Page:The New International Encyclopædia 1st ed. v. 03.djvu/730

* BUILDING ACTS. G48 BUILDING LOANS. by city ordinances, iilthough the construction and sanitation of tenement-houses in New York and other large cities lias become the subject of State legislation. Consnll: Eniden, Line h't-lulhiy to Building (London, 1895) ; Ash, Huildiny Code of 'Sew York City (New York, 1809) ; "New York Tenement House Act," Laics of New York, 1901, chap. 3:U. BUILDING AND LOAN ASSOCIA- TIONS. Private cor])<)ratins designed to fur- nish a safe niean.s for the accumulation of sav- ings, accompanied with an opportunity to secure money at reasonable rates for the jjurpose of building homes. The terra is here used to cover a variety of organizations with similar purposes and methods of business, as mutual loan asso- ciations, homestead aid associations, savings fund and loan associations, cooperative banks, cooper- ative savings and loan associations, building societies, etc. In Great Britain the organizations exist under the latter title, while in Germany they are known as Baugenossenschaften. The first in England was organized in Birmingham in 1781. They became numerous during the Nine- teenth Century, and acts were passed in 1838 . and in 1874 regulating them. The first association of this character in the United States was organized in Frankford, a sub- urb of Philadel])hia, in 1831. under the title of The O.xford Provident Building Association. Many were organized in the decade from 1840 to 1850. which may be considered as the real period of their inception in this country. According to the ninth report of the Commission of Labor, issued in 1893, there were at that time 5838 building societies in the United States, of which 5598 were local and 240 were national organiza- tions. Pennsylvania led the other States in the number of these organizations, having 1079 ; while Ohio followed with 721. The total amount paid in, plus the profits in all the associations, amounted to .$450,667,594; but 35 of the asso- ciations showed a loss at the close of the fiscal year amounting to $23,332.20. When a man becomes a shareholder in a build- ing and loan association, he pays a certain sum each month until the aggregate amount paid, increa.sed by profits, equals the maturing value of the shai'e, which is usually $200. If a man becomes the possessor of a share and pays $1 a month, it would re(iuire 200 months (16% years) to pay for the stock; in practice this time is very much shortened, as the money paid in is immediately loaned out. and members get the advantage of compound interest on all sums paid in. The capital of the association is thus made up of the savings, and interest upon the savings, of its members, and is increased from moiitli to month and from year to year. Pro- visions are made in all associatbms for the with- drawal of members before the shares mature. On this account, a sharp, before it matures, may be said to liave two values — the holding and the withdrawal values. The former is the actual value at a particular time. The latter is fre- quently much less than the actual value. . associations stipulate the ccmditions under which members may withdraw before their shares ma- ture, and, while these conditions difl'er, they are of such a nature as to discourage severing con- nection with the association. The second purpose of the associations is to en- able people to borrow to build homes. For this purpose provisions similar to the following are made: If a man owns a lot and desires to bor- row $1000 to build a home, he must purchase five shares of stock at $200 each. If the stock sells above par, those borrowing must bid a premium, and the highest bidder receives the loan. He gives a mortgage on the lot and pays in monthly installments, which include principal and inter- est, until the stuck is paid for. The building and loan associations in the Unit- ed States are divided into the national and local associations. These difl'er mainly in the scope of their operations, as the methods of organiza- tion and management of them are practically identical. The local association limits its oiiera- tions to a community, often a county, while the national association makes loans anywhere and sells shares to individuals regardless of resi- dence. Both organizations are under the control of a president and board of directors ; however, the secretary and the treasurer are usually the most important factors in their management. A property committee usually passes judgment on securities before money is loaned. Failures of the associations are due to ineflicient manage- ment and especiall}' to granting loans without adequate securitj'. Five States, New Y'ork, JIassachusetts, New .Jersey. Ohio, and Illinois, require these associations to make annual re- turns, the same as is required of savings banks. In all the other States, no control whatsoever is exercised over them. There can be no doubt that if people would save and place their money at interest in savings banks until an adequate amount had been accu- mulated to enable them to build, it would be much less expensive to secure homes in this way than by purchasing building and loan association stock. The way in which the borrowers in build- ing and loan associations receive interest on all sums paid in bliuj^s them to the real rate of interest they pay. The non-borrowers often re- ceive 10 per cent, interest and over on all sums invested, and the borrowers, as a class, must pay this. Few men of means would think of building from funds received from building and loan asso- ciations. These associations liave an advantage over savings banks in one respect — as the dues uf members must be [laid regularly, there is a con- stant pressure to save. The educative inlluence is its most commendable feature. People are taught to save and become property-owners, and are interested in providing for the future, who otherwise would live a hand-to-mouth struggle for existence. Consult: Rigley, How to Manage Building Associations (1873) ; Dexter, A Treat- ise on Coopcrafire l^arings and Loan Associations (New York, 18S9) ; Thompson. .1 Treatise on Building Associations (2d ed., Chicago, 1899) ; Ninth Annual Report of Commissioner of Labor (Washinglon, 1893). BUILDING LOANS. Loans made to {)er- sons who are owners or lessees of land, to be used by them in defraying the cost of buildings to be erected by them on such land. Such loans are usually made under a contract, which re- cites the nature of the borrower's interest in the land, sets out in detail the character and estimated cost of the •structure to be erected, and contains a promise by the borrower to use the money so obtained exclusively for the build- ing operations mentioned in the contract, and according to its terms. The loan is generally