The decision to foreclose was made by corporation personnel home improvement loan —HOlc regional managers, based on reports and recommendations by the corporation’s loan servicers. Foreclosure operations were directed by HOlc regional office legal departments, usually with local attorneys hired on a fee basis to handle local court proceedings.
Of the one million loans made in the initial three-year refinancing period, 200,000—one in five— were foreclosed (or voluntarily transferred to HOlc, 18 percent of the 200,000). Most foreclosures occurred early on: half were made by December 1937 and three-fourths by June 1939. after June 1942, the rate of foreclosure became negligible.
Foreclosure resulted in a property management and sales operation on an unprecedented scale. By June 1937, HOlc had effective control of over 70,000 properties, enough to house over a quarter of a mil-lion people. at the peak in 1938 and 1939, HOlc owned or was in process of acquiring over 103,000 properties.
to avoid depressing local markets, HOlc administrative policymakers decided early on that properties would not be rushed to sale, but also would not be held for speculation. the policy was to sell homes as
soon as a reasonable price could be garnered. this entailed a massive program of property maintenance and rental in the meantime. HOlc’s rental policy also aimed at sensitivity to local markets, and units were sometimes left vacant to avoid depressing local rents. By 1940, in response to congressional pressure, HOlc was selling properties sooner than corporation managers may have otherwise. On total gross sales of $738 million, HOlc lost about $337 million.
contract property manager/brokers were used extensively in the rental and sales operations, under supervision of property management divisions in regional HOlc offices.
By 1943, 10 years after its creation, HOlc was on financially firm ground. its inventory of properties under management and for sale had declined, and its loans were of good quality. the corporation was winding itself down by encouraging borrowers to accelerate payment or to prepay without penalty, but HOlc was not selling its loans.
Pressure to sell the good loans—mostly from the S&l industry—increased. HOlc resisted for a while, arguing to congress that they were liquidating in any event, and hasty sale would prevent HOlc from repaying taxpayers. But by 1948, the HOlc’s long-standing policy of encouraging borrowers to prepay their loans without penalty had been so successful that servicing was not cost-effective in many areas. the decision was made to speed up liquidation— encouragement to prepay was stepped up, and remaining loans were sold in statewide bulk lots. When HOlc closed its doors in 1951, the small profit returned to the treasury—the exact amount dependent on assumptions used to calculate corporation costs—meant the corporation approximately broke even for taxpayers.
Structure and staffing
HOlc’s success depended upon how managers and personnel understood and performed the aspects of the job, how they did the work, and upon how public managers structured and staffed the organization to do the work. they strove for efficiency within the constraint that effectiveness in helping homeowners was primary.
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