"Here should be an objective of Government itself, to provide at least as much assistance to the little fellow as it is now giving to the large banks and corporations."--Franklin D. Roosevelt, April 7, 1932
The burgeoning home-mortgage crisis of 2007 bears an eerie resemblance to financial conditions 75 years ago, when FDR realized that only the U.S. government could forestall a wave of home foreclosures by directly helping "the little fellow." Today, homeowners can only hope that something akin to Roosevelt's New Deal answer to the home-loan crisis of the 1930s--direct lending to homeowners--is embraced by policymakers once again.
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FDR's resulting legislation established the Home Owners' Loan Corporation. The HOLC was authorized to issue new loans to replace the existing liens of homeowners in default. Instead of a short-term, interest-only loan, the HOLC loans would be fully amortizing over 15 years, meaning that when the last payment was made, the borrower owed nothing further to the bank and owned the home free of any debt. HOLC was far more patient with borrowers than the banks could have been, and delinquent loans got individualized attention, including debt counseling, family meetings, and budgeting help.
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