Home Owners’ Loan Corporation (HOLC)

What Is the Home Owners’ Loan Corporation?

The Home Owners’ Loan Corporation (HOLC) was a temporary federal agency created during the Great Depression to stem a wave of home foreclosures. Congress established it in the Home Owners’ Loan Act of June 13, 1933, under the supervision of the Federal Home Loan Bank Board.

Economic historians writing for the National Bureau of Economic Research (NBER) report that roughly 40% of home borrowers had fallen behind on payments, and many lenders were unable to make new loans.

How It Worked

The HOLC bought troubled mortgages from lenders, clearing bad assets off their books. It then refinanced the borrowers into new loans with:

• 15-year terms, repaid in regular installments of principal and interest
• 5% interest, better terms than the regular market offered at the time

When it finished lending in June 1936, the HOLC had bought more than one million loans and held roughly a tenth of all U.S. nonfarm mortgages, the NBER researchers report. It spent years winding down that portfolio. A 1953 act ordered its dissolution, and it was formally terminated effective February 3, 1954, according to the National Archives.

The HOLC maps

Many refinanced borrowers struggled to repay. To understand local risk, the HOLC began a City Survey program in September 1935 and, over the next five years, produced “residential security” maps for more than 200 cities. Each neighborhood received a grade from A (green, lowest perceived risk) through B (blue) and C (yellow) to D (red, highest perceived risk).

Race shaped the grades, along with income and housing quality. In the NBER study’s sample of nine large Northern cities, more than 95% of Black homeowners lived in D-rated areas, although most residents of red areas were white.

HOLC vs. FHA

The HOLC is often blamed for redlining, but the record is more complicated. The NBER researchers note that the HOLC began its surveys after it had already refinanced about 90% of its loans, so the maps did not guide its own lending. It made many loans in areas later rated D.

The Federal Housing Administration, created in 1934, ran its own block-level property surveys. Federal Reserve historians describe the FHA as the architect of federally sponsored redlining from 1934 until the 1960s, through practices such as recommending racially restrictive covenants.

Why It Matters Today

A nearly complete set of HOLC maps survived in the National Archives and was digitized by the University of Richmond’s Mapping Inequality project. Studies using them generally find that lower-graded areas are worse off today on many measures, the NBER researchers note. Scholars still debate how much of that reflects the maps themselves versus the conditions and prejudices they recorded. The guide to redlining, segregation and fair housing covers the broader story.