Financial History Issue 113 (Spring 2015) | Page 38

Financing the American Dream continued from page 11 payments spread over 15 years and no balloon payment when the loan matured, the homeowner was spared the pain of losing his home to foreclosure. According to Fishback, Rose and Snowden, “Although long-term amortized loans were offered in some corners of the housing finance market before 1930, in just a few short years the HOLC gave its borrowers access to these loans, part of a wholesale change in lending practices across the country.” The B&Ls that survived the Depression discontinued share accumulation plans in favor of direct reduction loans that reduced the principal owed every time a borrower made a payment. These surviving firms became the basis for the modern savings and loan industry. In addition to the HOLC, which was designed to be a temporary measure of relief, the federal government established the Federal Housing Administration (FHA) to provide mortgage insurance. The FHA adopted the HOLC’s fixed-rate, long-term, fully-amortized mortgages and expanded the term to 20 years. In 1948, the FHA, in an attempt to stimulate construction, increased the maximum term to 30 years and ushered in the us HوH