STATE ADVANCES POLICY

New Zealand Herald, Volume LXXIII, Issue 22463, 6 July 1936, Page 8

STATE ADVANCES POLICY

Mr. Nash's warning to intending borrowers indicates that the State Advances Corporation is starting out with a sounder policy than guided the lending of some previous administrations in the department of housing. The Minister of Finance has noted that some people wishing to build their own homes are purchasing sections on deposit, hoping to obtain from the corporation a loan sufficient to cover the cost of building. He points out that State advances, like most other mortgages, are secured on the land, which includes all buildings erected thereon. The corporation's lpan must therefore be devoted first to clearing the land of encumbrances, only the remainder being available for payment on the cost of the house. The borrower has to find the rest of the cost of the house from his own money, a sum that, Mr. Xash emphasises, "cannot be provided by arranging a second mortgage unless the corporation consents in writing." The Minister has done intending borrowers a service by stating the position so plainly. They, are warned against setting their names to contracts for purchase of land or for building until they have counted the cost to the last penny and are certain they can meet it. There can be no last-minute recourse to second mortgages. In other words the corporation intends to see that its' security is not loaded up to the limit, and its mortgagor overloaded, as has happened too often in the past. It seems that the average borrower will be expected to put down a reasonable deposit and the corporation intends, moreover, to make sure that in the financial sense he does not bite off more than he can chew. If that policy is faithfully adhered to, it will avert the troubles of the past in which both the State and the borrower were involved in heavy losses.