FARMERS' LIABILITIES.

New Zealand Herald, Volume LIX, Issue 18021, 21 February 1922, Page 8

FARMERS' LIABILITIES.

ATTITUDE OF MORTGAQEEB.

"BUSINESS IS BUSINESS."

NEW FORM OF VICIOUS CIRCLE. Although the air is full of rumours as to what mortgagors might call the " sweet reasonableness " of mortgagees who reduce the indebtedness of farmers because the slump has reduced the value of land, inquiry among lawyers indicates that very little of this sort of thirtg has been done. Probably tho wish is father to the thought. Cases there are where mortgagees, realising tho great difficulties facing tho farmers, have agreed sot to press for their Interest for a period, particularly whero the farmer is a man whose personality inspires confidence. In cases, too, private lenders may have followed the Government in allowing present interest to be capitalised, but generally speaking the attitude seems to bo that business is business and not philanthropy. The proverbial Philadelphia lawyer surely never had worse problems to deal with than some' of the financial tangles now occurring owing to the accumulation of mortgages on the same property. Even simple cases are liable to cause a layman's head to reel. For instance, A sells a farm to B, and accepts, say, a mortgage for £10,000, B sells to 0, who takes ovor his mortgage and gives another for,'say, £5000. B may have been living comfortably upon his interest, or may have been using the money in some other venture. C now cannot pay the interest due either to A or to B. A immediately applies to B, who was the first signatory to tho first mortgage, for the interest on it. Thus B not only has lost part of his income, but is faced with a heavy obligation to the original owner. When a first mortgage has been passed on through, perhaps, four or five hands, thn obligation of tho first signatory still remains if the others cannot be made to pay. The Bights of Creditors. A case is quoted of a man who purchased at quite a reasonable figure a farm near an inland town. He cannot pay his interest, partly becauae of the drop in the price of butter-fat and partly because he has not been able to collect interest owing to him on other properties. Hera we see the vicious circle in a new form. A fact that is not likely to improve the peace of mind of people who, during the boom, cheerfully entered into obligations, is that if the washing-up leaves their full indebtedness undischarged, their creditors nwy, by legal processes, seize other property if ■ they possess it, or if they have no asset* at present, they may keep the liability within the statute of limitations for a lifetime if they like, by a simple) process every six years. Thus it is quite possible that future prosperity may yet have to pay for the impulsive optimism of the land boom period.

"In-many cases the first or second mortgagee of a farm property," said one lawyer, "is a practical farmer who is now living in retirement in a town, or has taken up some other occupation on the strength of the interest he expected to draw. Such men. especially where the land has been grossly inflated in value through successive sa|es, probably will have to roturn to it. Of course, exfarmers who have no chance of getting their interest and are unable or unwilling to return to farming, may be prepared to treat for an adjustment of the mortgage, but so far I have not heard of a case of the kind." An 111-advised Policy. A prominent solicitor had some pointed comments to make upon tho whole question of adjusting mortgages. He said that the worst thing the Government could do was to discourage moneylenders taking mortgages on farm lands, but this was Ae direct result of recent actions. Lenders were becoming more and more afraid of farm securities, and he could give instances where instructions had already been given for money now advanced on farm lands to be put into sound stock exchange investments at the earliest possible moment. Much of this money, he said, would never go back to the land. "Offering the services of a State official to act as a mediator between mortgagor find mortgagee," he said, "is tantamount to suggesting that there is t> moral duty upon the mortgagee to meet new conditions by foregoing part of what is due to him. This is entirely wrong. It is putting the moral responsibility on the wrong side. It tends to lower thp standards of business morality. The effect of the housing legislation was to discourage people from being landlords, and "the effect of tho present suggestions by tho Government in regard to breaking contracts will, as I have said, moke lenders very chary of farm investments. The t history of the moratorium and other thingß has tended to undermine the confidence of lenders in Government promises. I know of cases where mortgagee: have voluntarily decided not to press for interest for a time, but I know of no case where principal has been reduced."