Abstract
This paper examines the relief provided by the Home Owners’ Loan Corporation (HOLC), a New Deal program that purchased and refinanced over 1 million distressed residential mortgages. I document that the HOLC paid relatively high prices for its mortgages, most likely in an effort to encourage lender participation and stimulate the housing market. The consequence was that lenders were able to remove poorly performing assets from their balance sheets at attractive prices. While this meant the HOLC’s ability to seek principal reductions was somewhat limited, borrowers still received significant relief through the terms of the HOLC’s more modern and forgiving mortgage contracts.
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