Co-operative Home Ownin$

C. A. Doty, of Los Angeles, in "The Hbrne Owner."

The co-operative loan companies rvhich began operating in California last year have justi{ied the expenditure of time and money which have been put into them by their organizers and the oflicials of variotts state departments. They encountered the usual opposition which is offered to new methods of financing, but as they accumulate experience they are finding the field in which they can operate successfully which has heretofore been barely touched bv competitors.

The new m'ethod serves particularly those persons who have no.t yet accu,mulated, any savings with which to purchase a lot or make the necessarY initial payments on a ho,me already built. Such people cannot take advantage of the various other agen'cies existing for the acquiring of a 'home, but through these co-operative loan companies they are offered the opportunity to save the'ir money' receive an interest return equivalent to that paid by t'he savings bank and at the same time have the 'privilege of securing a loan at the maturity of their contract which is equivalent to 60 per cent of the appraised value of their property.

It will tre seen then, th'at this class o'f people can be encouraged to save their money for a suffi,cient period, they can add these savings to the 6O per cent loan which they could secr-lre and actually own a home before they could by any other means at the same cost.

These co-operative loan companies, therefore, do not offer any wildcat method of financing by which a person who has no money whatsoever can secure a horne' Such a procedure would violate every good commer,cial practice. The all-im'portant thing which the co-operative method does oifer is that when the lcan matures its member-s will have the privilege of easy repayment, will pay the rlowest known interest for real estate loans, and can secure a larger loan in proportion to the appraised value of the, property t'han can usually be secured elsewhere.

In the 'cooperative plan, contracts are sold in units of $10@ and paynlents are made at the rate of 1 per cent of the face value each rnonth. Loans are made on real estate security in numerical order from the co'operative fund.

From five per cent to five ancl one-half per cent is charged on the loan and payments made by the contract holder prior to the loan receive interest at 4 per cent, comp'ounded semi-annually.

E,very borror,r'er can secure loans equivalent to 60 per cent of t'he appraised valtre of his property over and above what he has saved, while a lender to other contract holders and the repayment of the loan can be made on very favorable terms.

The plan of financing is also particularly adapted to the needs of clubs, lodges, churches. hospital's and industrial organizations that have financing requirements and ,cannot usually be taken care of by the banks or building loan com'panies. The amortizing feature of the loan makes it possible for this cooperative method to handle loans up to 60 per cent on this character of security, which i'.s a larger percentage than can be loaned by the aforementioned agencies. \\rhere such organizations as those mentioned have not yet accumulated any savings with which to start a building enterprise, this co-operative loan contract offers the easiest method of doing so and still .combine's th,e privilege of securing a 6O per cent loan.

Fundamentally, the companies are just what they are called,-'ise-operative loan cotnpanies," but suffihient incentive has 6een supplied to bring into management of these companies all the initiative and administrative ability that a strictly private enterprise would enjoy. It will be seen, then, that these companies have achieved something new in the way of financing by combining the advantages of both the co.operative and individual methods of financing an enterprise.

Naturally, one of the features which has had to be given particular attention by both the organizers of these companies and the Corporation Com'missioner has been that of safeguarding the p.Syments, which are made by c'ontract holdirs prior to the'time that they secure a loan. This has been done rby the following procedure :

First, offrcers handling these funds are under bond of $50,00O each.

Second, the proper handling and distribution of all these rxoneys is placed carefully under the eye of the Corporation Cornmissior-rer by means of a certified public accountant's report made once each, month to him.

Third, a reserve fund is created and maintained which is wholly under the supervision of t'he Commissioner of Corporations foi the purpose of preserving intact the loan and irust fund payments against any bad judgment on the part of the adm,inistrators of the business.

Every salesman employed by the company must meet the usual requirements of the Corporation Commissioner as to integrity and past record in the sale of securities to the public. In addition to this, the company places every solicitor and district representative under a surety bond in sufficient amount to protect the public, and the company against any embezzlement.

No institution regulated by any of the various commissions of the state of California is subject to such rigid regulatio,ns as these ceoperative lesn qsmrpanies. It is entirely proper that such be the case because of their co-operative character and because it is the expectation that very large sums of money will be in their hand's for distribution to members of the co-operative group. A t'horough investigation of all the activities of the c'om'pany every thirty days is a much clos,er supervision than any savings bank or other type of bank is required to undergo in this state.