One of the defects of the building and loan societies, long recognized
in some quarters, has been the probable loss of the home to the family
of the member who dies before payment has been completed. At the time
when the widow most needs the home for her children, the payments
cannot be met and the association is reluctantly obliged to foreclose
the mortgage.
A plan to meet this situation, frequent in the aggregate, has been
devised and practised in New England, by requiring the borrower to take
out an insurance policy on the least expensive straight-life plan,
to an amount equal to the mortgage. The insurance premium is payable
monthly with the payment on the loan, the association turning it over
to the insurance company, and undertaking to adjust the payments if
the latter's premium periods do not coincide. The face of the policy
is made payable to the loan association which, in case of death, takes
from the insurance money the amount remaining unpaid on the mortgage,
and gives the widow the balance with a deed for an unencumbered home.
In the great majority of cases where the borrower lives to complete
his payments, the policy is surrendered to him when his mortgage is
cancelled, to be continued or dropped as he pleases.
The plan was described at the annual banquet of the Metropolitan League
of Co-operative Savings and Loan Associations, New York, by J. Q. A.
Brackett, former governor of Massachusetts, who is urging it on a
national scale as a necessary adjunct to what, in his native state, is
termed the co-operative bank.
More than two hundred men attended the banquet, representing
ninety-five constituent companies with 35,129 depositors, and
controlling assets of sixteen million dollars. One who attended
could not fail to be impressed with the evident feeling of these men
that their paramount duty is not to make money for their particular
organizations, but to help the average member buy a home. Ninety per
cent of them are unsalaried. One association, it was reported, has
reduced its interest rate without request of its borrowers. In the
words of the president, the main desire of building loan associations
should be "the encouragement of the habit of saving without irritating
penalties and restrictions and with equitable provision for the mishaps
possible to those undertaking a contract for specific saving extending
over a long period of years."