Definition
Building and Loan Associations, commonly referred to as Savings and Loan Associations (S&Ls), are financial institutions primarily focused on accepting savings deposits and making loans for residential mortgage purposes. These associations originally formed to help individuals save money and accrue funds to purchase homes. They offer various types of savings accounts, such as passbook savings and certificate of deposits (CDs), and use these deposits to fund mortgage lending.
Examples
- Washington Federal (WaFd Bank): An example of a contemporary Savings and Loan Association that offers both personal and business savings accounts, alongside mortgage and loan products.
- Third Federal Savings & Loan: A financial institution known for offering a wide range of savings accounts and mortgage products aimed at residential properties.
Frequently Asked Questions (FAQs)
What is the primary purpose of a Building and Loan Association?
The primary purpose of a Building and Loan Association is to accept savings deposits from customers and use those funds to provide mortgage loans. These institutions cater mainly to residential homebuyers.
How do Building and Loan Associations differ from traditional banks?
Building and Loan Associations focus primarily on residential mortgages and savings accounts, while traditional banks offer a wider range of services, including checking accounts, commercial loans, and investment services.
Are Building and Loan Associations still relevant today?
Yes, Building and Loan Associations still play a significant role in the financial sector, especially in providing mortgage loans and savings products to consumers.
What are the benefits of using a Building and Loan Association for a mortgage?
Benefits may include competitive mortgage rates, specialized lending services, and a focus on customer savings and loan products tailored to homebuyers.
How are Building and Loan Associations regulated?
In the United States, these institutions are regulated by the Office of the Comptroller of the Currency (OCC) and must meet specific requirements to ensure their financial stability and consumer protection.
Related Terms
- Mutual Savings Bank: A financial institution owned by its depositors and that provides various savings and loan services.
- Credit Union: A cooperative financial institution that offers various savings accounts and loans to its members.
- Federal Deposit Insurance Corporation (FDIC): An independent federal agency that insures deposits in banks and Savings and Loan Associations.
- Residential Mortgage Loan: A loan that is secured by a mortgage on property that is primarily used for personal, family, or household purposes.
Online Resources
- Federal Deposit Insurance Corporation (FDIC): Provides information on deposit insurance and regulated institutions.
- Consumer Financial Protection Bureau (CFPB): Offers resources for understanding mortgage options and financial products.
- Office of the Comptroller of the Currency (OCC): Regulates and ensures the stability of nationally chartered banks and Savings and Loan Associations.
References
- “Federal Deposit Insurance Corporation – Savings and Loan Associations.” FDIC, https://www.fdic.gov/
- “Consumer Financial Protection Bureau – Mortgages.” CFPB, https://www.consumerfinance.gov/
- “Office of the Comptroller of the Currency – About OCC.” OCC, https://www.occ.gov/
Suggested Books for Further Studies
- “The Oxford Handbook of the American Savings and Loan Industry” by David Bain & Eric Helleiner: This book provides an in-depth look at the history, regulation, and impact of the Savings and Loan industry.
- “Mortgage Banking, Basics & Beyond” by Martin L. Biles: Offers a comprehensive guide to the mortgage banking industry, including the role of Savings and Loan Associations.
- “The Law of Financial Institutions” by Richard Scott Carnell, Jonathan R. Macey, & Geoffrey P. Miller: Covers the legal framework governing different types of financial institutions, including Savings and Loan Associations.
Real Estate Basics: Building and Loan Associations Fundamentals Quiz
### What is the primary goal of a Building and Loan Association?
- [ ] Providing short-term business loans.
- [ ] Issuing credit cards.
- [x] Offering savings accounts and residential mortgages.
- [ ] Investing in stock markets.
> **Explanation:** The primary goal of a Building and Loan Association is to offer savings accounts and residential mortgage loans.
### How do Building and Loan Associations originate most of their mortgage loans?
- [x] Using customer savings deposits.
- [ ] Borrowing from other banks.
- [ ] Selling stocks.
- [ ] Federal funds.
> **Explanation:** These associations primarily use customer savings deposits to fund mortgage loans.
### What regulatory body oversees Building and Loan Associations in the United States?
- [x] Office of the Comptroller of the Currency (OCC)
- [ ] Federal Reserve
- [ ] Securities and Exchange Commission (SEC)
- [ ] Department of the Treasury
> **Explanation:** The OCC regulates and ensures the stability of nationally chartered banks and Savings and Loan Associations.
### What is another name for a Building and Loan Association?
- [x] Savings and Loan Association
- [ ] Investment Bank
- [ ] Commercial Bank
- [ ] Credit Union
> **Explanation:** Building and Loan Associations are also commonly known as Savings and Loan Associations.
### Which type of property are Building and Loan Associations primarily concerned with?
- [x] Residential properties
- [ ] Commercial properties
- [ ] Agricultural properties
- [ ] Industrial properties
> **Explanation:** These associations primarily deal with residential properties, offering home loans and related services.
### What is a key benefit of obtaining a mortgage from a Building and Loan Association?
- [x] Competitive mortgage rates
- [ ] Lower insurance premiums
- [ ] Higher interest savings accounts
- [ ] Free financial consulting
> **Explanation:** One of the key benefits is competitive mortgage rates tailored to homebuyers.
### When did Building and Loan Associations first become prominent in the U.S.?
- [x] Late 19th Century
- [ ] Early 17th Century
- [ ] Mid 20th Century
- [ ] 21st Century
> **Explanation:** Building and Loan Associations became prominent in the United States in the late 19th century.
### What type of institution is similar to a Building and Loan Association but is cooperatively owned by its members?
- [ ] Commercial Bank
- [ ] Federal Credit Union
- [ ] Investment Bank
- [x] Credit Union
> **Explanation:** Credit Unions are cooperatively owned by their members and offer similar savings and loan services.
### What is one of the key differences between a traditional bank and a Building and Loan Association?
- [ ] Traditional banks do not provide loans.
- [ ] Traditional banks only provide commercial services.
- [x] Building and Loan Associations focus mainly on residential mortgages and savings accounts.
- [ ] Building and Loan Associations do not accept deposits.
> **Explanation:** Building and Loan Associations primarily focus on residential mortgages and savings accounts, unlike traditional banks which offer a broader range of services.
### Do Building and Loan Associations participate in commercial real estate lending?
- [ ] Frequently, they primarily focus on commercial real estate.
- [x] Rarely, they mainly specialize in residential mortgages.
- [ ] Often, their main focus is on commercial loans.
- [ ] They do not provide any kind of loans.
> **Explanation:** Building and Loan Associations mainly specialize in residential mortgages and rarely, if ever, venture into commercial real estate lending.
