1870 – 1930 was a period of rapid urbanization;
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non-farm residential construction and home mortgage debt became increasingly
important to the nation’s capital formation.
Non-farm residential construction and home mortgage debt were highly localized,
institutionally diverse and unevenly regulated
1920-1950
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Calder Committee (1920) in response to the excess demand for housing that had
developed by end of WWI.
o Private enterprise should be relied on to alleviate the imbalance; this was in
response to the groups of architects, labor organizations and military who wanted
the continuation/expansion of federal housing programs.
o Recognized the inadequacies of the nation’s housing stock and recommended
policies that assists the private market
 Comprehensive statistical record of national building activity
 National clearinghouse for information about residential zoning
regulations and building standards
o Recommended relaxation of strict prohibitions on urban mortgage lending by
nationally chartered commercial banks
o Proposal to establish FHLB system (was shot down)
Housing construction boom (1921 – 1928)
Home mortgage market 1920’s grew more rapidly than the nonfarm housing stuck with
nonfarm residential debt tripling
o Supplied by a diverse set of lenders
 Life insurance companies and mutual savings banks expanded their
mortgage portfolios rapidly
 B&L grew in size and number and spread
o Private mortgage insurance
o Early forms of securitization
o Second mortgages appeared in great numbers (providing borrowers with the
ability to purchase homes with downpayments less than 40-50%.
o Mortgage contracts were short in term and structured as balloon or sinking-fund
loans.
Despite growth and innovation, market remained highly localized, regionally fragmented,
and institutionally immature
Foreclosure crisis in 1930
Hoover’s national housing conference (summer 1931) to provide a complete
examination of the stat of the nation’s housing and mortgage markets
o Produced an 11 volume conference report that serves as a remarkable snapshot
of the state of the US homebuilding and finance
o Identified the mortgage credit system as “the greatest hindrance” to progress
towards the national goal of increasing homeownership
o Identified high interest rates that varied substantially across the country, short
term contracts and the widespread use of second liens.
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Revivied the FHLB (1932)
 Began operating in spring of 1932
 Critiqued: was designed and used only by building and loan associations;
ultimately was incapable of stemming the general mortgage crisis of the
early 1930s.
Enter Roosevelt who promoted certain initiatives (1933 – 1935) that immediately
addressed the mortgage crisis and permanently changed the market’s institutional
structure
o Home Owners Loan Corporation (HOLC) in 1933; a publicly owned entity that
purchased 1 million worth of defaulted home mortgage loans from private lenders
between 1933 – 1936 and refinanced them on a long-term low interest basis
o Federal Savings and Loan (S&L) charters system
o Federal Savings and Loan Insurance Corporation (1935) – more support for the
S&L industry
o Housing Act of 1934; created the FHA and its program to insure long-term, low
down payment, amortized mortgages.
o Federal National Mortgage Association (FNMA) created in 1938 to support a
secondary market for FHA insured loans.