STATE ADVANCES

Otago Daily Times, Issue 22957, 12 August 1936, Page 10

STATE ADVANCES

OPERATIONS OF CORPORATION THE GOVERNMENT’S POLICY ' FULL DETAILS ANNOUNCED FINANCE FOR HOME BUILDER (From Our Parliamentary Reporter) WELLINGTON, August 11. Full details of the policy of the Government in respect of the administration of the State Advances Corporation were announced to-night in a statement by the Minister of Finance (Mr W. Nash). “The Board of Management of the corporation will be responsible for the administration of both ordinary investment loans and special loans authorised by this year’s Act,” Mr Nash said. .“The board will continue its ordinary business operations of lending for such purposes as it deems proper on its usual investment basis. Under this heading there is no restriction on the amount of a loan or the purpose for which it is raised, but the corporation is restricted by the Act to the granting of loans up to a limit of 66 2-3 of the productive value of the security as assessed by the board. The board will, however, also make advances beyond this margin in proper cases. Such loans will be mainly for the rehabilitation of farmers and the building of homes. They are to be termed special loans. “In eases where persons are willing and able to pay some reasonably substantial deposit toward the cost of building a home, the Government proposes to find the balance at as low a rate of interest and with as small a margin as are reasonable. That statement embraces the position generally where persons applying for special building loans are able to satisfy the corporation that they as mortgagors will have a reasonable equity in their homes. It seems to the Government that the present special building loans should be made available to assist families where the joint income of the husband and wife does not exceed £6 a week. “ Some reasonable allowance, however, to this limit will be made to meet the different circumstances and responsibilities of the households. The board will take the circumstances of each case into consideration, and where the families exceed three dependent children additional income earnings will be allowed for as appear reasonable. “ The board will give similar consideration to the amount of a loan that may be borrowed in any of the special buildipg cases and to the best terms that can be offered by the corporation to the particular applicant so as to bring the amount of the instalment to a figure that will not absorb more than a reasonable portion of the borrower’s weekly wage or income. This general aim can be attained only by bearing in mind three considerations—the amount of the loan, the term over which repayment is to be secured, and the annual income of the applicant. The board will have to guard against encouraging any borrower to assume a burden beyond his earnings, having regard in each case to the family responsibilities. In some cases a building loan up to £IOOO for a home and section may be warranted, and perhaps something higher in particular cases where there are four or more children dependent on their parents. ~ , . , “In the applications for special building loans the board will then give in each case its special consideration to the following factors:—The character and general circumstances of the applicant, the necessity for a new house in a particular area, the income of the applicant, and allied to that the amount of loan liability that can reasonably be carried by him in his circumstances. “ This year’s Act contains certain special provisions directed to improve service and the assistance for the mortgagor. I refer to the provisions for a variation of the scheme of table mortgages, the condition of accepting a life insurance policy as collateral security, and to the special class of policy covering the reducing of the balance of the loan, to the provision for periodical payments on account of rates, insurance, the maintenance of security, and to the different rates of interest that may be charged in respect of different portions of the same loan. These matters will be considered by the board in relation to each case submitted to it. IMPORTANT PROVISIONS “ Section 37 of the Act prohibits the mortgagor from giving any further mortgage or other charge over land subject to the corporation’s security without the written authority of the board. There is also a provision under which the corporation may call up the whole or any part of its loan in the event of the sale of the security unless the corporation has consented to the sale. These two provisions will enable the corporation to prevent the capitalisation of the facilities of tow interest rates and the small margins provided by the Government for specific purposes. Unless the applicant is proposing to build a home for the continued occupation of his family he will not be eligible for a special building loan from the corporation. The corporation will exercise its statutory powers to limit the possibilities of /-abuse of State benefits. With this knowledge no buyer can negotiate to purchase any security mortgaged to the corporation in the belief that he is buying, in addition to the property, exceptional finance facilities.

“The Government is desirous of assisting people to build homes in those places where the need for now homes is at' present acute The housing shortage is widely spread, yet there will be districts in the Dominion where the present shortage does not exist. In such cases the proper administrative outlook would be to assist in home purchases rather than in the erection of new houses. SERVICES OF ARCHITECTS “The corporation has concluded arrangements with the New Zealand Institute of Architects whereby the services of architects selected by the corporation will be available in different centres for an examination of the plans and specifications and the general supervision of buildings in the course of construction. Special fees have been agreed to by the institute in recognition of the element of social service involved in the programme The general planning features will not be overlooked, and the arrangement made will provide for a proper check over building tenders. HOUSES FOR RENTING " I desire also to draw public attention to the housing policy of the Government as the advancing of money bv the corporation for the building of homes by the Government arc closely related There are people who, because of the circumstances in which they earn their livelihood or for some other good reason, an! un able to find a reasonable proportion of the coat of a section and home The Government at an early dale will commence building houses for renting to such people at a figure that will be in keeping with their incomes. Although these houses may not be purchased from the Government, the tenant will be assured of permanency of occupation so long as he meets his obligations. The administration of these houses will be in the hands of the corporation, and with this purpose in view the corporation has established ‘a central record ‘ for the names of people, including those applicants for special building loans who have not been successful in their loan applications, so that data may be readily available from which selections may bo made of occupants for now houses People desirous of having their names listed in this record should obtain a form of the personal particulars supplied by the corporation to all post

offices. The completed form should be posted to the manager of the corporation in Wellington, together with a covering letter stating the requirements.

“A special loan procedure may also be adopted by the corporation for the purchase of existing dwellings. These loans will be considered by the corporation in special cases, but as a general rule will not be available where the proposed purchase involved a disturbance of an existing tenancy. This means that as the provision is intended to secure a home for the applicant the dwelling must be vacant and ready for his occupation. The condition of the improvements and the age of the building will be factors for the consideration of the Board of Management of the corporation. “In general, the considerations ‘hat will be applied to special building loans will be equally applicable to special loans for the purchase of existing dwellings. REHABILITATING FAHMS

“ I have stated that one of the purposes of the State Advances Corporation Act, 1936, was to provide money for rehabilitating farms. Special loans will, in proper cases, be available for this purpose, and consideration will be givih in all cases where there is a case for an advance in excess of the usual 66 2-3 margin, provided that the earning capacity of the land, in the opinion of the Board of Management so warrants.

"The corporation is now organising its field staff, and the facilities of the corporation will be operated in conjunction with the Government’s proposals for the relief of mortgagors. The same guiding principles will be applied by the corporation where special loans are granted, whether the special loan is for building a home or rehabilitating a farm. If the Government provides money for any farmer it will be to help that farmer to stay on his farm, and to obtain the best results from his land. It will not be to enable the farmer to sell his farm.

“ The State Advances Corporation is now sufficiently advanced in its arrangements to enable applications foi those special loans to be dealt with Post offices throughout the Dominion have been supplied by the Corporation with forms of application, pamphlets, and personal circumstances forms for the convenience of inquirers. In addition, the Corporation is represented in many towns throughout the Dominion and by its branch offices in Auckland. Wellington, and Christchurch. These agencies and branches will be of assistance in affording advice to intending applicants for loans from the Corporation. “ In many cases, both of farmers and home-owners, it will not be possible to effect any improvement in the position of the mortgagor merely by re-financ-ing. It is the intention of the Government shortly to introduce its proposals for legislation to enable the rehabilitation of mortgagors. It is recognised on all sides that the legislation of 1931 was, in effect, a mora-torium-only a postponement of the day of enforcement or adjustment. It is the considered opinion of the Government that the enforcement of mortgage claims would at this stage create desperate hardship and that the proper course to pursue is by way of adjustment. RURAL MORTGAGORS “Under existing legislation a final adjustment is limited to rural mortgagors. and they must endure a stay-order for five years before qualifying. Other classes of mortgagors and lessees are omitted from the 1934-35 Act. It is now intended that all qualified classes of mortgagors and lessees shall be entitled to an immediate adjustment based on the present-day value of the security. The mortgagee will be secured for every part of his loan that is sustained by that value, and the disposal of the balance will depend on the circumstances of the applicant. “After an adjustment,” the Minister concluded, “ every qualified farmer, home-owner, and other applicant will be able to work his farm and enjoy his home free from an intolerable burden of debt that could never be paid and released from the constant fear of dispossession.”