MORTGAGE FINANCE

Taranaki Daily News, 19 February 1935, Page 9

MORTGAGE FINANCE

EXPLANATION OF BILL DISCUSSION WITH MINISTER. URGENT NEED OF THE INDUSTRY. ADDRESS BY HON. S. G. SMITH. Addressing a meeting of business men convened by the Taranaki Chamber of Commerce at New Plymduth yesterday, the Hon. S. G. Smith, Minister of Education, gave an interesting explanation ol the Mortgage Corporation of New Zealand Eill now before Parliament. There was little doubt in the minds of thinking people, said the Minister, that something must be done for the relief or farmers’ finances. The Dairy Commission, after an exhaustive and dispassionate inquiry, had concluded that at least 50 pec cent, of the farmers were unable to mee<, their present commitments. The relief afforded by such measures as the Mortgagors Relief Act was only temporary, and the Government had set out to find some means of giving permanent assistance to the farming industry. There was, of course, the alternative of doing nothing and letting the Bankruptcy Act apply to those who were unable to meet their liabilities, but he assumed that was not acceptable to those who had studied the position carefully, noi* was it, in the opinion of the Government, the wisest policy for the Dominion. The problem was being attacked by two Bills, the “Mortgage Corporation,” which he proposed to discuss, and a second Bill, not yet before Parliament. By means of the mortgage corporation. it was hoped, by a method which he admitted was new to the Dominion, to find a means of providing cheap money for farmers’ finance. If the State accepted all the responsibility of rehabilitation it would have to borrow for the purpose and no one could say what amount would thus be added to the public debt. The Government considered, therefore, that to institute a mortgage corporation was the better method, provided that organisation had behind it the assistance of the State during the initial stages of its establishment, PROPOSALS DISCUSSED.

As most people knew, the Minister of Finance had discussed his proposals with many people interested and had consulted investors. Some had desired a purely State organisation, others that the cooperation should be entirely controlled by private shareholders. There were grave objections to both and the Ministry had tried to link with the assistance afforded by the State the benefit of private holdings in the corporation with representation on its management. The Government was satisfied that on the terms set forth in the Bill it could obtain the necessary capital and that, with the assistance of the State, the inauguration of th/; corporation would bring down interest rates and enable farmers and the general public to find a way out of their present difficulties. Mr. Smith discussed the Act clause by clause, giving not only an explanation of the various provisions but some of the reasons underlying them. He contended that the majority of five to three held by the State on the directorate was justified by.the assistance in'finance provided by the Government. It would be noted that no member of Parliament could be a director. That provision was to prevent' any suggestion of political influence in the corporation’s management. There was, said Mr. Smith, considerable misapprehension in regard to the two per cent, of the amount of a loan that a borrower must pay to the reserve fund of the corporation. Many farmers appeared to think this would be an annual charge. Shis was not so. A boirower could, if he wished, pay that amount in cash, or he could have it added to his loan and pay it off in instalments just as it was proposed to pay off the loan itself.. This would add but two shillings per £lOO borrowed to the payments made under the table mortgage. •

It was intended that all mortgages should ultimately become table mortgages, but in order to prevent hardship that is to say in cases where it would be difficult for a borrower to commence repayment at once, there was provision fot a flat mortgage at the cheaper rate of interest it was hope_d the establishment of the corporation would bring about, for a period of five years, with •. a possible renewal for another five years. TRANSFERS TO CORPORATION. The Minister explained the transfer of certain Crown mortgages to the corporation and of certain State reserves in order to strengthen the finance of the new organisation. He explained that there was no intention of giving the corporation power to make wholesale evictions, because eviction could not be permitted without the approval of the Minister of Finance, who would, of course, have to justify his actions to Parliament. Mr. Smith explained the reasons for the directors of the corporation becoming also the Rural Intermediate Credit Board. They would remain separate entities but it was considered wiser to have two organisations dealing with the same object—the improvement of farmers’ finance—under one control. There would be no hurry in making changes, continued Mr. Smith, the corporation must have time to be established and there would be no attempt to rush things.

Any profits made by the corporation would be paid into the public account until’ the contingent liabilities to the Crown had been met. When that position had been reached, profits would be paid into the corporation’s reserve fund. Replying to questions, Mr. Smith said it was not intended to make the corpora tion the only lending body in the Do-, minion. There were grave objections to such a course, but it was considered that private lenders could co-operate with the corporation for the benefit of all concerned. There was no State guarantee of interest proposed in the Bill, nor was there any appeal from the Minister’s decision where that was required in the Bill. Mr. W. C. Weston, president of the Chamber, thanked the Minister for the explanation he had given, and expressed the hope that when the Rehabilitation Bill was brougt down Mr. Smith would pay another visit and help those interested to grasp what were the Government’s aims and proposals.