , computer science , physical medicine and rehabilitation , operating system , casualty insurance , law , insurance policy
This paper examines the relief provided by the Home Owners’ Loan Corporation (HOLC), a New Deal program that purchased and refinanced over 1 million distressed residential mortgages. I document that the HOLC paid relatively high prices for its mortgages, most likely in an effort to encourage lender participation and stimulate the housing market. The consequence was that lenders were able to remove poorly performing assets from their balance sheets at attractive prices. While this meant the HOLC’s ability to seek principal reductions was somewhat limited, borrowers still received significant relief through the terms of the HOLC’s more modern and forgiving mortgage contracts.