The Homeowners Refinancing Act was part of Franklin D. Roosevelt’s New Deal during the Great Depression. It was an Act of Congress that was approved to help people that are about to lose their homes. This act which became in effect on June 13, 1933, offered loans and refinancing mortgage assistance to homeowners in debt or would-be homeowners.

The Act was sponsored by Senate majority leader Joe Robinson of Arkansas, created the Home Owner’s Loan Corporation (HOLC). The purpose of this corporation is to lend money, with low-interests, to families in danger of losing their homes to foreclosure. The corporation aided in making the American dream, the dream of owning a reality. It was a pipe dream at best during that time. Prior to the passage of the Homeowner Refinancing Act, roughly only 40% owned their own homes. The mortgage terms then were very hard to meet, required 35% downpayment, with five to ten years allowed to repay the loan. Additionally, The Great Depression of 1929 made things worse for wishful homeowners.

In 1933, banks were severely affected by the depression, the economic downturn gave them the capability to issue only about 864 mortgages, which is way below compared to the 5800 mortgages in 1928. The President and Congress worked together because of the call of the people for immediate solution. The solution they settled upon was the Homeowners Refinancing Act.

The Home Owners Refinancing Act provided the Home Owner’s Loan Corporation a start-up budget of $200 million and was allowed to issue tax-exempt bonds to the tune of $2 billion. With this huge infusion of cash, the HOLC was able to give better rates to homeowners and prospective homeowners. It was able to provide financing up to 80 percent of a house’s assessed valuation, at the same time offer refinancing for people who were about to lose their homes because they cannot pay the previous loan engagements. The interest rates provided by the HOLC were cut by as low as 5 percent, with repayments broadened to 25 years and insurance became available, by arrangements with the Federal Savings and Loan Insurance Corp and Federal Housing Authority. The enormous results in home financing market forever changed the US mortgage banking industry.