Loan Associations Began Home Financing from Start

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opened by the Land Run of April 22, 1889, building and loan associations began forming in communities to finance construction of homes.

The first, Guthrie Building and Loan Association, was formed in 1890, followed by similar institutions in Norman and Durant. The Oklahoma City Building and Loan Association, now called Continental Federal Savings and Loan Association, was created in 1898 from the Owen & Welsh Co, said William O. Alexander, chairman of the board of the thrift. That association is the oldest surviving savings and loan in the state, he said.

Local Building and Loan Association, which later became Local Federal Savings and Loan Association, was formed 10 years later.

The associations were initially called building and loans because until the turn of the century, most borrowers received loans to build their own homes, said Leo Smith, a founder of Capitol Hill Building and Loan Association in 1926.

By the 1910s, the loans were made to people buying homes built by contractors, but the term "savings and loan" didn't arrive until the '20s and was not widely used until federal legislation in the '30s.

When first formed, the building and loans had no supervision, save failure, according to W.M. Malone, secretary of the Vinita Building and Loan Association, in a speech given to the Oklahoma League of Building and Loan Associations in May 1922.

Though legislation governing the conduct of building and loan associations was passed within a year after statehood, the first state building and loan auditor was not appointed until 1910, Malone said. The auditor's powers were limited to reviewing three in-state associations and seven out-of-state associations lending in Oklahoma until state legislation in 1913. That law brought all associations in the state under the supervision of the Oklahoma Banking Department and allowed sale of three types of association stock: installment, fullpaid and prepaid, Malone said.

Sale of the latter two types of stock injected capital into the building and loans, allowing a burst of lending, Malone said. The building and loans in Oklahoma in 1913 had assets of $2 million, he said.

Four years after the meeting that Malone spoke at, Capitol Hill Building and Loan Association was formed.

A dozen Capitol Hill neighborhood businessmen met in January 1926 and canvassed the area to find others interested in capitalizing a new building and loan, Smith said. By late January, they figured they had $5,000 pledged to form the thrift, and received a charter on March 15, 1926.

The thrift opened for business April 1, 1926, with Smith serving as its secretary. The association made loans for seven homes with the $5,000 pledged, Smith said.

When the Great Depression gripped the nation in the 1930s, Congress passed legislation to insure accounts in federally-chartered building and loans, called savings and loans in the legislation. Oklahoma changed the name of the state regulatory board from the Building and Loan Board to the Savings and Loan Board to correspond to the federal name, Smith said.

The state-chartered savings and loans had the option of paying for insurance, but the federally-chartered savings and loans had to pay for insurance, Smith said.

When the legislation passed, the Oklahoma City Building and Loan Association became the Oklahoma City Federal Savings and Loan Association. …