The Poor Mortgagee

Dominion, Volume 28, Issue 168, 12 April 1935, Page 13

The Poor Mortgagee

Sir, —The letter of “Antiqua Ovis” is interesting because of the fundamental error upon which his arguments are based. He talks o'f the ‘‘mortgagee’s interest” in the sense that his mortgagee.is a partner with himself. The true position is that the mortgagee’s interest is merely that of a lender on the security of the property, which is pledged to provide for the sate refund of the loan moneys. “Antiqua Ovis’s” interest as owner and mortgagor comprises the equity in the property, which equitj' may at one time or another go up or down in value according to tbe vagaries of the land market.

In tbe event of the value increasing and the owner selling at a profit, there is no legal and no moral obligation for the mortgagor to divide his profits with the mortgagee. The same principle applies in the event of values retrogressing. Why should your correspondent expect loans on land to be treated in a manner different from that appertaining to loans on other securities, or no security at all? Supposing “iAntiqua Ovis” has money to invest and decides to buy stocks and shares, but that he wishes to purchase more than he lias money to provide for. He borrows from A.B'. The stocks and shares meet with a slump and go down in value. Would your correspondent have the temerity to suggest that A. 8., who lent him money to provide him with the means to speculate, should bear a proportion of the loss? I know of many cases in the past 30 years in which farmers have borrowed money to purchase a farm and sold at a great profit. According to your correspondent, these people should have presented their mortgagees with a-share of such profit. (What a surprise for the mortgagees.) The mortgagee is not a partner—morally or legally. If we established that mortgagees and mortgagors are partners, then the present mortgage system would collapse. Who would seek to be a partner in a business which lie cannot control? If a farmer wishes to make nis position assured, it is quite a simple matter. He should see that he purchases exactly the area of land and the number of stock that his own money will purchase, and not try to make money or a living by borrowing other people’s capital.—l am, etc., EGGSACTLY. Napier, April 9. Sir, —It is about time that the ideas promulgated by “Equity" and others that the mortgagor and mortgagee have distinct equities in the property, mortgages should be dissipated. These ideas sound plausible. When the property was mortgaged, bo.tli parties clearly understood that the whole value of the property was pledged to secure repayment of the money borrowed. In case of default, the property was to be sold, and the proceeds applied, first, in paying the costs of the sale, then the amount owing to the mortgagee, and the balance (if any) to the mortgagor. The mortgagee has no interest in the property, and no rights in regard thereto, until default has been made. It must be obvious to the meanest intelligence that no person would advance money on the terms that in case of loss he was to be a partner, but while the property was prospering he was to be a lender only, and that, in any case, he was to have no share, or say, in the management. Alay I repeat that the mortgagor had the opportunity when borrowing the money of having these terms he now contends for embodied in the mortgage, but failed to do so, for the reason that few mortgagees would have agreed to them. How wrong to bring them into action now. Is adversity making us a dishonest people?—l am, etc., X.Y.Z Sir,—ln Wednesday’s issue of your paper a correspondent, “Principles,” commenting on my previous letter, refers to the suggestions contained therein as being "weird notions,” and states that my pen-name clashes with my views. Of course there are two sides to every story, and on several occasions in both Wellington dailies correspondents have commented favourably on the suitability of the pen-name to the writings. It is quite evident that “Principles’ ” argument is based on ordinary business in normal times, and he chooses to overlook the fact that in times of crisis ordinary methods must be varied to suit the exigencies of a world depression, when, desperate taxation is loaded onto the ordinary taxpayer to help to support jhe primary industries, and thousands of workers, anxious and willing to work, are unable to obtain the wherew’ithall to support themselves and their families. “Principles” writes: "If this letter shows your correspondents their views have many flaws it will be to that extent justified.” Is there any human system or views which are without flaws to some section of the community? His argument may appeal to some mortgagees, but would it appeal to the sympathetic Christianised section of mortgagees who have already called, in the mortgagor, and of their own free will, knowing and realising the situation, have said: “Take thy £lOO bill and write down £70,” and if such has been done by—as we are told —many mortgagees, why should others escape their just share of the devaluation of their mortgages ? The salvation of th® country depends on such adjustment. “Principles” must realise that mortgagees or anyone else cannot get blood out of stone, and a crisis, whether economic or war, must be met by the people, and when sacrifice is required for the survival of a nation, the sacrifice should be one of equality, not lop-sided injustice such as has been handed to those outside the primary producing industry, and as permitted during the last war. The recent suggestions from America for running their next war, when those left to conduct the affairs of the home country shall be employed on the same basis as those conducting the country’s affairs outside the home country, are coming near to "equality of sacrifice,” except that if the country is a long way from the scene of action, the home section will be privileged to save their lives, while those abroad are privileged to offer it as a sacrifice to the country. "Principles” also writes: “There cau be no equality of sacrifice without equal conditions of opportunity.” If land values are written down and adjusted, as I have already suggested, pro rata between mortgagor and mortgagee, both urban and rural, and arrangements made for periodical revaluations based ou productive values, both’for taxation purposes and adjustments of capital values, would not this produce the ideal conditions as mentioned above by your correspondent? Is such an arrangement impossible with a Parliament working to do the best for all the people, or must wc be so hidebound as to cling to tradition and a wornout system which has definitely failed to function in a time of crisis? If “Principles” will thoughtfully consider such a scheme, leaving out the personal element, and noting the Alnster’s teaching, “Aly neighbour is all mankind of every description.” perhaps he will be able to change his views, which at. present are deplorable when the salvation of the country is at stake. The ’-eform of the currency and land systems is without doubt the mainspring of the new and better era which is coming to the world, and which will come by force of public opinion.—l am. etc., EQUITY. Wellington, April 11.