CHAPTER III. PREMIUM PLANS. The funds of associations are loaned to shareholders as the bylaws may prescribe-usually to those who offer the highest premium. Some associations, however, have a fixed or established premium rate, and, in these cases, loans are awarded to the members in the order of their applications or by lot. The premium is the amount which the borrower pays in excess of the ⚫ legal interest; or it may take the shape of a certain number of payments of dues or of interest to be made in advance. Loans are usually made only to the shareholders. If, however, there be no demand for money from the shareholders, some associations provide for loaning their funds to persons not shareholders upon such terms and conditions as may be approved by their directors. Loans are secured to the association by mortgage on real estate and by a pledge of the stock held by the borrowing member or any other security acceptable to the directors. When the loan is for the purpose of erecting a house the real estate is the house lot, which must be owned in fee simple, and the house to be built upon it. The borrower continues the regular payment of dues on his shares and interest on his loan, and, if the premium is not entirely paid in advance or deducted from the loan in advance, then such portions of the premium as the rules of the association may require. In other words dues and interest are usually paid periodically and premium may be. As a rule the plans of the associations provide that loans on real estate shall run to the maturity of the shares pledged, the maturing value of the shares being equal to the loan and by maturity satisfying the loan. In some associations, however, the loans run for a fixed period, but in nearly all associations they may be terminated at any time by repayment. The regulations governing loans on the shares held by a stockholder, without real estate security, commonly called stock loans, vary in different associations. While some advance only the withdrawal or present values (the latter usually spoken of as "book values") of the shares, or only a certain per cent of such values, others advance the full maturing value of each share borrowed on, but in such cases borrowers are required to pledge such additional security as may be acceptable to the directors of the association. Some associations apply the same rules to both real estate and stock loans, while others have adopted different rules for each. In conducting this investigation a great variety of premium plans have been found. Sixty-eight such plans relating to real estate loans were found to be in vogue. A description has been given of each of these plans and a statement of the number of associations in the various states and territories operating under each specified plan. It should be observed that in some cases, as under plan 2, there is said to be no premium, while in other cases, as under plan 41, premium and interest are said to be combined. The premium and interest are actually combined in both cases, but it was thought best, as the facts are perfectly clear, in each case to use the terms employed by the associations themselves. The tables following give a general summary of the situation in respect to all plans in vogue in the country: LOCAL ASSOCIATIONS OPERATING UNDER THE VARIOUS PREMIUM PLANS. |