Hostname: page-component-7c8c6479df-27gpq Total loading time: 0 Render date: 2024-03-29T06:48:38.251Z Has data issue: false hasContentIssue false

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

Published online by Cambridge University Press:  06 June 2011

Charles Courtemanche*
Affiliation:
Associate Professor, Department of Economics, Bryan School of Business and Economics, University of North Carolina at Greensboro, Greensboro, NC 27402-6170. Emails: cjcourte@uncg.edu and snowden@uncg.edu.
Kenneth Snowden*
Affiliation:
Associate Professor, Department of Economics, Bryan School of Business and Economics, University of North Carolina at Greensboro, Greensboro, NC 27402-6170. Emails: cjcourte@uncg.edu and snowden@uncg.edu.

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

Type
ARTICLES
Copyright
Copyright © The Economic History Association 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Bernanke, Ben. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” American Economic Review 73, no. 3 (1983): 257–76.Google Scholar
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.CrossRefGoogle Scholar
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.CrossRefGoogle Scholar
Federal Deposit Insurance Corporation. Federal Deposit Insurance Corporation Data on Banks in the United States, 1920–1936. Ann Arbor, MI: ICPSR 00007, 2001.Google Scholar
Federal Home Loan Bank Board. Annual Report of the Federal Home Loan Bank Board. Washington, DC: GPO, 1934–1940.Google Scholar
Fiorio, C. V.“Confidence Intervals for Kernel Density Estimation.” The Stata Journal 4, no. 2 (2004): 168–79.CrossRefGoogle Scholar
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.CrossRefGoogle Scholar
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.Google Scholar
Grebler, Leo, Blank, David M., and Winnick, Louis. Capital Formation in Residential Real Estate: Trends and Prospects. Princeton, NJ: Princeton University Press, 1956.Google Scholar
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.Google Scholar
Haines, Michael. Historical, Demographic, Economic, and Social Data: The United States, 1790–2000. Computerized data files from ICPSR 0003, 2008.Google Scholar
Harriss, C. Lowell.History and Policies of the Home Owners' Loan Corporation. New York, NY: National Bureau of Economic Research, Inc., 1951.Google Scholar
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.CrossRefGoogle Scholar
Mishkin, Frederic. “The Household Balance Sheet and the Great Depression.” The Journal of Economic History 38, no. 4 (1978): 918–37.CrossRefGoogle Scholar
New York Times, various issues.Google Scholar
Rose, Jonathan D. “The Incredible HOLC? Mortgage Relief During the Great Depression.” Unpublished Manuscript, 2010.CrossRefGoogle Scholar
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.CrossRefGoogle Scholar
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.CrossRefGoogle Scholar
Snowden, Kenneth. “The Anatomy of a Residential Mortgage Crisis: A Look Back to the 1930s.” NBER Working Paper No. 16244, Cambridge, MA, July 2010.Google Scholar
Tough, Rosalind. “The Life Cycle of the Home Owners' Loan Corporation.” Land Economics 27, no. 4 (1951): 324–31.CrossRefGoogle Scholar
U.S. Bureau of the Census. Census of Housing. Volume 2. General Characteristics. Washington, DC: GPO, 1943.Google Scholar
U.S. Congress. Senate. Operations of the Home Owners' Loan Corporation.” U.S. Senate Document No. 145, 73rd Cong., 2nd sess., S. Doc. 145.Google Scholar
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.Google Scholar
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.Google Scholar