Editing Home Owners' Loan Corporation

{{short description|American government-sponsored corporation}}
{{More footnotes|date=February 2015}}
{{Infobox company
|name = Home Owners' Loan Corporation
|image = Federal Home Loan Bank Board Building 1.jpg
|image_size = 
|image_alt = 
|image_caption = The [[Federal Home Loan Bank Board Building|former federal headquarters]] of the Home Owners' Loan Corporation<ref name="Grimberg">{{cite web|url=http://www.grimberg.com/leed/holc.cfm |archive-url=https://archive.today/20130124232216/http://www.grimberg.com/leed/holc.cfm |url-status=dead |archive-date=January 24, 2013 |title=Renovation of the Home Owners Loan Corporation (HOLC) Building |publisher=John C. Grimberg Company |access-date=December 23, 2010 }}</ref>
|type = Government-sponsored corporation
|traded_as = 
|company_slogan = 
|foundation = {{Start date|1933|06|13}}
|dissolved = {{End date|1954|02|04}}
|location = [[Washington, D.C.]]
|key_people = 
|num_employees = 20,000 (1935) and declined to less than 500 (1950)
|services = [[Credit (finance)|Credit]] services
|homepage = 
|industry = [[Financial services]]
|products =   
|revenue    = 
|operating_income =
|net_income = 
|assets     = 
|equity     = 
}}

The '''Home Owners' Loan Corporation''' ('''HOLC''') was a government-sponsored corporation created as part of the [[New Deal]].  The corporation was established in 1933 by the [[Homeowners Refinancing Act|Home Owners' Loan Corporation Act]] under the leadership of President [[Franklin D. Roosevelt]].<ref>[https://fraser.stlouisfed.org/title/70/item/23532 First Annual Report of the Federal Home Loan Bank Board]</ref> Its purpose was to [[Refinancing|refinance]] home mortgages currently in default to prevent [[foreclosure]],  as well as to expand home buying opportunities.

The HOLC created a housing appraisal system of color-coded maps that categorized the riskiness of lending to households in different neighborhoods. While the maps relied on various housing and economic measures, they also used demographic information (such as the racial, ethnic, and immigrant composition of neighborhoods) to categorize creditworthiness.<ref name=":1" /> Since [[Crabgrass Frontier|Kenneth T. Jackson's work]] in the 1980s, a number of studies have found that HOLC was a key promoter of [[redlining]] and a driver of [[Residential segregation in the United States|racial residential segregation]] and [[Racial inequality in the United States|racial wealth inequality]] in the United States.<ref name=":0">{{Cite journal|last=Faber|first=Jacob W.|date=2020-08-21|title=We Built This: Consequences of New Deal Era Intervention in America's Racial Geography|journal=American Sociological Review|volume=85|issue=5|language=en-US|pages=739–775|doi=10.1177/0003122420948464|issn=0003-1224|doi-access=free}}</ref><ref>{{Cite journal|last1=Aaronson|first1=Daniel|last2=Hartley|first2=Daniel|last3=Mazumder|first3=Bhashkar|date=2021|title=The Effects of the 1930s HOLC "Redlining" Maps|url=https://www.aeaweb.org/articles?id=10.1257/pol.20190414|journal=American Economic Journal: Economic Policy|language=en|volume=13|issue=4|pages=355–392|doi=10.1257/pol.20190414|hdl=10419/200568|s2cid=204505153|issn=1945-7731}}</ref><ref name=":1">{{Cite journal |last1=Aaronson |first1=Daniel |last2=Hartley |first2=Daniel |last3=Mazumder |first3=Bhashkar |last4=Stinson |first4=Martha |date=2022 |title=The Long-Run Effects of the 1930s Redlining Maps on Children |url=https://www.aeaweb.org/articles?id=10.1257/jel.20221702&from=f |journal=Journal of Economic Literature |language=en |doi=10.1257/jel |issn=0022-0515}}</ref>

==Organizational history==
HOLC was established as an emergency agency under [[Federal Home Loan Bank Board]] (FHLBB) supervision by the [[Home Owners' Loan Act]] of 1933, June 13, 1933.<ref name=FHLBB-records>{{Cite news|url=https://www.archives.gov/research/guide-fed-records/groups/195.html#195.3|title=Records of the Federal Home Loan Bank Board [FHLBB]|date=2016-08-15|work=National Archives|access-date=2017-10-24|language=en}}</ref> It was transferred with FHLBB and its components to the [[Federal Loan Agency]] by [[Reorganization Act of 1939|Reorganization Plan No. I of 1939]], effective July 1, 1939. It was assigned with other components of abolished FHLBB to the [[Federal Home Loan Bank Administration]] (FHLBA), [[National Housing Agency]], by EO 9070, February 24, 1942. Its board of directors was abolished by Reorganization Plan No. 3 of 1947, effective July 27, 1947, and HOLC was assigned, for purposes of liquidation, to the Home Loan Bank Board within the [[Housing and Home Finance Agency]]. It was terminated by order of Home Loan Bank Board Secretary, effective February 3, 1954, pursuant to an act of June 30, 1953 ({{USStat|67|121}}).

==Operations==
The HOLC issued bonds and then used the bonds to purchase mortgage loans from lenders.  The loans purchased were for homeowners who were having problems making the payments on their mortgage loans "through no fault of their own".  The HOLC refinanced the loans for the borrowers.  Many lenders gained from selling the loans because the HOLC bought the loans by offering a value of bonds equal to the amount of principal owed by the borrower, unpaid interest on the loan, and taxes that the lender paid on the property.  This value of the loan was the amount of the loan that was refinanced for the borrower.  The borrower gained because they were offered a loan with a longer time frame at a lower interest rate.  It was rare to reduce the amount of principal owed. The Government gave $200 million dollars to the people and it will help the people to be able to pay off the mortgage and they won't lose their house.

==Loan repayments and foreclosure policies==
Between 1933 and 1935, the HOLC made slightly more than one million loans.  At that point it stopped making new loans and then focused on the repayments of the loans.  The typical borrower whose loan was refinanced by the HOLC was more than 2 years behind on payments of the loan and more than 2 years behind on making tax payments on the property.  The HOLC eventually foreclosed on 20 percent of the loans that it refinanced.  It tended to wait until the borrower had failed to make payments on the loan for more than a year before it foreclosed on the loan.  When the HOLC foreclosed, it typically refurbished the home.  In many cases it rented out the home until it could be resold.  The HOLC tried to avoid selling too many homes quickly to avoid having negative effects on housing prices. Ultimately, more than 800,000 people repaid their HOLC loans, and many repaid them on time.<ref name="Harriss">
{{cite journal
|last1 = Harriss
|first1 = C. Lowell
|title = History and Policies of the Home Owners' Loan Corporation
|journal = NBER
|publisher = National Bureau of Economic Research
|year = 1951
|edition= 1st
|page = 1
|url = https://www.nber.org/books/harr51-1
|location = New York 
}}</ref><ref name="Fishback, Rose, and Snowden">
{{cite book
|last1 = Fishback
|first1 = Price
|last2 = Rose
|first2 = Jonathan
|last3 = Snowden
|first3 = Kenneth
|title = Well Worth Saving: How the New Deal Safeguarded Home Ownership 
|publisher = University of Chicago Press
|date = October 2013
|edition= 1st
|isbn = 978-0226082448
|location = Chicago 
}}</ref>   
HOLC officially ceased operations in 1951, when its last assets were sold to private lenders.  HOLC was only applicable to nonfarm homes, worth less than $20,000. HOLC also assisted mortgage lenders by refinancing problematic loans and increasing the institutions' liquidity. When its last assets were sold in 1951, HOLC turned a small profit.<ref>[http://bellwether.metapress.com/content/h128812346540080/ Crossney and Bartelt 2005 Urban Geography article] {{webarchive|url=https://archive.today/20120709153741/http://bellwether.metapress.com/content/h128812346540080/ |date=2012-07-09 }}</ref><ref>{{Cite web |url=http://www.mi.vt.edu/data/files/hpd%20vol.16%20issues%203%20and%204/articles/hpd6(3,4)%20crossney.pdf |title=Crossney and Bartelt 2006 Housing Policy Debate |access-date=2008-04-12 |archive-url=https://web.archive.org/web/20080414023817/http://www.mi.vt.edu/data/files/hpd%20vol.16%20issues%203%20and%204/articles/hpd6(3,4)%20crossney.pdf |archive-date=2008-04-14 |url-status=dead }}</ref>

==Redlining==
[[File:Brooklyn,_New_York_HOLC_Redlining_Map.jpg|thumb|Brooklyn, [[New York City|NY]] HOLC [[redlining]] Map|328x328px]]HOLC is often cited as the originator of mortgage [[redlining]].<ref>{{Cite news|title=In U.S. Cities, The Health Effects Of Past Housing Discrimination Are Plain To See|url=https://www.npr.org/sections/health-shots/2020/11/19/911909187/in-u-s-cities-the-health-effects-of-past-housing-discrimination-are-plain-to-see|access-date=2020-12-13|website=NPR.org|language=en}}</ref><ref>{{Cite web|date=2020-09-02|title=Racist housing policies have created some oppressively hot neighborhoods|url=https://www.nationalgeographic.com/science/2020/09/racist-housing-policies-created-some-oppressively-hot-neighborhoods/|archive-url=https://web.archive.org/web/20200903005409/https://www.nationalgeographic.com/science/2020/09/racist-housing-policies-created-some-oppressively-hot-neighborhoods/|url-status=dead|archive-date=September 3, 2020|access-date=2020-12-13|website=Science|language=en}}</ref>[https://dsl.richmond.edu/panorama/redlining HOLC maps]<ref>{{Citation|last1=Connolly|first1=N. D. B.|title=Mapping inequality|date=2018-01-19|work=The Routledge Companion to Spatial History|pages=502–524|publisher=Routledge|isbn=9781315099781|last2=Winling|first2=LaDale|last3=Nelson|first3=Robert K.|last4=Marciano|first4=Richard|doi=10.4324/9781315099781-29}}</ref> generated during the 1930s to assess credit-worthiness were color-coded by mortgage security risk, with majority African-American areas disproportionately likely to be marked in red indicating designation as "hazardous."<ref>{{cite web |last1=Nelson |first1=Robert K. |title=Mapping Inequality |url=https://dsl.richmond.edu/panorama/redlining/#loc=12/41.7665/-72.6830&opacity=0.8&text=about&city=east-hartford-ct |website=Mapping Inequality |publisher=University of Richmond}}</ref> These maps were made as part of HOLC's City Survey project that ran from late 1935 until 1940.<ref>{{Cite journal|last=Michney|first=Todd M|date=November 2022|title= How the City Survey's Redlining Maps Were Made: A Closer Look at HOLC's Mortgagee Rehabilitation Division|url=https://doi.org/10.1177/15385132211013361|journal=Journal of Planning History|volume=21 |issue=4 |pages=316–344 |doi=10.1177/15385132211013361|s2cid=236560695}}</ref> Perhaps ironically, HOLC had issued refinancing loans to African American homeowners in its initial "rescue" phase before it started making its redlining maps.<ref>{{Cite journal|last1=Michney|first1=Todd M|last2=Winling |first2=LaDale|date=January 2020|title=New Perspectives on New Deal Housing Policy: Explicating and Mapping HOLC Loans to African Americans|url=https://journals.sagepub.com/doi/full/10.1177/0096144218819429|journal=Journal of Urban History|volume=46|issue=1|pages=150–180|doi=10.1177/0096144218819429|s2cid=149628183|issn=0096-1442}}</ref> The racist attitudes and language found in HOLC appraisal sheets and Residential Security Maps created by the HOLC gave federal support to real-estate practices that helped segregate American housing throughout the 20th century.<ref>{{cite book |last1=Freund |first1=David M.P. |title= Colored Property: State Policy and White Racial Politics in Suburban America |publisher=University of Chicago Press |location=Chicago |year=2007 |isbn=978-0-226-26276-5}}</ref>

The effects of redlining, as noted in HOLC maps, endures to the present time. A study released in 2018 found that 74 percent of neighborhoods that HOLC graded as high-risk or "hazardous" are low-to-moderate income neighborhoods today, while 64 percent of the neighborhoods graded "hazardous" are minority neighborhoods today.<ref>{{cite web |last1=Mitchell |first1=Bruce |title=HOLC "redlining" maps: The persistent structure of segregation and economic inequality |url=https://ncrc.org/holc/ |website=National Community Reinvestment Coalition|date=2018-03-20 }}</ref> "It's as if some of these places have been trapped in the past, locking neighborhoods into concentrated poverty," said Jason Richardson, director of research at the NCRC, a consumer advocacy group.<ref>{{cite news |last1=Jan |first1=Tracy |title=Redlining was banned 50 years ago. It's still hurting minorities today. |url=https://www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/ |newspaper=Washington Post}}</ref>
[[File:Oshkosh,_Wisconsin_HOLC_Redlining_Map.jpg|thumb|Oshkosh, [[Wisconsin|WI]]  HOLC redlining Map|287x287px]]
A 2020 study in the ''American Sociological Review'' found that HOLC led to substantial and persistent increases in racial residential segregation.<ref name=":0" /> A 2021 study in the ''American Economic Journal'' found that areas classified as high-risk on HOLC maps became increasingly segregated by race during the next 30–35 years, and suffered long-run declines in home ownership, house values, and credit scores.<ref>{{Cite journal|last1=Aaronson|first1=Daniel|last2=Hartley|first2=Daniel|last3=Mazumder|first3=Bhashkar|date=2021|title=The Effects of the 1930s HOLC "Redlining" Maps|url=https://www.aeaweb.org/articles?id=10.1257/pol.20190414|journal=American Economic Journal: Economic Policy|language=en|volume=13|issue=4|pages=355–392|doi=10.1257/pol.20190414|hdl=10419/200568|s2cid=204505153|issn=1945-7731}}</ref> HOLC's evaluation of neighborhoods in the 1930s correlates with "health, employment, education, and income measures" in these same neighborhoods decades later.<ref>{{cite journal |last1=White |first1=Anna G. |last2=Guikema |first2=Seth D. |last3=Logan |first3=Tom M. |title=Urban population characteristics and their correlation with historic discriminatory housing practices |journal=Applied Geography |date=July 2021 |volume=132 |pages=102445 |doi=10.1016/j.apgeog.2021.102445|s2cid=236261789 }}</ref>

Since the rediscovery of HOLC documents in the 1980s, there has been considerable debate about the exact role of HOLC and its maps in redlining: even as the neighborhood evaluations largely align with race and with ongoing disparities, it is unclear exactly how much of an effect HOLC itself had.<ref>{{cite journal |last1=Markley |first1=Scott |title=Federal ‘redlining’ maps: A critical reappraisal |journal=Urban Studies |date=July 7, 2023 |volume=61 |issue=2 |pages=195-213 |doi=10.1177/00420980231182336 |url=https://journals.sagepub.com/doi/full/10.1177/00420980231182336}}</ref> According to a paper by economic historian [[Price V. Fishback]] and three co-authors, issued in 2021,<ref name="NBER29244">{{Cite journal|url=https://www.nber.org/papers/w29244|doi = 10.3386/w29244|title = New Evidence on Redlining by Federal Housing Programs in the 1930s|year = 2021|last1 = Fishback|first1 = Price|last2 = Rose|first2 = Jonathan|last3 = Snowden|first3 = Kenneth|last4 = Storrs|first4 = Thomas|hdl = 10419/251011|s2cid = 239123963|journal=Journal of Urban Economics}}</ref> the blame placed on HOLC is misplaced. Far from "ironically" issuing a few loans to African-Americans in an "initial phase" and then becoming a major promoter of redlining, HOLC actually refinanced mortgage loans for African-Americans in near proportion to the share of African-American homeowners. The pattern of loans had basically no relationship to the "redlining" maps because the program to create the maps did not even begin until after 90% of HOLC refinancing agreements had already been concluded.

However, the HOLC shared their maps with the other major New Deal housing program, the [[Federal Housing Administration]]. But, the FHA already had its own discriminatory program of systematically rating urban neighborhoods and the HOLC used the FHA's discriminatory guidelines for its maps.<ref>{{cite book |title=Underwriting Manual: Underwriting and Valuation Procedure Under Title II of the National Housing Act With Revisions to February 1938 |title-link=National Housing Act of 1934 |publisher=[[Federal Housing Administration]] |location=Washington, D.C. |chapter=Part II, Section 9, Rating of Location |quote=Recommended restrictions should include provision for the following: Prohibition of the occupancy of properties except by the race for which they are intended [...] Schools should be appropriate to the needs of the new community and they should not be attended in large numbers by inharmonious racial groups |chapter-url=http://wbhsi.net/~wendyplotkin/DeedsWeb/fha38.html |access-date=2023-06-07 |archive-date=2012-12-20 |archive-url=https://archive.today/20121220101009/http://wbhsi.net/~wendyplotkin/DeedsWeb/fha38.html |url-status=dead }}</ref>

As for private lenders, though [[Kenneth T. Jackson]]'s claim that they relied on the HOLC's maps to implement their own discriminatory practices has been widely repeated, the evidence is weak that private lenders had access to the maps.<ref name="NBER29244"/>{{rp|page=10-11|quote=Jackson (1985, p. 203) has stated that private lenders had access to the HOLC’s maps, and many scholars have repeated this statement. But Hillier (2003b) provides many reasons to seriously doubt this claim...Michney (2021) provides evidence from internal HOLC correspondence about how it refrained from sharing completed maps with its consultants. The finding aid for the HOLC City Surveys at the National Archives states that “none of these maps have ever been given to private interests.”}} By contrast, it is well documented that private lenders understood which neighborhoods the FHA favored and disfavored; suburban greenfield developers often explicitly advertised the FHA-insurability of their properties in ads for prospective buyers. Redlining was an established practice in the real estate industry before the federal government had any significant role in it; to the extent that any federal agency is to blame for perpetuating the practice, it is the Federal Housing Administration and not the Home Owners' Loan Corporation.<ref>{{Cite web|url=https://www.governing.com/context/redlining-didnt-happen-quite-the-way-we-thought-it-did|title = Redlining Didn't Happen Quite the Way We Thought It Did|date = 21 September 2021}}</ref><ref name="NBER29244" />

==See also==
* [[Federal Home Loan Banks]]

==Footnotes==
{{Reflist|30em}}

==Further reading==
* Brennana, John F. "The Impact of Depression-era Homeowners' Loan Corporation Lending in Greater Cleveland, Ohio," ''Urban Geography,'' (2015) 36#1  pp: 1-28.  
* Price Fishback, Jonathan Rose, and Kenneth Snowden, ''Well Worth Saving: How the New Deal Safeguarded Home Ownership.'' Chicago: University of Chicago Press, 2013.

==External links==
*[https://www.archives.gov/research/guide-fed-records/groups/195.html#195.3 Records of the Home Owners' Loan Corporation] from the [[National Archives and Records Administration]]
*[http://www.urbanoasis.org/projects/digital-holc-maps/ Security maps of the Home Owners' Loan Corporation for several U.S. cities] {{Webarchive|url=https://web.archive.org/web/20150331002139/http://www.urbanoasis.org/projects/digital-holc-maps |date=2015-03-31 }}
*[https://dsl.richmond.edu/panorama/redlining/ Mapping Inequality: Redlining in New Deal America]
*[https://fraser.stlouisfed.org/title/70 Annual reports of the Home Owners' Loan Corporation from 1933 through 1952], included in reports of the Federal Home Loan Bank Board

{{US housing by state}}
{{authority control}}

[[Category:1933 establishments in the United States]]
[[Category:New Deal agencies]]
[[Category:Corporations chartered by the United States Congress]]
[[Category:Mortgage industry companies of the United States]]