MORTGAGE LAW

Poverty Bay Herald, Volume LXIII, Issue 19122, 17 September 1936, Page 5

MORTGAGE LAW

THE PERSONAL COVENANT NOT TO BE ABOLISHED PROBABLE INTEREST RATE MINISTER RETICENT (Parliamentary Reporter.) WELLINGTON, this clay. The opening of the committee stage of the Mortgagors and Lessees Rehabilitation Bill enabled the discussion to continue in the House of Representatives last night on the short title, in the same way as during the second reading, with the result that some interesting points came again under review. The personal covenant, customary with mortgages, is not being abolished by the measure, and replying to some criticism, the Hon. W. Nash, Minister of Finance, explained the position under the new legislation. When a man had no assets, the personal covenant would go, but if lie had a position bringing him in £SOO or £IOOO a year it would be unfair to free him from the obligation because the mortgagee might not be as well off as'the man to whom the money was loaned. SOME DANGER IN CLAUSE

However, there was some danger in the clause, and if he could find a way out he would do so. The difficulty might be that the court might follow the letter and not the spirit of the clause bv ordering a man earning £5 a week to pay 10s a week on this liability. He did not wish to see this happen, for earning capacity was not an asset, and the determining factor should be assets. He knew of hundreds of eases where men on small wages had acquired properties for £IOOO, but. owing to falling values they were not worth more Ihan £7OO, although those men were liable for the £3OO.

Mr. H. G. Dickie (Nat., Pnica): Properties will go up. The Minister: They will not go up. We will watch that. He added that there were relief workers who were in the position he had mentioned, and it would take them a lifetime to pay off their liability under the personal covenant. He wanted to see them relieved.

Mr. R. A. Wright (Ind., Wellington Suburbs) asked if the court would have power to make an order against a mortgagor earning more than £5 a week, ns there were some men on commission whose earnings were highly variable, but were sometimes high. POWER TO MAKE ORDER The Minister replied that the court would have power to make an order. The next important point related to the final capitalisation of the security, based upon its productive power, having regard to expenses of operation and a reasonable standard of comfort for the ' mortgagor. This capital sum, according to clause 39, will bear interest at a rate fixed from time to time bv Order-in-Council.

There was a general inquiry regard ing the probable rate, but the Minis ter declined to forecast it.

The Rt. Hon. ,J. G. Coates (Nat., Kaipara) remarked that net income being capitalised became the mortgage, and it was important to know what would be the annual charge. Mr. W. A. Bodkin (Nat., Central Otago) expressed a hope that the interest rate would not be fixed too high. It should not ‘be greater than that on bank deposits, and if fixed at 5 per cent would be too high, for many mortgagees were prepared to take a lower rate to preserve their principal.