Mortgage Loans and Savings and Loan Associations

These institutions mainly make mortgage loans. These institutions generally offer higher interest rates than many other types of institutions because

The institutions that mainly make mortgage loans are the savings and loan associations (S&Ls). These institutions generally offer higher interest rates than many other types of institutions because they are taking higher risks.

What is a savings and loan association (S&L)?

Savings and loan associations (S&Ls) are institutions that primarily make mortgage loans to homebuyers. These institutions are different from commercial banks in that they do not offer a wide range of services.

The primary function of S&Ls is to accept deposits from customers, pay interest on those deposits, and use the deposited funds to make mortgage loans. They provide a critical role in the economy by supplying funds to borrowers who want to purchase or refinance homes.

S&Ls were first established to provide savings and mortgage financing to consumers. These institutions operated under the premise that the deposits they received would be reinvested in the community in the form of mortgage loans.