Parliament MORTGAGORS’ REHABILITATION

Dominion, Volume 29, Issue 301, 16 September 1936, Page 10

Parliament MORTGAGORS’ REHABILITATION

Government’s Adjustment Plan Discussed

MORE SECOND READING SPEECHES

Opposition Criticism of Proposals

Formal business and tributes of respect to two former legislators who died recently—Messrs. R. Moore and F. H. Smith — were the only matters dealt with at the afternoon sitting of the House of Representatives yesterday. The proceedings occupied half an hour, the House adjourning until the evening as a mark of respect. , ' ■Consideration of the Mortgagors and Lessees Rehabilitation Bill was resumed in the evening. Urgency was sought by the Prime Minister, Rt. Hon. M. J. Savage, for the second reading . stage of the Bill. This procedure was challenged by the Opposition, but the urgency motion was carried by 36 votes to 10. The first speaker was Mr. R. A. Wright (Independent, Wellington Suburbs), who suggested that steps should be taken to make it illegal for people to enter into contracts for second mortgages. He was followed in the debate by speakers from both sides of the House, including the Rt. Hon. J. G. Coates (Opposition, Kaipara), who contended that the. legislation was no improvement on that of the last Government.

Mr. R. A. Wright (Independent, Wellington Suburbs) said that under the Bill second mortgagees would lose practically all of their investment. It was questionable whether second mortgages should not be declared illegal From conversations he had had with people who had invested their savings on second mortgage, he had found that in most instances they had lost almost all of the money they had placed in that way. The unfortunate thing was that many were widows who had little knowledge of the complexities of investment. What money even now remained to second mortgagees would vanish under the legislation now before the House. Had the Minister of Finance anything in mind to assist persons whose investment would disappear through the operation of the Bill? asked Mr. Wright. He pointed out that the application of the legislation was not confined to mortgages on land, but involved money lent on the security of businesses and dwelling houses. Deprecating what he termed an inference in the legislation that the mortgagee was a kind of usurer, Mr. Wright emphasised that the business of the country could not go on without lending and borrowing. The stigmatising of the borrowing of money was quite out of place. Few business men in New Zealand to-dav were working without the aid of money borrowed from the banks. Generally it was sound policy to do so. The idea that the mortgagee was a person who operated as a grasping money-lender in a large way was a delusion. On the contrary, the average mortgagee was the small investor who in many cases had put life savings into a property in the belief that it offered a safe investment.

Mr. Wright predicted that friendly societies and other institutions who invested in mortgage the funds of a vast number of members would be hard hit by the Bill. The position of the State Advances Corporation would also be affected. He said he presumed that it had £40,000,000 out on mortgage. When the Bill had finished with the corporation it would lose probably £5,000,000 and the taxpayer would be called. l upon to make up the Joss. Much had been made by Government speakers of the I evil of land speculation, said Mr. Wright, but it had gone on from the (earliest times, and it was difficult ro isee how/ speculation could be. stopped, ’ unless the Government owned all the hand and buildings in the country.-This 'was clearly not possible. Critical Government Member.

Mr. C. H. Burnett' (Government, Tauranga) criticised certain provisions of the Bill and suggested several possible amendments. “One thing this j legislation should revise is the machin- ! ery dealing with the situation of the i farmer after rehabilitation,” he said. "After receiving assistance under any ; scheme of rehabilitation, a farmer (should not be allowed to encumber (himself again until he has paid off all (his obligations under that scheme. The (Bill does deal with one such evenituallty, by prohibiting the sale of a (property without the consent of the (court. But I hope that the Governiment will provide a clause which I will prevent the farmer from dealing (in any way with his land until he has (settled with his mortgagee. Such a t clause will prevent him from getting lout with the profit, as it were, and (leaving the mortgagee lamenting.”

, Mr. Burnett also referred to the absence of some provision for the right of appeal beyond the jurisdiction of ,the Court of Review. "Holding the views that I do about the constitutional right of appeal. I believe that there should be no limit in, the right of appeal," he said, “I do not think that there should be any limit in any law to prevent any man from going as far as he likes in any appeal.” ■ It was suggested by Mr. Burnett (that the limit which the Bill placed on the period in which applications ' could be made should be extended slightly. He pointed out that under the terms of the Bill application for adjustment must be filed before December 31, 1936, and suggested that the usual Christmas holidays observed by solicitors and others interested might interfere with the interests of applicants. The date should be extended to January 31, 1937. Dealing with the clause which provides for the determination of the values of town properties, Mr. Burnett asked the Minister of Finance, Hon. W. Nash, whether he would indicate what items valuers would be asked to take into consideration in tnaking their decisions. He claimed that some indication of the major i items ought to be available in the Bill itself. Nor was there any indication in the Bill, he added, as to what property owners would be called on to pay for the necessary valuations. Mr. Burnett also criticised the absence of a provision which would ' allow a mortgagee to buy his own property. Contracts Since 1931.

The action of the Government in bringing mortgage contracts entered into since 1931 within the scope of the Bill was strongly criticised by the Hon. Sir Alfred Ransom (Opposition, Pahiatua). Contracts, he said, had been made with a full knowledge of the conditions existing, and in those circumstances it was most unfair to the mortgagee now to pass legislation adversely affecting his investment.

Sir Alfred said that another unfair clause in the Bill was that basing the productive value of a farm on prices ruling over a period of from eight to

10 years. Last year had been a good season for sheep-farmers, but under the Bill the prices received that season would be excluded, from the calculation fixing the value of a property. There was a grave underlying danger in the legislation that it, might injure the credit of the client farmer, and that would be a serious state of affairs for the primary producers. So important a matter as the rate of interest was not mentioned in the Bill, but was to be gazetted at some future date. There was special provision whereby private arrangements could be made by Government departments and trustees if they were confirmed by the Court of Review. If such a provision were good for the State and trustees, surely it was equally as good for private mortgagors and mortgagees.

The Government, added Sir Alfred, appeared to imagine that there was an obligation on it to amend any legislation passed by the previous Government The general principles of the Bill be most inequitable in operation. The' Rural Mortgagors Final Adjustment Act was one of the most far-reaching measures ever passed in New Zealand, and as other speakers had said, probably cost the late Government a lot of popularity. In his opinion, however, the present Bill was even more objectionable. The proposals in the Bill, would make investments in landed property most unipolar, and for that reason if no other the Government should give the measure very careful consideration. “Had it not been for the financial assistance of mortgagees in the past New Zealand would not be in the position it is to-day of being the greatest exporter of butter and cheese in the world,” said Sir Alfred. “The mortgagee is being made the scapegoat to rehabilitate the farmer, when the Government itself promised to do so by guaranteed prices. A grave injustice will be done to a section of the community. Mortgagors are to be given the right to .sen on a rising market at the mortgagee’s expense. They are to be permitted to capitalise remissions and gamble on them.” The opinion that the Bill was the most important mortgage legislation that had been brought forward in New Zealand for many years was expressed by Mr. E. L. Cullen (Government, Hawke’s Bay), who said that if the Bill was carried into effect in the spirit intended by the Government it would be of great benefit to the farmers of New Zealand. Mr. Cullen asked whether the judge of the Court of Review was to be appointed from the judges in office today. He suggested that there were quite a number of legal practitioners dealing with farm commitments in the country who. would be suitable for that position. The necessity for revaluation in certain districts was emphasised by Mr. Cullen, who stated that this was particularly necessary in respect of some lands held under the Discharged Soldiers Settlement Act. “Government’s Triangular Plan.” A vigorous attack on what he termed “the Government’s triangular plan for farmers” was delivered by the Rt Hon. J. G. Coates (Opposition, Kaipara). The one result of the Government’s legislation, he said, would be the loss by the farmer of any equity in his land so that he would be reduced to the position of a wage worker for the State. Mr. Coates said he had listened to two Government speakers who had put up the worst case he had heard for a long time. It was impossible to reconcile the interests of farmer mortgagors and mortgagees. Mr. J. Thorn (Government, Thames): You had a shot at that yourself.

“I am bound to say that this Bill is no improvement on past legislation,” said Mr. Coates. “In tbe past there was provision for a 20 per cent, equity. That is to be taken away. I would like any member of the Government to show me where a penny piece of equity exists in this Bill. The Prime Minister promised to restore equities. Either the Minister of Finance»has let him down badly, or else he hag gone back on the promises which he made to the farming community.

“It is impossible to approach this Mortgage Bill as an isolated piece of legislation. It is part of the triangular plan for farmers. First, we had the guaranteed price, which is lower than the ruling market rate. The second leg of the triangle was the statutory minimum wage for farm labourers, which was fixed at a rate below tbe wage fixed for general labourers. And now we have the readjustment of mortgages. The mortgagor is to be allowed a reasonable standard of comfort, but at tbe same'time he will be left mortgaged 100 per cent.” Mr. Thorn: He is mortgaged 150 per cent, it present.

Mr. Coates said it was true that the legislation iu many respects was based on the Acts passed by the last Government. i

Mr. J. Christie (Government, Waipawa): Why complain about it? Mr. Coates: The hon. gentleman win get all the complaints he wants when he goes back to his own constituency. Mortgages could not be adjusted on the basis of the guaranteed price, said Mr. Coates. The price itself was to vary from year to year. The intentions of the Government were clear. It aimed at securing all equity in laid for the State. If the farmer lost his equity and all reasonable chance of an equity

he would be reduced to the standard of a peasant. Dealing with the detailed provisions of the Bill, Mr. Coates mentioned the case of a farmer with £l5OO of mortgage liability. On the basis of productive value, his farm might be valued at £lOOO and his mortgage automatically reduced to that amount. The terms of the mortgage could be varied by the adjustment commission dealing with the case or repayment could be ordered. The majority of farmers would still be left mortgaged .100 per cent, and in that case it would be impossible for them to refinance. The balance of £5OO after the reduction of the mortgage would become an adjustable debt and might or might not be discharged by the commission. There was nothing in the Bill to say that it would automatically disappear, and if the farmer thought that his mortgage was to be reduced and the amount of reduction wiped off then he would have another think coming. “The Bill before the House does nothing to simplify the position,” said Mr. Coates. “Indeed, it makes it more complicated and involved. It is all part of an attempt by the Government to take over the land with the farmer as a servant of the State. The Bill certainly docs not measure up to tbe declarations of the Government and in this respect can only be viewed with disappointment” The contention that the Bill would give the farmer the full benefit of his efficiency was advanced by Mr. J. G. Barclay (Government, Marsden). The farmer, he said, would receive the equity he was creating, and if he could increase the carrying capacity of his farm he would get the- benefit of that increase

Mr. Barclay said the price for dairy produce on the London market to-day was almost exactly the price the New Zealand farmer was receiving, and the market price was going down. He was satisfied the farmers were looking te the Bill to bring some stability to their industry—a thing they had .never had under the regime of the past Government.

The Hou. J. G. Cobbe (Opposition, Oroua) said that the unfortunate mortgagee, who had been on tenterhooks for months, did not know where he was to-day. The only thing he could be sure about was that the money be had lent was now only partly his. Moreover, the Bill would not give the expected relief to the mortgagor. It was an anaesthetic that gave only temporary relief. Mr. H. G. Dickie (Opposition, Patea) criticised the absence of any right of appeal. He said an Arbitration Court composed of a judge and two employers would not be acceptable to the Government, yet the Court of Review consisted of a judge and two representatives of the farmers. It should be possible to allow for the representation of mortgagees’ interests. At 1 a.m. the Minister of Finance, Hon. W. Nash, commenced his reply to the debate. At the conclusion of his speech the Bill was read a second lime and the House adjourned till this afternoon.