MORTGAGE BILL

Dominion, Volume 28, Issue 121, 15 February 1935, Page 12

MORTGAGE BILL

Second Reading Debate Opened SPEECH BY MINISTER Dependence on Primary Producer Emphasising the Government's belief that the prosperity of the Dominion rests to a very large extent on the position of the primary producer, the Minister of Finance, Rt. lion. J G. Coates, in moving the second reading of the Mortgage. Corporation of New Zealand Bill in the House of Representatives last night, claimed that the Bill's proposals would go far toward placing farming on a firmer basis. The Bill." he said, broke now ground ill Dominion finance, but the 'proposed mortgage corporation, was not without forerunners. Similar organisations were flourishing in Scotland and in England. The English Agricultural Corporation lent money to. farmers at from 44 to 4-J per cent, for periods.up to CO years. Farmers were able to secure sufficient money at a satisfactory rate, and the basis of the lending system fitted in well with the requirements of the agricultural industry Mr. Coates hoped that the New Zealand mortgage corporation would be sufficiently stable to attract investors The bond system of finance had peculiar advantages in providing money for primary industry, but the Government did not intend to make the organisation. apply only to agricultural 'interests It would offer its advantages to any industry or person which cared to offer the necessary security But the basis of the new system, amortised mortgages over a long period, would undo'ubtedly suit some better than others. The Basic Industry. “The country cannot afford to do other than assist in every reasonable way its basic industry,” said Mr. Coates. “I and this Government have said that before, and we will say it again. I shall continue to emphasise that the agricultural industry is far and away the most important for us. and that it is necessary for the.people to realise that they depend tremendously on farming exports. Some say that it would be better for us to foster local industry to the exclusion of exports, but I say that if we cannot find markets for our exports we will automatically lower the standard of living to the detriment of everybody in Hie Dominion. The Government believes that the mortgage corporation will bo the means of finding cheaper money than would be possible under any other system.” Not a Monopoly. Mr. Coates said he did not ggree with those who said that the corporation would be a monopoly. It would be a healthy competitor in* legitimate business. It was often said that money could be easily borrowed at 4 per cent, to-day, but it must be remembered that such money was advanced on a very conservative basis. This system of finance in no way suited the farmer. The Bill provided for loans for CO years. In Great Britain the basis was 60 years for land and 40 years for improvements. New Zealanders were accustomed to 364-year loans, but the extended period would make, payment easier and more secure. It was essential that the Dominion should reduce interest rates to the lowest possible level, and the ‘mortgage corporation would accomplish what the Government wanted to do. Mr. W. E Parry (Lab., Auckland Central) : And put all the other lending businesses out of operation. Mr. Coates: They will be in competition. Mr. A. M. Samuel Jim'.., Thames) : Will the Bill apply to all securities advanced by the Government under the Discharged Soldiers’'Settlement Act?' , Mr. Coates :Oh yes - City Securities Also. Continuing, Mr. Coates said that business people, workers and others in the cities, would have an opportunity of seeking loafis and whatever benefits that were to come to the farmer if the system suited them. He bxlieved that the proposals contained in the Bill had all the tried ami best elements of private enterprise ->ud of State enterprise. Tlie corporation would be free to take up any first-class security in rural or urban proiierty. It should be able to lend at a low rate because it should be able to,borrow at a low rate. The reason why the -Government considered the corporation would be a sound organisation was because Hie risk would be spread over a large volume of mortgages. Mr. F. Langstone (Lab.. Waimarino) : The State Advances Office spread theirs. Mr. Coates: This envisages something very much wider. The lending margins should he safe and the risk well spread. Adequate reserves will be built up. Any losses on mortgages taken over will lie guaranteed by the Crown. It i§. proposed to establish an organisation that will bo sound and at the same time meet the requirements of those it is urgently necessary to assist. We will call this measure A Bill and the one dealing with the rehabilitation to come next week B Bill. . Mr. 11. T. Armstrong (Lal)., Christchurch East) : (’all these both B Bills. : • ■■ ' \ ■ • Local Body Reserves. Mr. Coates explained that it was proposed to put £2.500.000 of local body reserves in the reserve fund, and this would be repaid from (lie profits of the Corporation over a long ‘period of years Reserves would also accrue by way o? repayments. If further reserves were necessary, then the Crown would provide them. Criticism had been made of the intention to include private capital, but the idea of flint was given a sense of security to the lender. To give a feeling of confidence to the investor was the keynote of Hie success of the organisation. Tlie dividend would be one per cent, above the bond rate. If bonds were in-ought on the market three per cent, then the dividend would be four per cent Mr. A. J. Stallworthy (Ind., Eden): Bonds will vary on the exchange. Will you take the average over a year? Mr. Coates : Yes. Mr. Samuel : Investors will be continually "pulling” the bonds to keep the dividend up. Mr. Coates said tlie table mortgage system gave a greater measure of security than obtained under the tint mortgage system. Mr. W. J. Jordan iLali., Manukau) : Will it affect tlie personal covenant? Mr. Coates: That will lie dealt with in the next Bill. Dealing with file transfer of the State Advances and Lands Department mortgages, Mr. Coates said that each case would be dealt with ou its merits since it'should be possible, during tlie course of revaluation, to reach a point where a true .valuation could bg defi-

nitely established, if at any time tlie corporation was short of lending money then tlie State would hurry more securities into the corporation in order to keep an ample amount of capital available for lending. In answer to a question, Mr. Coates said that no man would be put out of his house without the expressed consent of the Minister. A harsh policy wopld not lie adopted, and lie did not think that harshness had marked the policy of the State Advances Department in the past. Mr. Jordan: Will tlie corporation pay local body rates? Mr. Coates: The corporation will be liable'for rates in respect'of new mortgages, but in tlie ease of existing State mortgages it Will not pay rates until these are taken over. It will not be liable for arrears of rates. Mr. Coates’s speech was interrupted by tin 1 adjournment. STATE MORTGAGES Borrowers in Default Tlie sum of money represented by State advances mortgages under whicli mortgagors have made default was sought by Mr. It. A. Wright (Iml.. Wellington Suburbs), in giving notice to move for a return in tlie House of Representatives yesterday. Mr. Wright also sought information as to what sum was represented by Public Trust Office securities under which mortgagors or borrowers had made default, and wlmt money had been lent by the Postmas-ter-General or tlie Post Oilice, or Hie Post Office Savings Bank, to tlie State. Advances Office in order to enable that, office to make advances on mortgages or otherwise. Air indication as to when it is proposed to demolish the old wooden building in Wellington at present occupied by the Pensions Department aud dental clinic —known to many as the “Tomato House”—was sought by Mr. R. McKeen (Lab., Wellington South), in notice of a question given the Prime Minister in tlie House of Representatives yesterday. “This building,” said Mr. McKeen, “was erected to provide temporary office accommodation during tlie war, and is long since obsolete.”