The Home Owners’ Loan Corporation, or HOLC, was established as an interim mortgage bailout program during the New Deal initiatives of the Great Depression, so the company eventually liquidated its assets as the economy stabilized. By the mid-1940s, the company was under pressure to sell its mortgage holdings back to private lenders, and by 1951, all mortgages were either paid off, sold or foreclosed.
President Franklin D. Roosevelt approved the Home Owners’ Loan Corporation Act in 1933 to provide sustainable loan terms to American families who might have otherwise lost their homes. At the time, many private mortgage lenders offered a five- to 10-year installment plan, and after that period, borrowers had to come up with the remaining balance or apply for refinancing. The economic crash caused financial collapse for homeowners and banking institutions, motivating the government to create a dual-bailout system by paying bonds to lenders in exchange for mortgage contracts.
HOLC offered loan insurance and a 5 percent interest rate while establishing the contemporary system of 25-year mortgage repayment. While HOLC was forced to foreclose on 20 percent of mortgaged homes, the company typically allowed up to a year of delinquency and helped more than 800,000 homeowners retain their property. By 1943, approximately 462,500 loans were paid down to 70 percent or less of the initial balance, and Congress ordered HOLC to stop accepting new loans and begin liquidation. The liquidation lasted several years as HOLC took measures to avoid direct sales that would put financial pressure on homeowners and leave the government holding only the most unprofitable loans.