June 13, 1933 - Home Owners’ Loan Act

Policy Name: Home Owners’ Loan Act of 1933, (H.R. 5240)

Date: Effective June 13, 1933

The Home Owners’ Loan Act of 1933, also known as the Homeowners Refinancing Act, sought to “to refinance home mortgages [and] to extend relief to the owners of homes who occupy them who are unable to amortize their debt elsewhere.” Enacted during the Great Depression, the law established the Home Owners’ Loan Corporation (HOLC). This emergency federal agency provided mortgage assistance to homeowners by lending low-interest money, refinancing mortgages, and originating new mortgages. HOLC issued government insured bonds to local lenders in exchange for delinquent mortgages in their portfolios.

In addition to alleviating the Great Depression, the Home Owners’ Loan Act of 1933 forever changed America’s mortgage market. Before the HOLC, most home loans had three to five years terms, with high interest rates and a closing principal, or “balloon,” payment. HOLC established and normalized a 15-year amortizing loan, which allowed homeowners to pay off their mortgages in monthly installments over many years with the principal reduced over time. This change in mortgage finance would ultimately lead to the modern 30-year fixed-rate mortgage.