FARMERS' LOANS

New Zealand Herald, Volume LXXVII, Issue 23719, 27 July 1940, Page 14

FARMERS' LOANS

NEW REGULATIONS

FAR-REACHING PROVISIONS EFFECT ON MORTGAGEES Important and far-reaching provisions, afleeting not only fanners, but all who have invested money or contemplate investing money 011 loan to them, ai'O contained in the Farmers' Loans Emergency Regulations, which have recently been gazetted. As the regulations are becoming more widely known many of the provisions are attracting increasing criticism.

Tho regulations empower the State Advances Corporation to make advances to any farmer for the purpose of increasing or promoting tho production of any primary product. No limit to the advance is specified and it appears that 110 consent from any existing mortgagee is necessary. UlO amount of tho advance becomes a

charge on the land or chattel on the security of which tho advance is made. A drastic provision states that this charge is to rank pari passu with any existing first mortgage, but ahead of any second mortgage. '•lt is clear that the character of tho security of even first mortgages may bo radically altered," said a solicitor who handles largo sums for investment. "Trustees who have lent money 011 a properly conservative margin of security, and at proportionately low rates of interest may find that margin destroyed. They may find, too, that where tho attempt at 'promoting the production of any primary product' has been a failure, tho land is burdened with a charge which ranks pari passu with the first mortgage, but), as may well happen, has not let to any increase in tho valuo of the security. The case of the existing second mortgagee is even worse, because he is relegated to tho position of third mortgagee. "There appears to be a definite element of unfairness in thus placing the risk and burden of a national war effort upon tho shoulders of individual members of the community," he added. "Mortgagees have suffered many rude shocks since the last war, and the new regulations will be apt to destroy further any confidence in investment by way of loan to the farming c'ommunity."