MORTGAGE FINANCE

Wanganui Chronicle, Volume 79, Issue 30, 5 February 1935, Page 8

MORTGAGE FINANCE

GOVERNMENT’S PROPOSALS CONSIDERED TO BE UNJ UST AND DANGEROUS ALTERNATIVES SUGGESTED BY BUSINESS MEN WELLINGTON. Feb. 4. The conviction that it is possible to evolve a scheme for the final adjustment of mortgages without creating the proposed Mortgage Corporation is expressed by the Associated Chambers of Commerce in a statement issued to-day. The statement embodies the findings of a national conference of commercial and financial interests which was assembled under the auspices of the Associated Chambers of Commerce, and which through a special committee made an exhaustive investigation of the Government’s proposals for the establishment of a national mortgage corporation and for the rehabilitation of farmers’ finances. The particular interests represented at the conference were the Associated Chambers of Commerce, the Associated Banks, the New Zealand life insurance offices, the New Zealand Law Society, the Stock Agents’ Association, the New Zealand Fire and Underwriters’ Council, the New Zealand Investors’ Protection Association, the Building Societies’ Association, and investment companies, and the statement which has been issued is a unanimous expression of their views. The committee regards the rehabilitation proposals as “unsound, unjust and dangerous,” and believes that justice can be done to all parties concerned, including the farmer mortgagor, “without wholesale repudiation of contracts, and without the unjust discrimination against one class of the community—the farmers’ creditors.” As an alternative to the Government's proposals it is suggested that the present relief legislation be extended to December 31. 1939, and that the existing adjustment commissions be reconstituted on the lines of the proposed special Court of Review with an independent ehairman and two associate members—one representing mortgagors’ interests generally and the other representing mortgagees generally—thus increasing public confidence in these tribunals. So far as State mortgages .are concerned, the committee has suggested the creation of boards with full power to effect settlement with these mortgagors. Such settlement of State mortgages would be at the expense of the whole community, and would not prejudicially affect any particular icction

LOW_PRICES ONLY ONE FACTOR BORROWING AND SPENDING The committee points out that low nices are only one factor in tne present position of the farmers and contends that probably the main reason for the plight of many people in New Zealand to-day is over-borrowing and over spending. It is held that the Government s remedy would not stabilise mortgage interest rates at a low ligure and that taeie is still a danger of political influences being used on behalf of mortgagors. ■‘The Government’s scheme for the reorganisation of mortgage iinance contains two proposals, stales iho report. First, it is proposed to establish a National Mortgage Corporation which will alter the present system of rural and urban iinance, and second, it is proposed to rehabilitate farmers finance by readjusting present mortgages to new and undecided levels of land and produce values. The two proposals are not inter-dependent ana should not be confused. The committee is convinced that it is possible to exolve a scheme for the final adjustment of existing mortgages without creating the proposed Mortgage Corporation. “The scheme has been presented by the Minister of Finance in such a manner as to suggest the two proposals are interlocked. This is definitely not so. The Minister informed the committee that two entirely separate Bills are to be presented to Parliament and the committee therefore deals separately with the two proposals“The committee urges that anyone considering the Minister s proposals should divorce the Mortgage Corporation. from an\ scheme for the rehabilitation of farmers’ finance. “The committee has had the advantage of discussions with the Minister of Finance and his staff, and its comments are based on the Minister’s pamphlet of November 30, 1934, and on the information which was afforded it at the interviews it had with the Minister. Need for New Institution “1. The committee believes, and has urg-ed on Mr. Coates, that there are no producers to-day wno are efficient and competent men, and who have sufficient equity in their properties, whe cannot borrow, at very low rates of interest, whatever money they can use profitably in their businesses. “Mr. Coates’ pamphlet advances as the reason for the present position of the producers, the unparalleled drop in world values of primary produce. So la- as New Zealand is concerned this is only half the story. Admit tedly low prices are a factor. Probibly the main reason for the difficult position of many people in New Zea land to-day is oxer-borrowing and over spending, not only by individuals, bul oy all classes of the community, including local bodies and the Govern me nt. When, as a remedy for this oosition it is proposed to increase iacilities for borrowing. The public must naturally be alarnred. The remedj would seem to be to restrict rathei than «o expand borrowing. Arguments Refuted “The following reasons have been advanced as justifying the creation ol a new institution;— “(a) Tho expectation that the Mortgage Corporation will result in a steady flow of capital towards primary industries at substantially reduced rates of interest. “(b) The new institution will pro vid>e for the amalgamation of the mart gage lending activities of Government Departments. “(c) The necessity of having some lender able and willing to provide the long-term finance required to carry out rhe settlements contemplated by the rehabilitation legislation.

, “(d) The elimination of political pressure by State mortgagors. “With regard to these views, the < ommittea makes the following com- ■ merits: — “(a) The committee does not believe i that the Mortgage Corporation will be I able, permanently, to stabilise mortgage interest rates at a iow figure. The committee deals further with this matter later in this memorandum. “(b) With certain qualifications mentioned below, there is much to be said in favour of an amalgamation of the Crown’s mortgage lending activities- In the past there have been cases of departments competing in lending, the one with the other. “(c) The committee deals separately with the rehabilitation proposals. In the view the committee has taken there will be no necessity to create any new institution. If settlements are arranged between mortgagors and mortgagees on*a sound basis there is to-day, in the opinion of the commit tee, and will continue to be, ample facilities for the necessary refinancing. “(d; Undoubtedly attempts are made at the present time to bring political influence to bear on the Government lending departments. In the opinion of the committee the introduction of a so-called independent board of directors will not minimise improper political pressure on the part of mortgagors. On the contrary, the aggregation of mortgages into one channel will greatly facilitate and accen-

tuate political pressure from mortgagors. FARMERS’ FINANCE EFFICIENCY QUESTION SETTLEMENT OF CLAIMS “On the question of the rehabilitation of farmers’ finance the committee reiterates its view that it is necessary to consider the rehabilitation proposals as separate and distinct from the Mortgage Corporation proposals. “ Mr Coates, in his pamphlet, stresses the danger of competent farmers, who through no fault of their oxxm have got into difficulties, being dispossessed of the land into which they have put their life’s savings. We believe that the risk of a really Competent and efficient producer (even if he actually has little or no present equity in his property) being put off his property, is infinitesimal. The best interests of the mortgagee demand that such a man should be kept on his property, as the mortgagee would be in a worse position if a good farmer had to leave his farm. “As regards incompetent farmers, it is verv doubtful whether it is in the interests of the community generally, of the farmers themselves, or of their mortgagees, that thev should be. allowed to remain on their farms producing uneconomical]}’. Losses and Profits “This whole section of Mr Coates’ pamphlet appears to be based on the novel view that the relationship between present mortgagees and borrowers is one of partnership in sharing losses but not in sharing profits. Many farmers have succeeded in borrowing the full value, and more than the full value, of their properties. We very much doubt if it be possible to create machinery which will distinguish between those who are worthy of help and those who have arrived in their present situation through incompetence, mismanagement, and extravagance. “While final adjustment ot the unsatisfactory mortgage position to day is desirable, the committee has grave doubts as to whether final equitable adjustment is feasible. If we could regard the prices of primary products as stabilised, an equitable scheme for final adjustment could be devised. Primary products, however, have al wax’s been subject to violent and unexpected fluctuations. It is impossible to predict pjjee levels of primary produce, even months. ]pt alone, a. few rears, 4head. An adjustment which might ap-