Wh👍at Is a Building an🅷d Loan Association (B&L)?

Building and loan associations (B&Ls) were mutually held financial institutions (FIs) that greatly increased the accessibility of 澳洲幸运5开奖号码历史查询:home loans from the 1830s to the 1930s. Guided by a spirit of "mutual self-help," participants pooled their money—generally within small, regional B&Ls—and in turn became eligible to receive 澳洲幸运5开奖号码历史查询:dividends and take out a mortgage. 

From the mid-1930s onward, B&Ls began morphing into 澳洲幸运5开奖号码历史查询:federal savings and loan (S&L) institutions, which had a charter from the U.S. government and reli🐷ed on federal deposit insurance.

Understanding a Building anꦍd Loan Association (B&L)

A B&L, also known as a thrift, gets its start when a pool of individuals agree to pay a membership fee and subscribe to a certain number of shares that have a predetermined maturity value. The members are then obliged to pay a certain amount each month until the maturity value of their shares had been reac🦄hed.

If an individual took out five shares, each with a maturity value of $600, they would be able to take out a loan for up to $3,000. Because of limitations in the amount of capital these associations held, members would generally have to take turns—or, more specifically, outbid the other members—in order to take out a h🅷ome loan. If they still owed money on the shares, they would continu𝄹e to pay them off until the note was canceled.

The first B&Ls were structured as "terminating," or closed-ended plans that expired when all of the loans it made were repaid. However, by the mid-1800s, so-called "serial plans" came into existence, which periodically issued new shares that had their own termination date. Eventually, the💛se 🎃gave way to "permanent plans," where members could join whenever they wished.

History oꦫf Building and Loan Associations (B&Ls)

B&Ls were influenced by the British 澳洲幸运5开奖号码历史查询:building societies that became prevalent in the United Kingdom during the 澳洲幸运5开奖号码历史查询:Industrial Revolution. The large down payments and short repayment periods—often five years or less—required by 澳洲幸运5开奖号码历史查询:depository banks proved a significant hurdle to middle-class homeownership. The building societies circumvented the trad💫itional banking system by allowing members to buy shares and borrow against their value when they purchased a home.

Two English-born factory🍒 workers formed the first American B&L in Philadelphia in 1831. Soon these local cooperatives would spring up throughout the Northeast and Mid-Atlantic. By the 1870s, B&Ls had popped up in the majority of states.

The growth of B&Ls was fueled by the rising income of skilled laborers around this time. While they typically couldn't afford the hefty down payment needed for a bank loan, their increased earnings made it possible to buy 澳洲幸运5开奖号码历史查询:real estate through this alternate source of funds.

The use of B&Ls reached its apex in 1927 when 12,804 of them were scattered across the country, serv▨ing more than 11 million members. Within a decade, however, that influence would be greatly diminished.

Building and Loans (B&Ls) vs🦋. Sa😼vings and Loans (S&Ls)

In response to the 澳洲幸运5开奖号码历史查询:Great Depression and the resulting deterioration of B&L 澳洲幸运5开奖号码历史查询:balance sheets, the government began offering charters♈ for a new type of lender: federal S&L institutions. Wওhile the industry was reluctant to accept federal regulation at first, the benefits eventually became apparent.

For one, cash-strapped S&Ls could borrow from the Federal Home Loan Bank Board, established in 1932 by 澳洲幸运5开奖号码历史查询:the Federal Home Loan Bank Act, in order to shore up their capital. In addition, the Federal Savings and Loan Insurance Corpo💫ration (FS🥂LIC) aimed to stabilize thrifts by guaranteeing deposits made by its members.