Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1889-03-07
NOT ALL THEY SEEN.
Some Styles of Building and Loan
Associations Exposed.
AN EXAMINER FINDS THE FLAWS.
Very Poor Chance for the Many Members
Who Must Borrow.
THE LOCAL LIST IN A SINGLE LINE

Building and loan associations have been
both blessing and a curse, the former
when honestly conducted and on business
principles, and the latter when they were
mismanaged or designedly traps for the un.
initiated. Premium associations have some.
times bled people to the extent of 40 to &c
per cent of aloan extended. The mutual
companies, as rule, have the best record
and all that propose to give you something
for nothing are no more to be trusted than
is dealer in ''green goods"
For long time there was trouble to gel
rid of money after tour or five years of the
life of an organization, and non-borrowers
being forced to borrow their own money
left the declining years of the body quite
feeble. Mr.. George Booth tells of one Of
these mutuals that declared 10 per cent
semi-annual dividends in its youth, but
which dwindled to nothing in its age.
Now, however, this is largely avoided by
starting new series from time to time.
The mother hives swarm and new blood is
thus brought in and this may be continued
indefinitely until the country gets so rich
that no one will wish to borrow.
are very adverse, and yet cities greater than
Babylon have been built by the building
associations Thomas II. Davis, Esq, who
has been solicitor for several, has rather
POOR OPINION OF THEM,
and says it is the result of his experience of
them, while X. Q. Bigham, Esq, finds that
over 90 per cent of all the development of
Mt. Washington for near two decades has
been assisted by these organizations. Those
on the Mount are mutual, and while they
do not pay very largely, they give about
double the return of savings bank, and so
far have not met with any losses Of conse-
quence. The third series of the Prospect is
now year or two old, and in all its time it
has only been forced to make three sherif's
sales, and two of these were only for the
purpose of making title.
The only actual foreclosure was in the
case of a Braddock borrower, and during
the time this association has been running
its operations exceed half a million of dol
lars. so you see it's possible to run them not
only safely but proftably," said Mr.. Big
ham, but there isn't much in the working
OF a successful one for the lawyer, as he
must examine titles, etc., at about half
price, and the fat which comes out of fail
ures is missing, but a man must submit to
be used somewhat if he wants to go through
the world comfortably, and beside the solic-
itorship is of benefit to a lawyer in other
ways than for what it yields him."
The prospect is regarded as a savings
bank by some investors, while the majority
go into it with intent to get loans. Borrowers
pay 61I per cent interest, and pay it weekly,
which makes it higher yet, but they share
In the profits and others get rebate. Nom
borrowers get 6 per cent compound interest.
There is no speculation in this, and the rate
is maintained by starting fresh series from
time to time.
THE PROFIT REFUNDERS.
But while this is strictly business, W. j.
Brennan, Esq, tells of one on the South
side which gives back all the profits except
for the quarter previous to withdrawal and
the entrance fee of So or $40, or whatever
that may be. While this may pay those
who hold on, Mr.. Brennan thinks the man
who computes the amounts due each retiring
stockholder will have anything else than a
snap.
Now all these mutual building and loan
associations are of immense use to the Door
when properly managed, but some schemes
which seem to grow out of them are regard
ed BY legal gentleman who has examined
them as not only ultra UireS, but schemes to
make vast profit off the masses BY few,
and it is said man is separating in this part
of the country with copyrighted scheme,
which he sells.
As to the working of a somewhat similar
plan in Philadelphia, it is said:
The idea is that borrower shall reduce his
Indebtedness by monthly payments of both
principal and interest until the entire amount
shall be paid of, generally in 10 or IL years. If
f6n dahf 1ao
any time. Six per cent interest is charged
For instance, man borrows 81, 200 on mort
gage on his house. At the end of the first
month he pays an installment of $40 on the prin-
cipal and pays Sc in interest The principal is
thus reduced to 81, 100, and the next interest
charge is only IS s.. By continuing this process
the principal at the end of the first year is re-
duced 70 $1,000 and the monthly interest to
s. So The close of the second year finds the
debt only S970 and the interest 81 90 and so il
goes on until the one hundred and twentieth
payment wipes the mortgage off altogether.
ONE POPULAR PLAN.
Some people hereabouts who are thinking
of forming an association have taken the
precaution to get a legal opinion on the
Homestead Loan and Trust plan, and here
is the gist of the history and opinion:
First-These companies are incorporated as
real estate companies under the act of 1874.
Second-In their organization they form three
classes Of shareholders, A, B and c. A is com
posed of shareholders who need not hold capi-
tai stock, class of stockholders and class G
lump or periodically on condition to withdraw
1t at certain time and receive interest or
tranfer to class A at the option of the party.
the time of withdrawal said to be usually
fixed at one year.
Third-Subscription are called in at the rate
OF per cent a month from class B. conse-
Quently 20 months are required to pay up The
companies also derive a revenue from CON
tracts made with the shareholders of the other
classes, usually received in small monthly
payments. These Compose their resources
ana SO much as has been received from class G
must be returned at the time limited. Capital
is usually limited to Sl5,000 that usually being
subscribed to classes A and G. They buy prom
erty and sell il to the shareholders of class A
on small monthly payments at a certain price
with interest at per cent, requiring l62S years
70 pay II out ana they compel the stockholders
IN that class to take, whether they want it or
not, and the shareholders of class B, who are
the @ end of year, have closed out
OF class lass A getting a house in that
cent per annum. The officers are salaried the
first year and thereafter there is but little to
do, except receive deferred payments of sales,
from class A The examiner states that he
finds from certain blank forms of contract for
real estate with shareholders of class A, that
the contract nominally is called lease but is
in fact a contract or agreement to convey, on
deed or mortgage is made until the property is
fully paid for. These companies also make
loans TO pay OF mortgages, build houses, etc,
to their members, presumably of class A.
HERE Is THE OPINION:
From this review the examiner finds that
these corporations are all doing business
outside Of their chartered powers, in that
they are making an issue of stock greater
than authorized by law.
The common stockholders are in Class B and
Glass c must be treated as preferred stock
holders. and there is a question as to whether