Home Owners' Loan Corporation Created, Establishes Racial Appraisal Framework

President Roosevelt signs the Home Owners’ Loan Act, creating the Home Owners’ Loan Corporation (HOLC) as an emergency response to the mortgage crisis of the Great Depression. Between 1933 and 1936, HOLC refinances approximately one million mortgages (one-tenth of all urban homes with mortgages) that are in default, preventing mass foreclosures and stabilizing the housing market. However, the agency simultaneously establishes a racial appraisal framework that institutionalizes discrimination.

HOLC introduces standardized appraisal methods that explicitly factor neighborhood racial composition into property valuations. The agency creates “Residential Security Maps” covering 239 cities, with neighborhoods graded A through D based on perceived mortgage lending risk. Areas with Black residents, immigrants, and working-class populations systematically receive lower grades regardless of housing condition or economic stability. These “redlined” neighborhoods are deemed hazardous for investment.

While recent scholarship shows HOLC itself actually made loans to African Americans in rough proportion to their homeownership rates, the agency’s lasting damage comes from codifying racist appraisal standards that the Federal Housing Administration and private lenders adopt wholesale. HOLC’s appraisal sheets use explicitly racist language, describing Black presence as “infiltration” and treating integration as inherently devaluing. This federal endorsement of discriminatory appraisal practices provides the institutional architecture for decades of housing segregation, creating the template that shapes private lending, FHA insurance, and real estate industry practices well into the 1960s.