British Colonies

In several of the British colonies, legislation similar to that of the mother country has been adopted. In Victoria, Australia, a crisis occurred, in which many building societies suffered severely. In the other Australian colonies the building society movement has made progress, but not to a very large extent. In the Dominion of Canada these societies are sometimes called "loan companies" and are not restricted in their investments to loans on real estates, but about 90% of their advances are on that security. At the close of the year 1904 their liabilities to stockholders exceeded £13,000,000, and to the public £21,000,000. The uncalled capital was £5,000,000. The balance of current loans was £28,000,000, and the property owned by the societies exceeded £7,000,000.

Belgium, Etc

In Belgium, the Government Savings Bank has power to make advances of money to societies of credit or of construction to enable their members to become owners of dwelling-houses. The advance is made to the society at 3 or sometimes at 2½% interest, and the borrower pays 4%. In the great majority of cases the borrower effects an insurance with the savings bank so that his repayments terminate at his death. On the 31st of December 1903 nearly 25,000 advances were in course of repayment. In Germany, building societies are recognized as a form of societies for self-help, but are not many in number, being overshadowed by the great organization of credit societies founded by Schulze-Delitzsch. In other countries there has been no special legislation for building societies similar to that of the United Kingdom, and though societies with the same special object probably exist, separate information with regard to them is not available.

(E. W. B.)

United States

"Building and loan association" is a general term applied in the United States to such institutions as mutual loan associations, homestead aid associations, savings fund and loan associations, co-operative banks, co-operative savings and loan associations, etc. They are private corporations, for the accumulation of savings, and for the loaning of money to build homes. The first association of this kind in the United States of which there is any record was organized at Frankford, a suburb of Philadelphia, on the 3rd of January 1831, under the title of the Oxford Provident Building Association. Their permanent inception took place between 1840 and 1850. The receipts or capital of the building and loan association consists of periodical payments by the members, interest and premiums paid by borrowing members or others, fixed periodical instalments by borrowing members, fines for failures to pay such fixed instalments, forfeitures, fees for transferring stock, entrance fees, and any other revenues or payments, - all of which go into the common treasury.

When the instalment payments and profits of all kinds equal the face value of all the shares issued, the assets, over and above expenses and losses, are apportioned among members, and this apportionment cancels the borrower's debt, while the non-borrower is given the amount of his stock. A man who wishes to borrow, let us say, $1000 for the erection of a house ordinarily takes five shares in an association, each of which, when he has paid all the successive instalments on it, will be worth $200, and he must offer suitable security for his loan, usually the lot on which he is to build. The money is not lent to him at regular rates of interest, as in the case of a savings bank or other financial institution, but is put up at auction usually in open meeting at the time of the payment of dues, and is awarded to the member bidding the highest premium. To secure the $1000 borrowed, the member gives the association a mortgage on his property and pledges his five shares of stock. Some associations, when the demand for money from the shareholders does not exhaust the surplus, lend their funds to persons not shareholders, upon such terms and conditions as may be approved by their directors. Herein lies a danger, for such loans are sometimes made in a speculative way, or on insufficient land value.

Some associations make stock loans, or loans on the shares held by a stockholder without real estate security; these vary in different associations, some applying the same rules as to real estate loans. To cancel his debt the stockholder is constantly paying his monthly or semi-monthly dues, until such time as these payments, plus the accumulation of profits through compound interest, mature the shares at $200 each, when he surrenders his shares, and the debt upon his property is cancelled.

Every member of a building and loan association must be a stockholder, and the amount of interest which a member has in a Shares. building and loan association is indicated by the number of shares he holds, the age of the shares, and their maturing value. The difference between a stockholder in such an association and one in an ordinary corporation for usual business purposes lies in the fact that in the latter the member or stockholder buys his stock and pays for it at once, and as a rule is not called upon for further payment; all profits on such stocks are received through dividends, the value of shares depending upon the successful operation of the business. In the former the stockholder or member pays a stipulated minimum sum, say $1, when he takes his membership and buys a share of stock. He continues to pay a like sum each month until the aggregate of sums paid, increased by the profits and all other sources of income, amounts to the maturing value of the stock, usually $200, when the stockholder is entitled to the full maturing value of the share and surrenders the same. Shares are usually issued in series. When a second series is issued the issue of the stock of the first series ceases. Profits are distributed and losses apportioned before a new series can be issued.