Building and Loan Association
Definition and meaning of Building and Loan Association in real estate.
Building and loan association is a member-owned financial institution that pools savings from local depositors to provide home mortgages and construction loans to its members.
In more detail
Originally, these associations operated on a mutual model where members deposited money regularly and took turns borrowing funds to build or buy homes. Once all members secured housing, the association would often dissolve, though many eventually transitioned into permanent community banks. They played a critical role in expanding homeownership in the United States, especially for working-class families who could not access traditional commercial bank loans.
While most have merged or converted into modern banks, their historical legacy remains visible in the mutual savings bank structure. They are subject to federal and state banking regulations to protect member deposits.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Historical role | Precursor to modern savings and loan associations |
| Primary benefit | Provided community-focused home financing and savings programs |
| Business structure | Mutual ownership by depositors and borrowers |
In the early twentieth century, a worker deposited a portion of their weekly savings into a local building and loan association to eventually secure a mortgage for their home.
Frequently asked questions
Do building and loan associations still exist today?
Most have transitioned into standard savings and loan associations or commercial banks, though some mutual savings banks still operate on similar community-focused principles.
How did a mutual building and loan association work?
Members pooled their weekly savings until the association had enough cash to fund a home loan, which was then awarded to a member by auction or drawing.
Related terms
Sources & references
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