MORATORIUM AND DEPOSITS

Dominion, Volume 15, Issue 14, 11 October 1921, Page 5

MORATORIUM AND DEPOSITS

IMPORTANT CONFERENCE SAYS WHOLE BILL SHOULD BE RE-DRAFTED TO AVERT FINANCIAL PANIC Mr. J. T. Martin (president) occupied the chair at a special meeting of the Wellington Chamber of Commerce held yesterday to discuss the Mortgages and Deposits Extension Bill, which has been submitted to Parliament by the Government, and is now being discussed throughout tho country. In addition to members of tho council there were present: Messrs. T. S. Weston (Employers’ Association), Robert Bell (Ashburton Building and Investment Society), Bawnsley (Wellington Trust and Loan), I'l. A. Liddle (Equitable), C. W. Mason (Investment find Mortgage)—all representatives of companies vitally concerned in the measure before the conference. TERMS OF THE BILL. “Tho provisions of the Bill,” said the chairman, "apply only to mortgages executed before October 24, 1919. Under tho Mortgages Extension Act, 1919, and subsequent amending Acts, the due date of mortgages was extended from year to year, or, rather, the powers of the mort. gagee were restricted. It was competent, however, for a mortgagor or mortgagee to malto application to the Supreme Court, and the, Court had power to vary tho terms of tho mortgage after taking all factors into consideration. Tho present Bill alters the method. Where a mortgage is already due, or falls- duo before June 30, 1925, a mortgagor has to give notice to tho Public Trustee. The effect of giving this notice is deemed to bo an offer by the mortgagor to pity interest from January 1, 1922, until the extended date of the mortgage at GJ per cent., or at a higher rate if tho mortgage already provides for a higher rate; and also is deemed to bo an offer io repay the instalments of principal oet out in section 10. "Tho Public Trustee gives notice to tho mortgagee. If tho mortgagee does not object the mortgage is deemed io be extended to June 30, 1925, subject to the payment of interest, and reduction of principal set out above. If the mortgagee does object the Land Board hears the objection. The Land Board, among other things, may disallow tho objection, or allow it, or may vary the due date of the mortgage, or require larger payments in reduction of principal. TOO HIGH AND TOO LOW. "The Government, it will be seen, is in a difficult position with mortgages contracted befo.re August, 1919. Exception is being taken by mortgagees to the rate of interest of GJ per cent, being too low, while mortgagors contend that it is too high, to the decision of extensions being relegated to a land board, thus necessitatipg a mortgagor making his private financial position known to the general public, that the Land Board's decisions which admit of no appeals, might result in hardship in many eases, and that the foes charged by tho Public Trustee, which amounted on a 520(10 mortgage to 55, on a '55000 mortgage to 59 10s„ on a 510,000 to 517, bn a 550,000 to 578, were altogether too high, and in any case could bo done, considerably more cheaply, expeditiously, and satisfactorily if entrusted to local solicitors or agents. "The procedure appears to be this: a mortgagor with a 55000 mortgage desires an extension, and if located, say, in Auckland, ho writes to®tho Public Trustee, Wellington, enclosing 56 fee, the Public Trustee applies for extension to the mortgages, ami if he objects must lodge with tho Trustee 53 10s. The Public Trustee submite the matter to tho land board in the mortgagor’s district, and tho board takes evidence in public, and adjudicates between mortgagor and mortgagee, and from this adjudication there is no manner of appeal. A letter from the mortgagor's solicitors to the mortgagee could do.all that was necessary without any intervention of the Public Trustee. Again it is urged by 'many that it would bo better if the decisions were vested in magistrates, who could hear the claims of mortgagor and mortgagee without making tho proceedings public. It seems to mo, however, that though there may not lx* any justification for tho intervention of tho Public Trust Department, there is something in favour of the land boards, who could he depended on bringing into consideration knowledge! of local conditions which in many cases would surely bo helpful to both parties. THE WRONG TIME. "I find on discussing the Bill with many business mOn and others that cbjectioft is taken not so much to the machinery of the Bill as to tho attempt to pass at this critical financial stage any Bill whatever for reducing of 1 mortgages. The original Mortgage Extension Act was brought into operation when it was never needed, when there was no clamant desire for it; when money waa easy no one had any real difficulty in arranging their finances. In fact, the Act did more harm than good, as it encouraged people to think that they need not bother to meet their engagements on due dates so long as (hey could pay the cun-ent rates of interest. Now, when everybody is either hard up or getting that way, when the country is in the throes of one of the worst, financial depressions ever experienced, money tight, lending rates high, farmers’ revenue scarcely meeting expenditure, products, selling, in many instances, below actual cost of production, banks and financial institutions refusing further assistance, and taxation extrembly oppressive, the farmers are to bo compelled under tho Act to make periodical reductions in their mortgages. It cannot bo done, and it will not work. If over there was a time to extend mortgages without insisting on reductions, it is surely now, and I consider, therefore, that we should ask the Minister of Finance not to go on with tho proposed Bill, but instead to merely extend tho payment of mortgages at current nites of interest until December 31. 1922, and than review the whole position in tho light of tho conditions then existing in this country.” A WARNING DISREGARDED. Mr. M. A. Carr was not inclined to agree with some of the chairman’s contentions. In respect to the rate of interest payable, for which GJ per cent, was provided, he held that that rat“ should be tho current one. It was unfair to ask a mortgagee ‘o accept GJ per cent, when the current, rate was 7 or perhaps 7J per cent. He, too, did not agree that an appeal to a magistrate would bo effective. He rather favoured the setting up of a special board. Ho did not think the provisions of tho Act should apply to transactions made.since! 1919. lit was a. great pity that th" Government had not paid attention to fTio recommendations made by a joint conference of the council ot the chamber and the Accountants’ Institute in 1919, in wliich time limits were set fnr (ho repayment, of mortgages. He hoped any representations made ns I he result of that meeting would meet with more consTicrafion than 'Tiey hau in the past. “A CRUDE AND ILL-DIGESTED MEASURE.” Mr, T, S., Weston, said the Bill waa a

very crude and ill-digested measure. Tile Initial mistake was the extension of the Bill in tho first instance, with tho result tliat land appreciated abnormally. Ono of tho worst features of the Bill was fhe making of the land boards the deciding body. Land boards were not judicial bodies in training or tnulitiop to enable them to exercise such wide powers. The authority should bo given either to a Judge of tho Supreme Court or a ~f7[ ( Tpendiary Magistrate. As to extending the Act to mortgages made since 1919, the Attorney-General had given a (solemn assurance that securities would not bo interfered with. If New Zealand were going to pull through the present crisis it would bo only done by mutual toleration and forbearance. If there was any chance at all it would bo found that the mortgagee would be forced to meet the mortgagor, for tho simple reason that if he did take the property concerned there would bo no market for it. He would probably have to work it himself, and who was going to do that under the existing conditions? Mutual toleration, as in the past, would be the factor in helping to bring about a settlement. They did not want all this cumbersome machinery of going to the Public Trustee and tho Land Boarij, when thev could go to a Supreme Court Judge or Magistrate. If the Government broke its solemn assurance that the Act would not apply to transactions subsequent to 1919 it might seriously affect trustees* in advising their clients as to investments. lie hoped that .the Government would have a date limit for the repayment' of mortgages (as was formerly recommended by tho chamber), so that a crisis would not bo created in providing that all mortgages (under tho Act) shall become due and payable in 1925. In his opinion tho best thing for tho Government to do would be to redraft the whole Bill. Mr. C. W. Mason said that if the Bill became law the financial companies would have to start paying off their deposits in 10. or 7} per cent, as from January. 1922, whilst the companies’ assets were not repayable until a year later. How were they going to do it? Bight through the piece they had been able to manage without any trouble with mortgagors raising the rate of interest commensurate with the one imposed on them —and they always got it. To fix the rate at GJ per cent, was unfair, for if they had to borrrfw they would at least have to pay 1 nor cent, more to the bank The trouble was tbit the Bill had been drafted as if all deposit money was at. call, and not for a term. They had discovered what they believed was a flaw in the Act owing to that presumption, as the term of some of their annual deposits bearin" 4J per cent, interest did not lapse until March.3l, 1922, but the Act insisted on payment of 6J per cent, as from January 1, 1922. building societies. Mr. Robert Bell quoted tho case of the building societies in the south. He said that such societies were created under specific Acts —one dating away back to the early days, and the other the Finance Act of 1929. Under such authority his society (tho Ashburton) was empowered to borrow by way of oeposits up to two-thirds of the amount advanced by way of mortgage (subject to license following a Government auditor a report). Ho said that if the Bill as drafted were passed all such companies would Im gradually wound up. He thought that things should lie allowed to proceed as at present until December <>!, 1922. "LIKE A ROW OF NINEPINS!” Mr. A. F. Roberts said that the man in the street did not yet realise what a serious condition the country was in. Flo did not realise or believe that the producer (the man on the land) was at the present time not able to meet his expenses out of his earnings. Ho (the speaker) knew that because he had dealings with such men, and knew how they stood. What the Government had to do at tho present time was to try and prevent anything in the nature of a financial panic. The. unreasonable mortgagee was about—after his pound of flesh. He was the danger. The producers to-day were like a row of ninepins leaning against one another. Pull the feet of one away, and there was going to bo a crash. It was for the Government to curtail the activities of the unreasonable mortgagee by refusing him the right to sell a man up. In any case, who was he going to sell to? As things were, no one wanted to buy, nnd if it once started you would put up 10,000 or 20.000 acres to find values down to nothing. Ho personally thought the whole nf the Bill should be redrafted, especially ns Mr. Mason had pointed out that the deposits provisions were most unsatisfactory. THE RESOLUTION. After further desultory discussion it was decided, on the motion of the chairman, seconded by Mr. M. A. Carr: (a) That the Minister of Finance be requested to withdraw the Mortgages and Deposits Extension Bill as nt present drafted, and that tho new draft provide that (b) Mortgages originally duo on. dates in 1914, 1915, or 1916. be paid on the corresponding rates in 1922, 1923, and 1924; and' that all mortgages which were originally due between January 1, 1917, and October 27. 1919, to bo payable on the latter date. (c) That the machinery clauses relating to the Public Trustee nnd land boards bo dropped, and that any question of hardship or of the right of a 'mortgagee to exercise his power bo determined' by a Supreme Court Judge or Stinendiary Magistrate, and that it is desirable that there bo no fixed rate of interest for renewal mortgages, but that the rate, be a matter of mutual arrangement between mortgagee and mortgagor, and, failing to agree, same be fixed bv a Sunromn Court Judge or Stipendiary Magistrate. It was decided that the chairman, secr’tarv (Mr: H. D. Vickerv), Messrs. A. F. Roberts. H. Bowden, C. W. Mason, and T. Shailer Weston bo a special committeo to wait upon the Minister in connection with the above resolution.