A savings and loan association is a financial institution which specializes in accepting savings deposits and making mortgage loans. The term is mainly used in the United States; similar institutions in the United Kingdom and some Commonwealth countries are called building societies. They are often mutually held (often called mutual savings banks), meaning that the depositors and borrowers are members with voting rights and have the ability to direct the financial and managerial goals of the organization. It is possible for a savings and loan to be stock-based and even publicly traded. This means, however, that it truly no longer is an association and depositors and borrowers no longer have any managerial control. In Financial economics, a financial institution acts as an agent that provides financial services for its clients. ... In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan. ... Mortgage loan is the generic term for a loan secured by a mortgage on real property; the mortgage refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. ... The Commonwealth of Nations (CN), usually known as The Commonwealth, is a voluntary association of 53 independent sovereign states all of which are former colonies of the United Kingdom, except for Mozambique and the United Kingdom itself. ... Building society was the name given in 19th century Britain for working mens co_operative savings groups: by pooling savings, members could buy or build their own homes. ... Mutual describes a form of business enterprise which is owned by those who do business with it. ... A mutual savings bank is a financial institution chartered by state or federal government to: (1) provide a safe place for individuals to save and (2) invest those savings in mortgages loans, stocks, bonds and other securities. ... For other uses, see Stock (disambiguation). ...

Early history of the savings and loan association

At the beginning of the 19th century, banking was still something only done by those that had assets or wealth that needed safekeeping. The first savings bank in the United States, the Philadelphia Savings Fund Society, was established on December 20, 1816, and by the 1830s such institutions had become widespread. Savings and loans accepted deposits and used those deposits, along with other capital that was in their possession, to make loans. What was revolutionary was that the management of the savings and loan was determined by those that held deposits and in some instances had loans. The amount of influence in the management of the organization was determined based on the amount on deposit with the institution. Alternative meaning: Nineteenth Century (periodical) (18th century — 19th century — 20th century — more centuries) As a means of recording the passage of time, the 19th century was that century which lasted from 1801-1900 in the sense of the Gregorian calendar. ... For other uses, see Bank (disambiguation). ... In business and accounting an asset is anything owned which can produce future economic benefit, whether in possession or by right to take possession, by a person or a group acting together, e. ... Wealth from the old English word weal, which means well-being or welfare. The term was originally an adjective to describe the possession of such qualities. ... PSFS, or the Philadelphia Savings Fund Society, was the first savings bank in the United States. ... December 20 is the 354th day of the year (355th in leap years) in the Gregorian calendar. ... 1816 was a leap year starting on Monday (see link for calendar). ... Events and Trends Electromagnetic induction discovered by Michael Faraday Dutch-speaking farmers known as Voortrekkers emigrate northwards from the Cape Colony Croquet invented in Ireland Railroad construction begins in earnest in the United States Egba refugees fleeing the Yoruba civil wars found the city of Abeokuta in south-west Nigeria...

The overriding goal of the savings and loan association was to encourage savings and investment by common people and to give them access to a financial intermediary that otherwise had not been open to them in the past. The savings and loan was also there to provide loans for the purchase of large ticket items, usually homes, for worthy and responsible borrowers. The early savings and loans were in the business of "neighbors helping neighbors".

In the United Kingdom, the first savings bank was founded in 1810 by the Reverend Henry Duncan, Doctor of Divinity, the minister of Ruthwell Church in Dumfriesshire, Scotland. It is home to the Savings Bank Museum, in which there are records relating to the history of the savings bank movement in Great Britain, as well as family memorabilia relating to Henry Duncan and other prominent people of the surrounding area. However the main type of institution similar to U.S. savings and loan associations in the United Kingdom is not the savings bank, but the building society and had existed since the 1770s. 1810 was a common year starting on Monday (see link for calendar). ... The Reverend is an honorary prefix added to the names of Christian clergy and ministers. ... Henry Duncan (8 October 1774 - 12 February 1846) was a Scottish geologist and a Church of Scotland minister who founded the worlds first commercial savings bank. ... Doctor of Divinity (D.D., Divinitatis Doctor in Latin) is an academic degree. ... Ruthwell is a village and parish on the Solway Firth between Dumfries and Annan in Dumfries and Galloway, Scotland. ... St. ... Dumfriesshire (Siorrachd Dhùn Phris in Gaelic) was a county of Scotland. ... Motto: (Latin) No one provokes me with impunity(English) Wha daur meddle wi me? (Scots)[1] Anthem: Multiple unofficial anthems Capital Edinburgh Largest city Glasgow Official languages English, Gaelic, Scots[2] Government  - Queen Queen Elizabeth II  - Prime Minister Tony Blair MP  - First Minister Jack McConnell MSP Unification    - by Kenneth I... A savings bank is a financial institution whose primary purpose is accepting savings deposits. ... Henry Duncan (8 October 1774 - 12 February 1846) was a Scottish geologist and a Church of Scotland minister who founded the worlds first commercial savings bank. ... A building society is a financial institution, owned by its members, that offers banking and other financial services, especially mortgage lending. ...

The savings and loan in the early 20th century (in the U.S.)

The savings and loan association became a strong force in the early 20th century through assisting people with home ownership, through mortgage lending, and further assisting their members with basic saving and investing outlets, typically through passbook savings accounts and term certificates of deposit. (19th century - 20th century - 21st century - more centuries) Decades: 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s As a means of recording the passage of time, the 20th century was that century which lasted from 1901–2000 in the sense of the Gregorian calendar (1900–1999... This article is about the legal mechanism used to secure property in favor of a creditor. ... Save might refer to: Save (sport) - to stop a goal or maintain the lead To save a document in computer file management (see also Saving a webpage) The River Save (Zimbabwe), Zimbabwe The River Save (Hungary), Hungary -- joins the Danube just above Belgrade. ... Investment is a term with several closely related meanings in finance and economics. ...

Early mortgage lending

The latest of mortgages were not offered by banks, but by insurance companies, and they differed greatly from the mortgage or home loan that is familiar today. Most early mortgages were short term with some kind of balloon payment at the end of the term, or they were interest-only loans which did not pay anything toward the principal of the loan with each payment. As such, many people were either perpetually in debt in a continuous cycle of refinancing their home purchase, or they lost their home through foreclosure when they were unable to make the balloon payment at the end of the term of that loan. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...

This bothered government regulators who then established the Federal Home Loan Bank and associated Federal Home Loan Bank Board to assist other banks in providing funding to offer long term, amortized loans for home purchases. The idea was to get banks involved in lending, not insurance companies, and to provide realistic loans which people could repay and gain full ownership of their homes. The Federal Home Loan Banks are an essential source of stable, low-cost funds to financial institutions for home mortgage, small business, rural and agricultural loans. ... The Federal Home Loan Banks are an essential source of stable, low-cost funds to financial institutions for home mortgage, small business, rural and agricultural loans. ... Amortization may refer to: Amortization (business), the allocation of a lump sum amount to different time periods. ...

Savings and loan associations sprung up all across the United States because there was low-cost funding available through the Federal Home Loan Bank for the purposes of mortgage lending.

Further advantages

Savings and loans were given a certain amount of preferential treatment by the Federal Reserve inasmuch as they were given the ability to pay higher interest rates on savings deposits compared to a regular commercial bank. The idea was that with marginally higher savings rates, savings and loans would attract more deposits that would allow them to continue to write more mortgage loans which would keep the mortgage market liquid and funds would always be available to potential borrowers. The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. ... Interest is the rent paid to borrow money. ... A commercial bank is a type of financial intermediary and a type of bank. ... This article is about the legal mechanism used to secure property in favor of a creditor. ...

However, savings and loans were not allowed to offer checking accounts until the late 1970s. This impacted the attractiveness of being a savings and loan customer and required many of them to hold accounts across multiple institutions so they could have access to checking and receive competitive savings rates all at the same time. A cheque (British English) or check (American English), thought to have developed from Persian چك chek, is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositors name with that institution. ... The 1970s decade refers to the years from 1970 to 1979, inclusive. ...

A famous perception of savings and loans at this time was that they used the "3-6-3" business model:

• Take Deposits at 3 %
• Lend at 6 %
• Be on the golf course at 3 o'clock.

See also

• Cooperative banking
• Savings and Loan crisis

This article, image, template or category belongs in one or more categories. ... The Savings and Loan crisis of the 1980s was a wave of savings and loan association failures in the United States in which over 1,000 savings and loan institutions failed. ...

External links

• Office of Thrift Supervision