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The federal response to home mortgage distress: lessons from the Great Depression

  • David C. Wheelock

This article examines the federal response to mortgage distress during the Great Depression: It documents features of the housing cycle of the 1920s and early 1930s, focusing on the growth of mortgage debt and the subsequent sharp increase in mortgage defaults and foreclosures during the Depression. It summarizes the major federal initiatives to reduce foreclosures and reform mortgage market practices, focusing especially on the activities of the Home Owners' Loan Corporation (HOLC), which acquired and refinanced one million delinquent mortgages between 1933 and 1936. Because the conditions under which the HOLC operated were unusual, the author cautions against drawing strong policy lessons from the HOLC's activities. Nonetheless, similarities between the Great Depression and the recent episode suggest that a review of the historical experience can provide insights about alternative policies to relieve mortgage distress.

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File URL: http://research.stlouisfed.org/publications/review/08/05/Wheelock.pdf
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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2008)
Issue (Month): May ()
Pages: 133-148

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Handle: RePEc:fip:fedlrv:y:2008:i:may:p:133-148:n:v.90no.3,pt.1
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  1. J. E. Morton, 1956. "Urban Mortgage Lending: Comparative Markets and Experience," NBER Books, National Bureau of Economic Research, Inc, number mort56-1, September.
  2. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  3. Yuliya Demyanyk & Otto Van Hemert, 2007. "Understanding the subprime mortgage crisis," Supervisory Policy Analysis Working Papers 2007-05, Federal Reserve Bank of St. Louis.
  4. John M. Quigley, 2006. "Federal credit and insurance programs: housing," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 281-310.
  5. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  6. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  7. C. Lowell Harriss, 1951. "History and Policies of the Home Owners' Loan Corporation," NBER Books, National Bureau of Economic Research, Inc, number harr51-1, September.
  8. Leo Grebler & David M. Blank & Louis Winnick, 1956. "Capital Formation in Residential Real Estate: Trends and Prospects," NBER Books, National Bureau of Economic Research, Inc, number greb56-1, September.
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