The Rural Voice, 1985-12, Page 59ONE MAN'S OPINION
Debt moratorium:
everybody loses
A hungry people is unreasonable,
unjust, and unmerciful.
Seneca.
The mushrooming of calls to im-
pose a moratorium on farm
foreclosures, is disturbing. But as
Seneca knew, one can't talk to a
starving man.
The moratorium on FCC mort-
gages should be lifted as soon as
possible, or borrowers should not be
allowed to let their FCC mortgage
debts increase beyond the combined
value of first, second, or third mort-
gages.
Fathers and Sons
I was first alerted to this problem
by a letter to the editor in the Chris-
tian Farmer's magazine Earthkeep-
ing.
The writer explained how he held a
second mortgage on his late father's
farm. The new owner faithfully paid
him the agreed sum. What he didn't
know was that the first mortgage to
the FCC was not being paid. Every
half year the interest owed was added
to the FCC mortgage. When finally
the amount of the mortgage exceeded
the value of the farm, the FCC
foreclosed. To the understandable
dismay of the second mortgage
holder, there was nothing left for him
and his inheritance was wiped out.
Unless the FCC moratorium is
lifted, many pensioners who, in good
faith, gave a second mortgage at low
rates when they sold their farm, may
lose their pension.
I heard of another instance where a
father had sold the farm to his son.
The father lost his pension, the son
was not helped anyway, and both
ended up penniless.
Pensioners and Banks
The problem, when a moratorium
applies only to the FCC, can possibly
be diminished if the holder of the se-
cond or third mortgage keeps track of
payments to the first. If he knows
what is going on he can initiate his
own foreclosure action.
But if the call by the OFA, NFU,
various farm women's groups, and a
number of county federations of
agriculture is heeded, a moratorium
could be placed on any lender. The
pensioner could be prevented from
foreclosing to protect his pension.
The same would hold true for
banks. The result would be
disastrous. The small pensioner can't
afford to take the risk of leaving his
pension in the hands of the buyer, be
it son or stranger. The bank might
continue to lend with the farm as
security, but to minimize the risk the
bank's interest rate would have to in-
crease.
The time when the sellers of a farm
could help a new farmer through a
low-interest mortgage will be a thing
of the past.
Moratoria wouldn't help anyone,
not even bankrupt farmers. Banks
will, and have, leaned backwards to
help farmers through difficult times.
It is in their own interest to, in some
cases, write down loans because their
losses will be less. This process has
been assisted through advisory
boards of bankers, OMAF personnel,
and farmers. When the debt to asset
ratio was simply too high, they
declared the case hopeless. When a
write-down or an interest reduction
could help, they so advised. But I
haven't heard of one case where
bankruptcy was advised if the farm
could be salvaged.
Moratoria might be useful. If they
were, the lenders would be the first to
see it. But imposing liberty to dodge
obligations across the board will help
no one. The retiree loses; the new
farmer, at best, pays higher interest
rates; the bankrupt person suffers
prolonged agony, and the trust the
lending institutions have had in
farmers will be severely damaged.
Please, if you think me wrong (or
correct) let me know where I fail by
writing to the Rural Voice. ❑
Adrian Vos, a regular columnist with
The Rural Voice, is a freelance writer
from Huron County.
PAG
S
Your representative
Bob Van Den Neucker
519-482-9800
R.R. 4, Seaforth
Ii)
Ward & Uptigrove
CHARTERED
ACCOUNTANTS
Listowel
Mitchell
R.B. Karcher, C.A.
C.D. Newell, C.A.
R.E. Uptigrove, C.A.
291-3040
348-8412
C.W. Brouse, C.A.
R.H. Loree, C.A.
G.J. Martin C.A.
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