MORTGAGE BILL

Evening Post, Volume CXXII, Issue 67, 16 September 1936, Page 12

MORTGAGE BILL

FARMERS' POSITION

ADJUSTMENT BASIS

PRESIDENT'S COMMENT

Comment on the Mortgagors and Lessees Rehabilitation Act was made this afternoon by Mr. W. W. Mulholland, Dominion president of the New Zealand Farmers' Union.

"The Mortgagors and Lessees Rehabilitation Act will be definitely the final opportunity given to mortgagors for the adjustment of their mortgages and other debts, and when it becomes law it will be necessary for everybody who may need the protection of such legislation to file their application before December 31 next," said Mr. Mulholland. "This fact also makes it particularly necessary that the basis of the adjustment shall be such "as will enable a capable farmer to have a reasonable chance of carrying on under the conditions that will obtain in the future at there will be no further opportunity for the revieiy of his.debts as under the present Act. Of very great importance in this respect is the method adopted in the valuation of land and of the stock and chattels. The Act instructs the Commission to value the stock and chattels on the basis of values ruling on the date of the passing of the Act. As the price of most farm stock is high at the present time —partly due to'a buoyant market, and partly due to the time of the season, sheep approaching full wool, etc. — there is the prospect that average prices over the next few years may be considerably lower than this, and while under the system of determining basic values in the Bill this may not seem directly to affect the farmer, it does in fact mean that he will have a greater amount of working capitalto find, and he will have no security to offer for it, while the mortgagee will have a consequential reduction in the amount of his adjusted mortgage. A DIFFERENT METHOD. "There does not seem to be any reason why a different method of valuation should be adopted for the land and for the stock. It will have the effect of placing the people who have advanced money on the stock and chattels in a more favourable position than those who have advanced money on the land. An^important point in the determining of the basic value is the allowance that is made to the farmer himself by way of wages or living expenses or whatever it may be called. It will be wrong, and given an entirely false value if this is calculated on the basis of ordinary farm wages. It should certainly be a management wage, i.e., a salary that would be paid to a working manager, and should be sufficient to enable him not only to keep his family in the same standard of comfort as -an artisan in town, but should also enable him to pay a little off his mortgage year by year, and so rebuild out of his hard labour the equity in his farm. If all he is to be allowed is enough to cover costs of Hying and maintaining himself and his family, he will certainly not be encouraged to stay on his farm. The interest rate which can be arbitrarily fixed by the Government is another important matter. If the rate is fixed at a low level, the effect will be to make the basic value higher—consequently also the capital value of the mortgage. While at first glance a low interest rate may seem to be advantageous, the increase of the capital debt must also be considered, and the point can easily be reached where the cost of amortisation on a table mortgage plan of large capital indebtedness would increase the annual repayment instalments to a burdensome level. It is, therefore, desirable that the interest rate on which the basic value is computed should be moderate —neither high nor low." ' |