Forbearance by Contract: How Building and Loans Mitigated the Mortgage Crisis of the 1930s

52 Pages Posted: 14 Dec 2015

See all articles by Sebastián Fleitas

Sebastián Fleitas

Universidad de la Republica - Instituto de Economía

Price V. Fishback

University of Arizona; National Bureau of Economic Research (NBER)

Kenneth Snowden

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics; National Bureau of Economic Research (NBER)

Date Written: December 2015

Abstract

During the Great Depression, Building and Loans (B&Ls), the leading home lenders, had a structure that mitigated the crisis. Borrowers were owners of the B&L and dissolution of the institution required a two-thirds majority vote. Using panel data from New Jersey in the 1930s, we find that this voting rule delayed dissolution by about one year. The year delay allowed one-fourth of the borrowers in the at-risk B&L to pay off their loans, but nonborrowers lost share value. The net loss was roughly -0.67 percent of the value of all New Jersey B&L assets in the mid-1930s.

Suggested Citation

Fleitas, Sebastián and Fishback, Price V. and Snowden, Kenneth, Forbearance by Contract: How Building and Loans Mitigated the Mortgage Crisis of the 1930s (December 2015). NBER Working Paper No. w21786, Available at SSRN: https://ssrn.com/abstract=2703191

Sebastián Fleitas (Contact Author)

Universidad de la Republica - Instituto de Economía ( email )

Uruguay

Price V. Fishback

University of Arizona ( email )

Tucson, AZ 85721-0108
United States
520-621-4421 (Phone)
520-621-8450 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kenneth Snowden

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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