LOANS TO FARMERS

Evening Post, Volume CXXX, Issue 26, 30 July 1940, Page 10

LOANS TO FARMERS

IMPORTANT POINTS RAISED

Important and far-reaching provisions, affecting not only farmers, but all who have invested money or contemplate investing money on loan to them are contained in the Farmers' Loans Emergency Regulations recently gazetted. As the regulations are becoming more widely known many of the provisions are attracting increasing criticism. The "New Zealand Herald" sought legal opinion on the effect of the regulations and learned that they empower the State Advances Corporation to make advances to any farmer for the purpose of increasing or promoting the production of any primary product with no limit to the advance specified, no consent from any existing mortgagee being necessary. The amount of the advance becomes a charge on the land or chattel on the security of which the advance is made and this charge is to rank pari passu with any existing first mortgage, but ahead of any second mortgage. "It is clear that the character of the security of even first mortgages may be radically altered," was the opinion of a solicitor handling large sums for investment. "Trustees who have lent money on a properly conservative margin of security, # and at proportionately low rates of interest, may find that margin destroyed,' he said. "They may find, too, that where the attempt at 'promoting the produc- j tion of any primary product' has been a failure, the land is burdened with a charge which ranks pari passu with the first mortgage, but, as may well happen, has not led to any increase in the value of the security. The case of the existing second mortgagee- is even worse, because he is relegated to'the position of third mortgagee. "There appears to be a definite element of unfairness in thus placing the risk and burden of a national war effort upon the shoulders of individual members of the community," concluded the solicitor. "Mortgages have suffered many rude shocks since the last war, and the new regulations will be apt to destroy rfurther any confidence m .investment by way of loan to the farming community." .