MORTGAGES AND MORALS

Greymouth Evening Star, 4 July 1933, Page 6

MORTGAGES AND MORALS

THE ULTIMATE SETTLEMENT. A striking summing-up of moral losses incurred in the financial crisis is made by Herbert 0. Frey in an article, “Mortgages and Morals,” in the “Trust Companies Magazine.” Mr Frey sees reasonable prospect of early recovery of material values in reaii estate. The outlook is not gloomy. But he adds: “There is a matter that 1 should occasion more concern than this, i If the shrinkage in values- has occasioned us worry, the loss of some-i thing far more difficult to restore,, namely', morale, should occasion genuine alarm. There has been unquestionably an adverse change in the

moral code in business relationships. This is a phase of the mortgage situation which has become serious. To those concerned chiefly with matters financial this phase of our present situation may appear irrelevant.»But the words of Francis P. Garven, of Yale University, are in point here: ‘lt is not the fair play taught in sports when leading bankers say that they are responsible for nothing except money.’ We should be interested in the moral issues of business, and we are. Here are some indications of the moral trend in our mortgage situation: “There is a distinct lowering of moral ieals. Great pressure has

wrought this. We have always had evasion of obligations to a degree, ‘but to-day this is not only intensified, but is lightly treated and sometimes even condoned. Tenants treat leases as scraps of paper and have no regard for the sacredness of their Avritten obligations.. Mortgagors do not hesitate to withhold payments of interest and taxes in an effort to enforce concessions not always justified. “Financial institutions are confronted Avith a demand for mortgage money backed by excellent, security, and are forced to decline because the needed funds cannot be obtained save by de-

manding payments from existing borroAvers Avhom they have no desire to embarrass. What is the result? The would-be borrower blames the banker for not being helpful. The beneficiary for whom the banker acts condemns the banker because of his lenient attitude towards the borrower. The mortgagor who is not pressed for payment of principal adds his meed of censure because he has not received other con-

cessions. No one is ever Avrong except the banker. He i s never right. There is no fair play in his attitude. j DISAPPEARANCE OF EQUITIES. “There is a distorted vision of moral rights. This is occasioned by the shrinkage or disappearance of

equities. The owner whose property does not pay its way decides that the loss of both principal and interest should be borne equally by himself and' the holder of the first and second mortgages. There is ip this attitude a forgetfulness of the order ,of things. The first mortgagee wap given a prior claim to the security and its earnings when the debt was created. There was no question or misunderstanding about this originally. The second mortgages came next in order. He ran a greater risk, and was compensated often by a 'higher rate of interest and sometimes ( by amortisation of principal. The moral distortion lies in the fact that | when values were increasing and income substantial, the first mortgagee • was never a partner in Die profits, nor did he expect to be. We have learned! only how to win, but not how to lose. It is true that the pressure of adversity has never been so great as now, but the effect does not reflect great credit upon our educational methods of training in moral conduct. z “There is the growth of enmity of borrower against lender, culminating in vindictiveness which sweeps aside every consideration of what is right and fair. The thing itself is not new, but has been unusual in our civilisation. It is the ultimate stage in the moral breakdown, and demands the consideration of thoughtful people. It exhibits itself in studied effort to secure every advantage by financial default, subterfuge, bankruptcy, neglect of property, and often in Wan-

ton destruction. Vandalism is so rife that one is amazed that such conditions could obtain in a policed community. Such destruction of property is purely vindictive, and is' not occasioned by the desire for loot. It is the expression of antipathy against the owner of tangible property. It is unreasoning, or its perpetrators would realise that their acts are driving potential investors in mortgages out of the market. This moral decadence represents by far the most serious loss the country has suffered in the past three and a-half years. The mlichmaligned copy-book of school' days, which extolled the homely virtues, night be good medicine to-day.”