The politics of foreclosure

Press, 15 May 1987, Page 13

The politics of foreclosure

A few Canterbury farmers are waiting to be thrown off their land because they are so far in arrears and they have been refused loan restructuring, but financiers have been quite reluctant to act.

Although no financier or branch manager would admit this publicly, the reason for not moving is the considerable adverse publicity which would surround the first few enforced evictions.

People involved in rural support in Canterbury say farm families who have been declined debt restructuring and who have come to the end of their credit are now forced to just sit in their homes and wait. Most want someone to say, “right, you will have to go.” Only a handful have walked off. Another small core of farmers in a completely hopeless financial position are not responding to any attempt to contact them

By

HUGH STRINGLEMAN

and encourage them to make decisions to move, according to one senior farm adviser in Canterbury.

“All financiers have one or two clients in this position and a few of the farmers have indicated they will respond aggressively to any attempts to move them forcibly,” he said.

The financiers, probably all family men themselves, are acutely conscious of the plight of the wives and children of the “hopeless cases” and nobody wants any show of force such as occurred recently in Australia when sherriffs and bailiffs moved against farmers. Nor do financiers want anything like the glare of publicity which surrounded the two recent enforced auctions and sales in the North Island — the Dufty family near Hamilton and the Geurtjens family of Bulls.

As a general strategy all the financiers now want to move “in step” so that no-one gets picked off by the militant farmers and the media. So considerable efforts are being made to convince farm families for whom there can be no help by way of debt restructuring to go quietly, co-operatively and perhaps by way of declaring bankruptcy and gaining the advantages of having the Official Assignee take over unsecured debt management.

The official reluctance to foreclose may also have something to do with the scheduled General Election, in August, at least in the case of the Rural Bank.

The Prime Minister, Mr Lange, on a recent visit to North Canterbury, referred again to the 5000 farmers who were in a financial position from which they were unlikely to recover.

But he stopped short of repeating that these hopeless cases “would have to go.” The former president of Federated Farmers and member of Parliament for Waikato, Mr Rob Storey, has backed away from an earlier prediction of a flood of forced sales. He said he still believed up to 6000 farmers were technically bankrupt but there were several reasons why the flood would not occur.

They included the “sheer tenacity” and versatility of farmers and their families, the reaction of the farming community to lenders who tried to force sales and the size of debts where a property sale would not return the outstanding mortgages.

Many of the desperate farmers would continue on their properties until next autumn, particularly in Canterbury where cropping farms are traditionally sold at that time, said one senior adviser. Although they would be

refused seasonal credit and would be marking time while their loan arrears continued to mount, the financiers would not move until all appeals for co-operation had been rebuffed.

A slight increase in farm sales has been noticed in the last few weeks and a further upsurge is expected in the spring, when crops are in the ground and purchasers can see income from lambs, wool and crops not far away. But the farm advisers emphasise that these are voluntary sales.

Some financiers have agreed that losses should be left “on farm” on the departure of the farm family and some have even advanced a few thousand dollars redundancy or relocation money when it is in everyone’s interests to get a sale underway.

Federated Farmers has attempted to formalise an increased relocation assistance and wants the Government to lift the grant in the July Budget. Having moved the “too hard” cases to one side, the farm finance sector has put considerable efforts in recent months into possibly the ' most worrying category —

those further 5000 or 10,000 farmers who must have debt restructuring and an improvement in product prices to survive the next three or four years. Hundreds of these are Canterbury cropping farmers.

Private sector financiers have made some

handsome concessions on principal, interest rates and loan terms at discounting meetings to match Rural Bank offers. These concessions have been made to good farmers with long term prospects but who have high debts. Considerable periods of time have been bought by these farmers, only to continue to see the economic indicators move against them. So the financiers, along with the farmers, have to believe that it is only a matter of time before the' dollar value and interest rates fall. However, private financiers are not anxious to extend debt restructuring on a formal basis to farmers without Rural Bank loans. Federated Farmers initiatives aimed at getting a formal scheme with agreement from the Bankers’ Association, Stock and Station Agents’ Association, the Government and merchant bankers and finance houses have not got very far, according to one • Wellington source. But requests to ask the independent chairpersons recruited by the Rural Bank to chair farm finance meetings in which the bank is not involved are becoming more frequent. This may well be because militant farmers’ groups have said they will try to disrupt any forced sales when a "creditors’ meeting” has not been held.