MORTGAGE LOANS

New Zealand Herald, Volume LXXIII, Issue 22404, 28 April 1936, Page 16

MORTGAGE LOANS

RECENT LEGISLATION DISAPPROVAL EXPRESSED "RECOVERY RETARDED" "Since the advent of statutes restricting mortgage contracts, the trustees have expressed thoir strong disapproval, and, in my opinion, the legislation has retarded the recovery from the depression," said Mr. E. A. Brown, president of the board of trustees of the Auckland Savings Bank, at the annual meeting yesterday. "It has placed barriers between mortgagee and mortgagor that were never intended, and has frozen the How of money between lender and borrower. "It cannot be denied that, in spite of all possible legal protection, and even in times of national prosperity, some mortgagors fail in their obligations, and the only solution is an ending of the contract," continued Mr. Brown. "In such cases, realisation of tho position with a fresh start is a much better solution to the mortgagor than the mental strain and stress of continual supervision and investigation, which usually ends with tho same result. Any suggestion of further interference with mortgage contracts must cause grave repercussions on life insurance companies, building societies, and trustee savings banks, which havo the custody of the majority of the savings of our people." Mr. Brown said that another important factor was that the mortgagee was placed on the defensive and was not encouraged to make reconciliations advantageous to both parties. He would be failing in his duty to the depositors if he did not repeat the protest against this legislation. In his varied experience, and as the result of many, personal visitations, he was convinced that the adverse position of tha farmer mortgagor had been greatly exaggerated. The bank held 4789 mortgages, amounting to nearly £3,500,000, and could speak with authority. The statutes introduced in the last few years had been all on the side of tho borrower, and the mortgagee had received little or no consideration.

"Such legislation is most unjust, especially on financial institutions such as our own," said Mr. Brown. " We have at all times been ready to investigate failure to make payments, and, provided we are satisfied "with the efforts, ability, and sincerity of our borrowers, we have not tried to force the position. Many evidences expressing appreciation of our action have been received. I consider that we are fully competent to deal with the position, and I am perturbed with legislation that places a stigma on what has always been one of the main channels of investment of trust funds. Notwithstanding this, the bank, realising tho need, has continued lending on approved town and country securities at a conservative rate, at present 4$ per cent, and I am convinced by practical experience that our type of mortgage is unexcelled, containing as it does the option of repayments in multiples of £5, without notice, on any quarter day. "Savings banks can only lend such sums as are received from depositors, plus reserves," Mr. Brown concluded. "Trading banks can similarly lend only what is received from their depositors, fixed or otherwise, plus reserves, and capital. The position is quite simple, and statements made that banks can create credit at will by a ledger entry are quite erroneous."