Savings and Loan Association (S&L)

Savings and Loan Association Financial Institution Home Loans Building and Loan Association Mortgage Lending
A Savings and Loan Association (S&L), also known as a building and loan association, is a financial institution similar to a savings bank, with a historical focus on providing home loans. In recent years, S&Ls have expanded their services to include a wider variety of loans.
On this page

Definition

A Savings and Loan Association (S&L), also referred to as a building and loan association, is a financial institution primarily concentrated on accepting savings deposits and making mortgage loans. Historically, the main aim of S&Ls has been to facilitate home ownership through providing affordable financing options to individuals for purchasing and building houses.

Examples

  1. Federal Savings and Loan Associations (FS&Ls): These are federally chartered S&Ls that adhere to regulations set by the Office of the Comptroller of the Currency (OCC).
  2. Mutual Savings and Loan Associations: These are member-owned S&Ls where profits are distributed among members as dividends.
  3. Thrifts: This term broadly includes S&Ls, savings banks, and credit unions, all of which focus on savings and mortgage lending.

Frequently Asked Questions (FAQs)

What is the primary purpose of a Savings and Loan Association?

The primary purpose of an S&L is to offer financial products and services to facilitate home ownership. They accept savings deposits and provide mortgage loans to individuals.

How does an S&L differ from a commercial bank?

An S&L historically focused on savings deposits and residential mortgage loans, whereas a commercial bank offers a wider range of financial services including business loans, investment services, and commercial real estate lending.

Are S&Ls regulated differently from commercial banks?

Yes, S&Ls are regulated under different laws and by different agencies, like the Office of the Comptroller of the Currency (OCC) for federally chartered institutions and state agencies for state-chartered institutions.

Can S&Ls offer other types of loans?

Yes, in recent years, S&Ls have diversified their portfolios to include other types of loans such as auto loans, personal loans, and commercial real estate loans.

Are Savings and Loan Associations still relevant today?

Yes, even though their role has evolved, S&Ls continue to play a significant role in providing mortgage lending and savings products, particularly in community-focused banking operations.

Mortgage: A loan secured by the collateral of specified real estate property, which the borrower is obliged to pay back with a predetermined set of payments.

Mutual Savings Bank: A financial institution chartered primarily to provide savings accounts and residential mortgage lending, operated for the benefit of its depositors, who are the owners.

Federal Home Loan Bank System (FHLB): A government-sponsored enterprise created to support mortgage lending and related community investment through its member financial institutions which include thrifts and S&Ls.

Credit Union: A member-owned financial cooperative, providing credit at competitive rates and other financial services to its members.

Online References

  1. Investopedia - Savings and Loan Association (S&L)
  2. Wikipedia - Savings and Loan Association
  3. The Office of the Comptroller of the Currency (OCC)
  4. Federal Deposit Insurance Corporation (FDIC)

Suggested Books for Further Studies

  1. “Thrift: A Cyclopedia” by David M. Seelman
  2. “The Big Short: Inside the Doomsday Machine” by Michael Lewis
  3. “The Savings and Loan Crisis: Lessons from Failure” by James R. Barth, Susanne Trimbath, and Phillip Kevin Yago
  4. “Modern Bank Behaviour” by Hans W. Hoops

Fundamentals of Savings and Loan Association (S&L): Finance Basics Quiz

### What was the original primary purpose of Savings and Loan Associations? - [x] To provide loans for purchasing and building homes. - [ ] To offer business loans. - [ ] To provide insurance products. - [ ] To issue credit cards. > **Explanation:** The original primary purpose of Savings and Loan Associations was to provide loans for purchasing and building homes to help individuals afford housing. ### How are S&Ls different from commercial banks? - [x] They primarily focus on home loans and savings deposits. - [ ] They offer a wider range of financial services. - [ ] They primarily cater to businesses. - [ ] They only offer personal loans. > **Explanation:** S&Ls primarily focus on home loans and savings deposits, while commercial banks offer a wider range of financial services, including business loans and investment services. ### Which agency regulates federally chartered Savings and Loan Associations? - [ ] Federal Reserve - [x] Office of the Comptroller of the Currency - [ ] Federal Trade Commission - [ ] Securities and Exchange Commission > **Explanation:** Federally chartered Savings and Loan Associations are regulated by the Office of the Comptroller of the Currency (OCC). ### Can Savings and Loan Associations offer auto loans? - [x] Yes, they can. - [ ] No, they cannot. - [ ] Only if they are federally chartered. - [ ] Only to existing mortgage customers. > **Explanation:** In recent years, S&Ls have diversified their loan offerings and can now provide auto loans among other types of loans. ### Which term broadly includes S&Ls, savings banks, and credit unions? - [ ] Federal Saving Clubs - [ ] Commercial Banks - [ ] Cooperative Banks - [x] Thrifts > **Explanation:** The term "Thrifts" broadly includes Savings and Loan Associations, savings banks, and credit unions, all of which focus on savings and mortgage lending. ### What financial cooperative is member-owned and provides credit at competitive rates? - [x] Credit Union - [ ] Mutual Funds - [ ] Commercial Bank - [ ] Federal Reserve Bank > **Explanation:** A Credit Union is a member-owned financial cooperative that offers credit at competitive rates and other financial services to its members. ### Are Savings and Loan Associations still relevant today? - [x] Yes, they are. - [ ] No, they have become obsolete. - [ ] Only in rural areas. - [ ] Only for federal employees. > **Explanation:** Savings and Loan Associations continue to play a significant role in providing mortgage lending and savings products, particularly in community-focused banking operations. ### What financial institution primarily focused on residential mortgage lending and saving deposits benefits its depositors as owners? - [x] Mutual Savings Bank - [ ] Commercial Bank - [ ] Investment Bank - [ ] Private Equity Firm > **Explanation:** A Mutual Savings Bank is focused on residential mortgage lending and savings deposits and operates for the benefit of its depositors, who are the owners. ### What system supports mortgage lending and related community investments through its member institutions? - [ ] World Bank - [ ] International Monetary Fund - [x] Federal Home Loan Bank System (FHLB) - [ ] European Central Bank > **Explanation:** The Federal Home Loan Bank System (FHLB) is a government-sponsored enterprise designed to support mortgage lending and community investment through its member financial institutions, including thrifts and S&Ls. ### Which term refers to a loan secured by a real estate property, where the borrower must make specified payments? - [ ] Personal Loan - [ ]) Credit Line - [x] Mortgage - [ ] Bonds > **Explanation:** A Mortgage is a type of loan secured by the collateral of specified real estate property, which the borrower is obliged to repay with a set of payments.

Thank you for delving into the comprehensive world of Savings and Loan Associations. Continue to enhance your financial knowledge and understanding!

Wednesday, August 7, 2024
Savings and Loan Association (S&L)
Savings and Loan Association (S&L)
Savings and Loan Association January 1, 1
Mutual Association January 1, 1

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.