LENDER AND FARMER

Taranaki Daily News, 21 December 1931, Page 16

LENDER AND FARMER

PROBLEM OF MORTGAGES STANDING TOGETHER. A CANTERBURY SCHEME. The question of farmers’ finance and mortgagors’ relief has been engaging the active attention of the Canterbury Chamber of Commerce for the last 12 months, and as a result of conferences of delegates, representing farming and commercial interests, bankers and legal men, approval has been given to proposals that the farmer, his mortgagee, and the banker shall stand together for one farming year. The scheme was outlined to Hie Wellington Chamber of Commerce by Mr. Norton Francis, of the Canterbury Chamber of Commerce. At the end of last year it was realised by all interested in farmers’ finance, said Mr. Francis, that the low prices being received for most products from the land would make it impossible to pay mortgage interest and - other debts, and must result in ruin for a large proportion of farmers unless some protective measures were provided. A renewal of the war-time moratorium was suggested, but, realising how far.reaching had been the damaging aftereffects of the previous moratorium, particularly to farmers by the heavy withdrawal of capital from farm mortgage investments, many were opposed to the idea. The difficulty was to find alternative relief, and,one suggestion was the arrangement of a partnership between the farmer, his mortgagee and banker, to enable production from all farms to continue as before, and yet give a fair division of the proceeds to each of the interested parties. It was considered that a workable scheme could be evolved, and a conference representative of 'all interests was A compulsory scheme for the postponement of payment of interest and principal was rejected, a voluntary scheme being the only one considered acceptable. OUTLINE OF SCHEME. After submission to a further conference the proposals adopted were that the farmer, his mortgagee and the banker, firm or lender finding his working capital, should enter into an agreement to stand together for one farming year. The lender agreed to open a new account with the credit limit estimated on a “budget form,” which showed the various headings of outgoings and estimated income. This budget had to be approved by the mortgagee, and was to provide for working and living expenses of the farmer and stock required to. maintain average production. The total estimated expenditure was not to be exceeded without the formal consent of the mortgagee. Where the whole or part of any property was held on lease tne landlord was required to act .similarly to the mortgagee to prevent any possibility of distraint fox' rent. All advances made by the lender on the new account would carry interest at current rate to be a first charge on the following season’s products. When maintenance liabilities had been cleared, land tax and local rates for the current year were to be the next charge on the season’s returns. Provision is made for the distribution of any further surplus among the mortgagee and lender in due proportion and after them to lawful creditors. Legislation had been passed to enable trustees to adopt the scheme and- also to find some income for the beneficiaries until the deferred interest payments were received. 1 After referring to possibilities of difficulties arising, Mr. Francis said the scheme had received the approval of New Zealand Chambers of Commerce. The committee’s " contentions were that their proposals were to provide for the extraordinary conditions met with durinw the present year and that nearly every°mortgagee was only too anxious to leave the mortgagor on his farm, despite c?reat inconvenience tind. often monetary loss. When such action was voluntary there was more goodwill shown than would be possible in concessions fixed by law and the after effects, so far as lending money or farm mortgages was concerned, would be very different. It was better to leave adjustments to the parries concerned, because when a mortgagor had a chance to recover his position few mortgagees would refuse him the opportunity and the Mortgagors Relief Act adequately protected the farmer against any Shylock demanding his “■pound of flesh.” PRIVATE CAPITAL INVESTED. V Where there was no reasonable hope of recovery, it was better for . all parties that the farm be sold as soon as practicable to a solvent purchaser, who would be able to maintain full production. Under the Chamber of Commerce scheme it was hoped that confidence in farm mortgages as a desirable investment, when ■ the amount loaned was based on a productive and not a “boom” speculative value, would be restored because without the aid of much private capital the financing of farm lauds was impossible. There was probably over; £100,000,000 of private capital invested in farm lands in New Zealand to-day, and despite the great assistance given by the various Government lending departments in the past it would be quite impossible, and, it possible, very detrimental, to the credit of the Dominion, for the Government to find even onehalf of this sum. The best investment for the savings of the people of New ■Zealand should be on its farming lands from which was derived practically the whole of the wealth of the Dominion.

As Canterbury had largely temporarily solved the present difficult position, concluded the speaker, he asked why should not some general voluntary scheme be evolved for the whole of New Zealand which might be equally successful for the coming year.