The Dominion. TUESDAY, FEBRUARY 5, 1935. MORTGAGE FINANCE

Dominion, Volume 28, Issue 112, 5 February 1935, Page 8

The Dominion. TUESDAY, FEBRUARY 5, 1935. MORTGAGE FINANCE

The lengthy statement from the Associated Chambers of Commerce on the Government’s proposals in regard to mortgage finance is well worthy of careful perusal. The interests, represented in ns compilation lend a considerable weight of authority to the views expressed. Most are directly or indirectly associated with, tLe lending side of finance, and from that point of view likely to be more or less affected by the Government’s proposals. But althougn the statement to that extent may have a savour of partisanship, anc is essentially critical, much of the cnticisA submitted is.of a constiuc tive kind. Where one proposal is condemned, a practical alteinativ is offered. There is at least substantial agreement on the fundamental proposition, namely, that the present state of' affairs in mortgage finance is so unsatisfactory that a remedy must be found. The Government has taken the initiative, and it is for all concerned to help as much as possible to enable a solution to be arrived at which will not onlyprovide a way out of present difficulties but also ensure that mortgage finance will be placed on a more secure basis in the future. ie Government’s proposals are to constitute a reform as well as a palliative, then these should ensure that the errors of the past wil be avoided in the future. For these errors both lenders and borrowei s must accept responsibility. Conditions must be made secure both. The Committee of the Associated Chambers of Commeice makes the point that the reason given for the present position ot the producer, the unparalleled drop in the world values of primary produce, insofar as this country is concerned, is only half the story, and it gives as the main reason “over-borrowing and ovei-spendm H , not only by individuals, but by-all classes of the community, including local bodies and the Government.” This is a true diagnosis, bu does not some responsibility attach to'those who have lent ( too freely and are now faced with losses ? It is a matter of fact that money during the boom period could be borrowed to an amount largely in excess of conservative y-estimatec security. High interest rates tempted the lender and liberally-estimated security the borrower. Now rates are down, values arc down, and the conversion or transfer of flat mortgages has become a matter ot great difficulty. Equities have disappeared, and there is no margin tor refinancing. In spite of all that can be said for mortgagors, relict by legislation, and that is considerable, the fact does remain that through its operation investment on the security of landed property has lost much of its attraction. Not only the farmers, but a laige proportion of the rest of the commiinity affected by the mortgage situation are being held up by this deadlock. During the good times very few people having flat mortgages of short-term periods such as five years made any effort to reduce their debt, trusting no doubt either to a profitable sale or a renewal or transfer of then bond. ie depression caught them in a strangle-hold. Hence the two objectives of mortgage finance legislation should be relief and reform. ' As to the former, the just claims of both lender and borrower should be settled fairly and squarely. Each should be prepared to recognise that in many instances there has been over-lending as well as over-borrowing, that the indulgence of the one in the past has been a contributory factor to the present comparative insolvency of the other, x Past experience shows that t.iesC errors are likely to be repeated unless values 'and credit are placed under some kind of oversight that will restrict both imprudent lending and‘borrowing. * Credit in modern times has become the principal basis of financial intercourse between individuals or between communities, and the present lack of confidence on the part of lenders is due largely to the fact that credit has been impaired by unwisdom on both sides of the transaction. There are exceptions, of courge, and both lenders and borrowers who have exercised prudence and foresight in their contracts have .now good reasons to justify their . caution.-, .As to the method of dealing with both relief, which is urgent, and reform, which is obyiously desirable, the suggestions submitted by the Special Committee of the Associated Chambers of Commerce differ in impoitam essentials from those outlined in the pamphlet circulated by the Finance Minister. Having regard to its representative and • authoritative character great weight should be attached to its findings. The conclusions reached and the reasons given are therefore entitled to receive the serious consideration of the Minister of Finance.

The National Mortgage Finance Corporation proposal of the Government is a measure which could-only be justified as an extreme and last resort, and even then it is questionable whether it would serve the purpose designed. In the face of the findings of the Special Committee, which include alternative proposals of an important character, it is clear that the Minister of Finance should stay his hand and give that further consideration to the matter which the importance of the subject demands. -