Mortgages and Land Values

Dominion, Volume 28, Issue 90, 10 January 1935, Page 11

Mortgages and Land Values

.Sir,—There is a good deal of talk about this Mortgage Corporation, about which it is proposed to bring in legislation during the February meeting of Parliament. Many people are rather hazy as to the purport of the scheme; but most agree that something should be done to put the position of both the mortgagee and mortgagor on a more satisfactory footing au 1 the pooling of mortgages is certainly a step in the right direction. But does the proposed scheme go far enough and is it going to be fair to all those interested? To me it seems not. It seems to be going to deal with first mortgages only. Is it proposed to take them at their "face” value based on advances made when the prices of our staple products were very high and the price of land correspondingly high in sympathy? If this is done the measure will but serve to prolong the evil it is designed to cure. It may give the farmer relief to the extent of i per cent, or even 1 per cent.; but what good is that if h's property is assessed at 25 pep cent, or 40 per cent, above its present market value—which can only be arrived at by computing the value of the goods that can be produced from it at present-day market prices.

To me it seems before issuing bonds to redeem the present mortgagee it would be a very desirable thing to revalue all land and do away with any inflation that had been brought about in the past by hign prices for our products, for no lasting benefit can accrue to anyone if the mortgages are consolidated on an over-estimat-ed value of the security. This revaluing of the land looks, on the face of it, rather a big job, but it is i.ot so necessarily. ■ For years owners of land have had to supply land returns to the Commissioner of Taxes, giving particulars of the land they held, together with the value of the land. Would it not be possible to take these valuations spread over a number of years, average them, and so arrive at an approximation of the present value? These approximations could be checked by the land board of the district concerned and the values fixed. Having thus got the value of the land you could subtract it from the price paid for it in “boom” times and your result would show the amount of depreciation that had occurred owing to the fall in the prices of our staple products. This depreciation should then be distributed among all those interested in the place in proportion to the amount of money they had invested. In this way no one person would .secure all the equity to the injury of everyone else — first mortgagee, second mortgagee, third mortgagee —-and even the farmer would only jose his fair proportion of a drop in values that was brought about by lowering prices, not through anyone’s fault. Having got thus far on the road to adjustment, then, and not till then, it would be a real good act on the part of t(ie Government to consolidate all mortgages and issue negotiable bonds- bearing a fixed rate of interest, to those people holding mortgages. By following the plan I suggest, or one of a similar nature, everyone would be treated fairly. The farmer who put all his savings into land at a high price when the price of commodities was very high would not now. after years of toil by himself, his wife and family, be mulcted of all his savings owing to a big drop in world prices and turned out in his advancing years to join the ranks of the big army of unemployed. He would retain a small equity in his farm. Nor would the lender of money on second mortgage —money that had perhaps been spent on buying manures, fertilisers, or on the erection of fences—be told there was nothing for him. He would be credited with his fair share of the equity. And the first mortgagee, who had advanced money after having the property duly valued and was as much to blame for lending too much on the land as the farmer was in offering to pay too much for it, he, too, would share in the depreciation and have bonds issued to him to the value of his fair’ share of the present value of the property.

By following the plan roughly outlined above you would satisfy the farmer that you were honestly trying to benefit him. The second mortgagee would see he was not being victimised, and would be satisfied with the little left to him, and the first mortgagee, though he might squeal a little at first, would soon see that it was the best thing that could have happened to have put the farming community on a satisfied working basis again, and he would be quite pleased to cut his losses, knowing full well that he was getting his fair share, and would, in future, be sure of his interest, and if he wanted a little extra money he could sell one or more of his bonds and get it quite easily. Perhaps this, too, would make money circulate more freely and assist in relieving the unemployment position for the farmer being made sure of his position would have more confidence in having work done. —I am. etc., JOHN McFADDEN. Main Street, Gore, January 4.