Foreclosure is the legal process that banks use to get back some of the money they loaned when a borrower can’t repay the loan. During the 30s, there were thousands of foreclosures. The word “foreclosure” itself became a rallying cry for political movements.
Here’s what often happened. During the 20s, many farmers borrowed money from banks to buy more land or new machinery. Farmers pledged their assets as security on the loan. So if a farmer couldn’t make the payments on a loan for land, the bank could take back the asset – the land – and sell it to get back their money. In the 1920s, many loans were written when land values and crop prices were high. After the stock market crash, few people had the money to buy land, and so land values plummeted. When a bank had to foreclose and sell the land, they couldn’t make up the difference. So, banks would take all of the assets pledged to the loan. Families were often thrown off their farms and lost everything.
Harvey Pickrel (left) had two experiences with foreclosure. His father-in-law, Merle, couldn’t pay off his loan, so the bank sold his farm at auction. But Merle was luckier than most. He kept farming – only now he was a renter rather than an owner of the farm. Later in the decade, Harvey got behind on payments for a $400 tractor. In 1939, he came close to being foreclosed upon. But his banker was willing to give him more time, and Harvey was able to pay off the loan later.
And some farmers and townspeople tried to find buyers of their property so they wouldn’t have a foreclosure on their record. That’s how Louise Dougherty and her husband, John, bought their first house.
Written by Bill Ganzel of the Ganzel Group. First written and published in 2003.