The Daily News THURSDAY, MARCH 14, 1935. FARMERS’ FINANCES.

Taranaki Daily News, 14 March 1935, Page 4

The Daily News

THURSDAY, MARCH 14, 1935. FARMERS’ FINANCES.

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The chief impression gained

from a study of the summary of the Rural Mortgagors’ Final Adjustment Bill is that the proposed Court of Review will require the most capable of staffs if it is to carry out efficiently the duties to be placed upon it. Insofar as the Bill facilitates voluntary adjustments between mortgagees and mortgagors it will be welcomed. The existing mortgage adjustment commissions have exercised a beneficial influence in that direction, whatever may have been thought of the policy they were appointed to carry out. Apparently the commissions are to remain as part of the machinery of mortgage adjustment under the new legislation, and when voluntary agreements are impossible are to be given power to determine whether protection of a rural mortgagor is justifiable. If it is, the Bill provides the conditions under which the protection can be given subject to appeal, by either mortgagor or mortgagee, to the Court of Review that is to be set up. If protection is not considered justifiable the ordinary laws affecting debtors and creditors will apply and the only relief for an insolvent debtor will be through the Bankruptcy Court. When protection is considered desirable it will be given by means of a “stay order” to be issued by the Court of Review, either on the recommendation of the adjustment commission or by judgment of the Court on appeal from such recommendation. The protection will carry with it supervision of a mortgagor’s operations by the adjustment commission which will include budgetary control. Once the principle of compulsion of creditors to accept adjustment is admitted there seems little to complain of in the new Bill up to this point even from the mortgagee’s point of view. It is when the supervisory period is over and final settlement of a farmer’s liabilities has to be made that the controversy on the new Bill really begins. For however carefully it is hedged about with conditions and rules the Bill does give the Court of Review power to interfere with the rights of a creditor, for the Court is to be given power to retain a certain portion of a debtor’s assets as his equity in his farm. The onus of deciding whether it will exercise the power is placed upon the Court itself, and there is no question of the seriousness of this responsibility. Such equity must not exceed 20 per cent, of the basic value of the farm when the supervision period has ended. The question immediately arises of what is the equity to which a mortgagor is entitled at the expense of the mortgagee in a case, for instance, when he put no cash down when purchasing his farm. The reply is that the mortgagee would lose all he has advanced above the present value of his security if he foreclosed; that it is better for him that his asset be improved by good farming; that its real value should be determined and production kept up. It is therefore better for lender and borrower that a farmer should have an equity retained for him which will urge him and his family to greatest effort. Very elaborate rules have been suggested for the guidance of the Court, so elaborate indeed as to indicate the theorist rather than the practical man of affairs or the experienced judicial authority. The Bill attempts to prevent land value inflation by requiring half of any profit made on the sale of a farm under mortgage protection being made available to mortgagees whose securities have been re-

duced by the Court, and by according such mortgagees the right to call up mortgages when a sale is made. There is no question about the sincerity of the intention of the Bill to afford relief to deserving farmers. Whether the machinery it provides for separating the deserving from the undeserving will work satisfactorily remains to be seen, and the first impression is that it is over-elaborate. The main question the Government has to answer is whether the interference with creditors’ rights in endeavouring to retain equity in his land for a hard-working farmer whose misfortune is due to circumstances beyond his control will turn the stream of investment money towards rural securities, or will the new policy create even greater distrust of those securities than exists at present? For upon the attractiveness of a security depends the cheapness of the money invested therein, and if legislation diminishes that attractiveness the prospect of cheap money and lessened burdens for the farmer will be further off than ever. Before a reply to that question can be attempted, however, a considerably closer study of the Bill is necessary than is possible at present.