MORTGAGORS AND CREDIT

New Zealand Herald, Volume LXXIV, Issue 22688, 29 March 1937, Page 8

MORTGAGORS AND CREDIT

It is evident from a statement the Attorney-General has made that the grant of ordinary bank accommodation to mortgagors who have filed applications for relief has been affected by the Mortgagors and Lessees Rehabilitation Act, 1936. The Minister refers directly to section 5S of the Act. To read it is to realise that the banks have good reason to feel uncertain about their power to protect themselves when extending credit in such circumstances. On the surface at least it appears that any security given for an overdraft may prove to be useless to the lender, and the giving by the borrower a breach of the law. The Minister wishes the banks to continue carrying clients who have started proceedings for mortgage adjustment, and says if any legislation is required for their protection it will lie provided. This is accompanied by a clear statement that the Government is not in any way indemnifying the banks against losses by this promise. It could hardly be expected to do that, but it is difficult to see what protection can be given by legislation. The position is made more difficult because Parliament will not be meeting for some months to come. The task of the adjustment commissions is a heavy one, and it is generally agreed that to dispose of the mass of applications by mortgagors will be a long business. Thus the present state of uncertainty is likely to continue. The Minister's statement really does little to improve things. It is not his fault, because to give a satisfactory assurance is beyond anybody's power so long as the restrictions on pledging property set up by the Act are maintained. The effect on the mortgagor's credit when he filed an application was pointed out when the legislation first appeared. The anxieties of the banks over granting accommodation are simply proof that this forecast was correct*