REVISION OF MORTGAGES

Hawera Star, Volume LIII, 17 June 1933, Page 6

REVISION OF MORTGAGES

Farmers Want Reductions

RELIEF BY RE=VALUATION Drastic Scaling Down Urged SERIES OF PLANS DISCUSSED. DEPUTATION TO MR. COATES. Urging that a drastic downward revision of mortgage values should be made without delay, a public meeting attended ' by . over 100 farmers at New Plymouth yesterday considered that unless relief was given or prices improved farmers would face a crisis that would be disastrous not only to themselves, but also to the whole community. The meeting discussed several, schemes and decided to place a series of proposals before the Rt. Hon. J. G. Coates when he visits Hawera during the Winter Show week, with,a request that a special committee be set up to consider them. The meeting was organised by tne North Taranaki provincial executive of the Farmers’ Union, and Mr 11. E. Blyde presided. Messrs S. G. Smitn, O. A. Wilkinson and W. J. Poison, M.’sP., were present and took an active part in the debates. Mr Wilkinson suDmitted his own scheme of dealing with mortgages, and Mr Smith read another prepared by a New Plymouth business man who wished to remain anonymous. Speaking as president of the New; Zealand Farmers’ Union, _Mr Poison said that organisation Would support any scheme that re -deemed satisfactory, but that up to the .present-he did not believe a suitable one had been evolved. . , The object of the meeting was to initiate a, movement for revaluation and the adjustment of mortgages, said die chairman. Details- of the different plans could not be; discussed, at the meeting, but it was hoped to lay down some basic principles, just and equitable to both the mortgagors and the mortgagees, upon which action could be taken. ~ . -, Tt was imperative to provide hardworking farmers with some sense at security and’some guarantee that then work in improving a property was worth while, said Mr Smith prior to reading a scheme submitted, by a New Plymouth business man. Some scheme was required that would make both mortgagee and mortgagor certain of their positions. In the scheme he had there was no mention of interest, but there was full power to deal with both interest and principal under the Mortgagors’ Relief Act. “The fact- that business men .such as the Mayor of Auckland and those associated with hitn could seriously Support such a scheme as that which they recently placed before the Minister of Finance lias lecl me to writ© tliis letter,” read Mr Smith. “The scheme they suggest is pure inflation, and would beyond any doubt lead the eountrv into further difficulty.”

SCHEME OF DEFLATION It was explained by the writer that his .scheme was deflation, and not inflation. It was generally conceded thau the prices of primary produce, although they would improve on those ruling at present, would never return to. the high levels reached some years ago. The value of land, continued the letter, could only be assessed qn its productive value. "When prices of produce were high a few years; ago the price of land was high. The prices of produce had fallen away, and it followed that there must be a corresponding reduction, not only in land values but also in the liabilities on land. The difficulties in reducing such liabilities to correspond with the reduction of land values was due to the fact that mortgages of the land were given at a time when values were high and the amount for which land was mortgaged was, in many cases, greater than to-day’s value of the land., “The mortgagees have beyond doubt lost a portion of the capital they have invested, but they h-ope things will improve and -so are- adverse to reduce the amounts of their mortgages,”, continued the letter. “If they do so, and things improve, the mortgagor gets the- whole of any future rise in the land value. There must therefore be some scheme whereby the mortgagee can temporarily reduce the mortgage debt and) yet not be totally deprived of the benefit of any possible rise. “At the same time, most mortgagees will, I think, admit that the farmer and others dependent upon the farmer cannot carry on and make a decent living unless relieved of some overhead charges. If the mortgagor cannot be given some hope of retrieving his position mortgagees will eventually lose the , whole of their invested capital. In the interests of all parties some scheme is necessary.”

BASIS OF ADJUSTMENTS The following was suggested as the genesis of such a scheme : “Every property to be dealt with separately by the adjustment commissions upon application of the mortgagor or mortgagee, the powers of the commissions being extended to enable them to act ois follows : “Farm lands : (1) Ascertain the pre-sent-day value of the property, assessing such value on what the property will produce; (2) total up the whole of thei mortgages on the property and direct that for two years any mortgage money in excess of two-thirds of today’s value of the land shall not bear any interest, preference being given to first mortgages as against second mortgages, and so on; (3) ascertain today's value of the stock upon the land and the stock moutages thereon and direct that for two years any mortgage money in excess of two*-thirds of today’s value shall not bear a.ny interest, the same to apply to jjiortgages of farm implements; (4) give all parties the light to call for the revision of the order every two years for a period of ten years; (5) at the expiration of ten years the order then in operation to be permanent.”

As an o‘illustration the following example was given : Value of farm five veafrs ago, £21,000; mortgages taken five years ago stHl in existence, Ist £14,000, 2nd £2000—£10.000; presentday value oif farm, £12,000. Tile effect of the scheme outlined on such a property on an order made by the adjustment commission would be : Interest-hearing part of Ist mortgage, being two-thirds of the mesont value, £8000; not interest-hearing part of list mortgage. £OOOO ; 2nd mortgage, £2000; total not interest-bearing, £BOOO.

“In two years’ time the price of primary produce increases by, say, 20 per cent. The mortgagee therefore applies to the adjustment commission, which may then decide that the pre-sent-day value of the property hais increased in the same ratio as the increase in primary products. The position for the following two years would then be as fellows: New value of farm (£12,000 plus 20 per cent.), £14,400; interest-bearing part of Ist mortgage being two-thirds of the new value, £9600; not interest-bearing part of Ist mortgage £4400, 2nd mortgage £2000; total not interest-bearing, £6400. BALANCE WITH PRICES. “The same thing would happen every two years, the interest-bearing part of the mortgage being increased or decreased in accordance with the rise or fall of prices of primary products. Stock mortgages would be dealt with in somewhat .similar manner, the stock being valued every two years on the application of either the mortgagor or the mortgagee. “In ten years the .position would have been stabilised and provision Should be made whereby the parts of the mortgages or stock mortgages not interest-bearing at the end of ten years should be wiped out entirely and an endorsement to that effect be made by the adjustment commission on the mortgage document. “Where a farmer holds his farm under a lease the commission would upon application every; two years decide what is the fair annual -rental of the farm and rule that rent above that amount be not recoverable. Where there are mortgages on the lea.se they should he dealt with in a similar way to mortgages on freehold farms. “Rents of shops in towns and cities should also he reduced; this could be done by the adjustment commissions in the .same way as leasehold l farms, the conditions of each lease being considered on its merits.” Mr Wlillkinson briefly outlined his scheme as recently published. The farmers desired to be juist to those people who had lent them money a.s well as to themselves. The position at present was that the state of uncertainty existing throughout the country could not be permitted to continue He contended that his scheme met the position. New schemes were always a trouble and he outlined instances where ideas now in practice had received jeers when placed before the public at first. Business people as well a.s farmers were beginning-to get behind the saheme. FARMERS’ UNION VIEW. “Justice has to be done to the mortgagee,” said Mr Poison. “i cannot lose sight- of that responsibility. Determined as I am to help fellow farmers, I will not be a party to lobbing fellow citizens of ther just share, at the instance of any other class—even my own.”

He had no intention of placing any scheme before the farmers at that stage, he continued. His organisation would not support any scheme proposing something for nothing, and he was satisfied that the farmers did not wish to gain at the expense of others The national viewpoint was one that had to be considered all the time. How would the people up and down the Dominion be affected by the adoption of any scheme ? That was a question always present. Mr. Poison said lie realised that the country’ essential industry had to be succoured, for otherwise the suffer-' ings by all sections of the community would continue. Other communities simply reflected the troubles of the farmers, and he thought everyone realised that something had to be done to assist the primary producer. The Farmers’ Union did not think the Mortgagors Relief Act was going far enough, for when there was a mountain of principal it was useless to temporarily reduce interest payments. Those people who had lent money to improve or stock a farm were not in the same position as vendor mortgagees, in the opinion of the Farmers’ Union, continued Mr. Poison. Their treatment could not be the same. So far every plan he had heard affected someone unjustly, and some of them if brought into force might have ie-j percussions in the future. To afford some relief lie had been concentrating on the reduction' of costs by gaining tariff reductions. . It seemed to him that Mr Wilkinson’s plan rooted the farinpr to the land, and its application might have the effect of producing a system oi peasantry similar to that in European countries, and wild© there was that danger he could never support it. lie thought financial companies might become more powerful than ever under Mr. Wilkinson’s scheme, and on the one side- there would be the enormously wealthy class and on the other the peasantry. If Mr Wilkinson would reassure him on that fundamental objection he could say he liked the plan. He believed artificial barriers would be broken down by the decisions of the World Economic Conference and that international trade would be restored, continued Mr. Poison. If the nations could come together as experience had shown was necessary he believed the revival in trade would greatly benefit the fanning community of New Zealand. In the meantime it was pleasing to note that New Zealano ranked with South Australia and New South Wales as the three countries who had done more for the farming community in the way of relief than any others in the world. jf e said the Farmers’ Union was prepared to support any plan that would guarantee the farmers undisturbed possession and nurse them through the crisis until they were on their feet. But justice had to he done to the mortgagees; it had to he remembered that there were many old farmers and old farmers’ wives who had retired on the proceeds of a mortgage, and he would be party to nothing that would rob such people of their small igcome. EQUALISING THE SACRIFICE. To put mortgagee and mortgagor on a permanent footing, giving each a sense of .security and at the same time equalising to a large degree the amount of sacrifice, Mr. B. Richmond proposed another scheme. Briefly, i it was: (1) That the whole of the rural lands in New Zealand be re-valued on the nominal price of the produce sold from that land. Mr. Richmond suggested Is a lb in the case of butterfat. In arriving at the amount producable from that land he suggested that the returns for the past throe years be taken and the average ho the basis at which the valuation he arrived at. (2) That in the event of the valuation arrived at being loss than the total amount of mortgages, each mortgagee reduce the amount of his mortgage proportionately. (8) That interest be charged on a sliding scale. For instance, when but-ter-fat is at is a lb the rate he C per cent., and when at Od a lb at 3 per cent. (4) That no land be sold after valuation for more than the re-valuation or, if sold in excess, only for cash. That is. any amount over and above the revaluation price must be paid in cash so that at no time will there be any mortgage in excess of such revaluation.

(o) That no mortgage© should call ap monev during the term. (6) That no mortgagor should repay any mortgagee by raising a new mortgage or, if so, only on the same conditions as the previous mortgage. (7) That when apportioning' mortgages after re-valuation hais taken place, arrears of interest be taken into consideration. (8) That wheq. re-valuation is made due consideration he given to rates on. such lands. (9) That no mortgagee whose mortgage is due shall call up his mortgage until such re-valuation has taken place. (10) Tliat the Mortgagors Relief Act shall not cease operations until the completion of tlje whole re-valuation. (11) That the term of the foregoing •lie 15 years from the passing of the Act. • , Mr. D. le G. Morgan (secretary ot the North Taranaki branch of the union) read the report of a scheme submitted by Mr N. B. Fletcher (Stratford) to a meeting of the New Zealand executive of the union. The scheme Cided a. moratorium for all farm mortgages. The first thing necessary under Mr Fletcher’s scheme was the re-valuation of all farm lands. The values placed on the farmers by : competent assessors would liave to stand for several years—say, seven years—and would l>e based on. t-ne stated butter-fat price or tlie price of wool, lambs or other stock according to the class of farming followed. Referring to the existing mortgages Mr Fletcher said that a- number of them would ha.ve to cut down to that particular value and interest in no case would be more than 5 per cent. Where a mortgage exceeded the declared or assessed value instead oi ■mpletely wiping off the excess he sugested 'that the Government issue bonds bearing interest at the rate oi 2 per cent, on the excess value. Money might have been lent or borrowed m good faith and while ]t had gone today under his proposal a good deal of it might, with the coming of better prices, he reinstated. He suggested that tins applied only to actual monev lent and not in own case to vendors’ mortgages. In other ords. if a farm had been sold at high values—values which never existe<l—and a great deni of money was left in, it would be eliminated alto“eWitli regard to the bonds issued for this excess money it would be noticed that he did not propose to niteriere with private mortgages up to the actual value of the land at the present time because he did not want to interfere m any way with the circulation of money, which was so necessary for the improvement of the farming lands of the country. Under this scheme private people would lend money on land. In New Zealand that should be looked upon as one of the soundest investments possible, and it would be, too, because the mortgage would not exceed the assesed value of the land.

REDEMPTION OF BONDS. The Government bonds, he continued, would he redeemable from time to time hv a system of ballot, the funds for redemption being provided by a sales "tax m all sale 'transactions of land where the price was in excess of the value assessed. The advantages to be gained by the scheme would bring immediate relief to the primary producer who needed it. It would give him a secured tenure and at the same time jt Avould act as a guarantee to the ortgagae that he would get his 5 per cent, interest up to the assessed value according to the price of produce. , , Mr. Fletcher said that where the mortgagee had lent more than to-day s value of the land it would not mean repudiation because while not getting the full value he would get 2 per cent. With regard to speculation in land, he said that it would be impossible te inflate the prices because anyone purchasing above the assessed value would only affect the lender and not the particular farm or the country at large. The scheme .would not prevent the buying and selling of farm lands. There still might ; be cases if such a scheme were carried out where the farmer would not make good, but it Mould be perfectly clear in such cases that this was not through any fault of the land, but because the farmer was incompetent and he would be weeded out. Such a scheme would restore confidence to money-lenders because they would know they were not advancing money beyond tlio actual earning capacity of the farm. The chairman said the position was obviously hedged with difficulties and he again asserted that it was only principles that needed to be impressed on the authorities. The motion was then carried, and it was decided that the deputation to wait on Mr Coates should be as large as possible and contain as many representatives as possible of North, Central and South Taranaki farmers. The speakers will be the members of Parliament, the chairman of the North and South provincial executives of the Fanners’ Union, and the chairman of the Stratford sub-provincial executive. Several speakers urged the necessity for action during the comi ing session of Parliament, and it was agreed that it was desirable for the investigation committee to begin work as soon as possible. All these points will be urged on Mr Coates.