Building And Loan Association
( Originally Published 1918 )
These associations, usually incorporated, are established for the purpose of loaning money to their members upon real estate security. They make it their object to enable persons having a lot to borrow money thereon for the purpose of erecting a dwelling, allowing them to repay the money in installments amounting to little more than ordinary monthly rent. When the full amount is paid up the borrower becomes owner of the property.
Interest.—In considering the question of usury in a loan from a building association, payments made by the borrower as dues are not to be considered as interest, as such payments are made in order to acquire an interest in the property of the association and not for the use of money.
Fines imposed for default in payment of dues and interest cannot be collected by foreclosure of a mortgage given to secure payment of an amount borrowed, unless this has been provided for by special agreement.
Liability of Stockholders in most states is governed by statute.
Plan of Operation.—The associations are formed on two plans, called "terminal" and "serial." The terminal associations compel all members to begin payments on the same day. A new member joining after the beginning of the association is thus forced to pay arrearages. This is avoided in serial associations by allowing new members to join at stated intervals, usually six months or a year, without payment of arrearages.
The Advantages of building and loan associations are : That each share, whether borrowed upon or not, has credited it to a pro rate amount of all profits declared. Loans are generally advanced to within 80 per cent of the appraised value of the property. No large salaries are paid. All officers are elected in open meeting. Members may withdraw at any time after the first year, obtaining a fair share of the profits. Loans are invariably secured by first mortgage. Only members may obtain loans. Mortgages may be paid at any time. There are no speculative features, the association buys nothing, the borrowing members making all contracts.
The Membership of the building and loan associations in the United States numbers over 2,800,-000. There are more than 6,000 associations, with total assets amounting to over $1,248,000,000. In Pennsylvania alone, where this kind of mutual benefit association originated, there are 1,710 associations, with a total membership of 510,839, and assets exceeding $233,000,000. Ohio has 649 associations, with a total membership of 524,316, with assets exceeding $224,000,000. New Jersey ranks next, having 643 associations with a total membership of over 241,487, and assets exceeding $118,000,000.
About 70 per cent of the membership of these associations is composed of wage-receivers, and the remaining 30 per cent consists of agents, bankers, brokers, corporation officials, government employes, merchants, and other business and professional men and women.