ALTERNATIVES.

Auckland Star, Volume LXVI, Issue 29, 4 February 1935, Page 9

ALTERNATIVES.

MORTGAGE SYSTEM.

INDEPENDENT BOARD.

AMENDING BELIEF ACTS,

Alternative proposals to the Government's plans for the establishment of .a national mortgage corporation and the rehabilitation of farmers' finance were outlined in a statement issued to-day on behalf of the national conference of business and financial interests which met recently in Wellington. The committee, which prepared the report of the deliberations, expressed the opinion that under existing legislation the difficulties between private mortgagees and their mortgagors were in course of settlement. Although in many cases those settlements were stated to be temporary only, the committee believed that final settlement would in due course eventuate on the lines of, and as an outcome of, temporary settlement. The position between the State and its mortgagors was entirely different, and the committee therefore believed that private mortgages aid State mortgagee should be dealt with separately. In the case of State mortgages, to secure uniformity of administration, eliminate inter-departmental competition,, and also to eliminate political interference, if that be possible, the committee suggested the amalgamation of the mortgage lending activities of the various departments, and the control of those activities by an independent board. In view of the large sums involved, the committee was of the opinion that the best results would be obtained if more than one board were created. For this purpose the Dominion might be divided into districts, each with its own board, the districts being so arranged that each board would have approximately the same amount of mortgages under its control. To secure uniformity, the chairmen of all the boards should form an advisory committee for the whole scheme. If the principle of this suggestion were accepted, there would be no necessity for the elaborate process of the new board taking over mortgages and issuing debentures. The boards should administer the existing mortgages, answering to the respective departments in the same way as the Public Trustee handled his mortgage invest•uents which were outside the Common Fund. New Business. With regard to now business, the committee contemplated that a department having funds for investment on mortgage would invest through the boards— the department not coining into contact in any way with any prospective borrower. The boards should be given full powers, comparable with those possessed by individual mortgagees, of varying mortgage contracts by mutual arrangement with the respective mortgagors. In these proposals the committee contemplated achieving the same result as is mentioned in Mr. Coatee' pamphlet. The Minister's proposal was that the bonds allotted to the State would be sold, anc the proceeds used to repay the loans raised, for instance, by the State Advances Department. The committee contemplated that the repayments, of principal received by the boards in respect of Stale Advances mortgages would be applied in repaying the loans raised by that department, so that eventually that liability would be extinguished. On the other hand, other departments were, and would be. continuing concerns, and would have from time to time further funds for investment. Satisfactory Adjustments. In the case of other mortgagees the committee believed that necessary adjustments between private mortgagees and their mortgagors were proceeding satisfactorily under existing machinery. All that was necessary to complete the programme of adjustment was some modification of that machinery.

• The committee was satisfied that (here was ample finance available at cheap rates to effect the refinancing of existing mortgages as and when that became necessary and advisable. If it should be found that there were insufficient facilities at present for long-term lending on a table basis, the committee considered the proper course was to encourage the formation of new private institutions of modest size on a district basis and free of governmental control. The committee would be glad, if the Government so wished, to submit proposals in detail for legislation having as its object the encouragement of such institutions. Rehabilitation. Dealing with the question of rehabilitating fanners' finance, the committee expressed the conviction that justice could be done to all parties concerned, including the farmer mortgagor, without wholesale repudiation of contracts, and without the unjust discrimination against one\ class of the community— the farmers' creditors. Much as the committee disliked any proposal which validated repudiation of a contract, it recognised that there was some necessity for amendment of the present mortgagors' relief legislation. It urged that, having instituted a system of dealing with disputes between mortgagors and mortgagees, the Government should, if that system had proved somewhat unsatisfactory, endeavour to improve upon it ratlier than to scrap it and substitute an entirely new and untried system. The committee accordingly made the following suggestions regarding private mortgages: —

"Orders under the present legielation be made to be operative until December 31, 1930. The present Act expires on December 31, 1035, and orders may be made under it having a currency of two years. The proposal of the committee therefore means an extension of two years. The existing adjustment commission be reconstituted on the lines of the proposed special Court of Review, that Iβ, an independent chairman and two associate members —one representing mortgagors' interests generally and one representing mortgagees generaliy—thus increasing public confidence in these tribunals. It be laid down distinctly that the judge (or magistrate) is bound to hear and consider evidence offered by either party which was not available at the hearing before the commission, and if necessary refer the case back to the commission. A full right of appeal to the Court of Appeal be conferred. This is essential if public confidence in mortgage lending is to be restored."

In conclusion, the committee urged the Minister to circulate the draft of the proposed legislation at the earliest, to give ample time for public consideration before its introduction to Parliament. The committee expressed ite willingness to co-operate with, the Government in further consideration of alternative measures for the solution of the admittedly difficult problems of ruisi finance.