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HERALD WEEKLY ISSUE 432 : 05 November 2008

Mortgagee sales - woes and alleviaton

The plague of mortgagee sales in the Cook Islands really began last year co-incidentally at about the same time that a financial institution dealing in the speculative sale of guaranteed mortgages in the US collapsed – and got Federal funding support!! The Asian Development Bank has asserted that the Pacific Region is “shielded” from the effects of the financial meltdown in the US. They got it wrong. Except for a few economies that are very strong like that of China or those that have no substantial links with the financial institutions of the US the world at large has been affected by the rapacity and underhand dealings – free market techniques – of the collapse of Wall Street, the major finance centre of the US.
Some 28 financial institutions in New Zealand collapsed and this does not include fund management agencies in Australia. In New Zealand surviving financial institutions have battened up, restructuring options are being prepared for consideration by shareholders and all payments have been frozen for an undetermined period. The Australian government responded to the melt down very smartly and quickly by dropping the lending rate by a full 1% and guaranteeing deposits held by all banks which included both Australian banks in the Cook Islands. The New Zealand government has maintained a “serious watchful eye” over the situation.
Heaven only knows what the Cook Islands government is doing. So far it is doing nothing of substantial implication. We are soon to have a supplementary budget and already the whispers are for more belt tightening!!
Major stock markets around the world fell dramatically by an average of 20% and fluttered up and down unpredictably over the last three months as news of a $700 billion Federal bail out fought against insidious world wide loss of confidence in stocks and shares. Governments around the world quickly turned to alleviation measures with phenomenal amounts of bail outs accompanied by drops in lending rates in order to shore up economies in recession and to fend off the ominous threat of a depression.
In the US and several other countries the victims of the free marketeering rapacity of US financial institutions number in the millions with sums of money numbering in the billions with millions losing their homes, businesses and jobs. In the US alone over 700,000 people this year have lost their jobs. By comparison the situation in the Cook Islands is like a glass of water in a large lake. The pain, nevertheless, is the same.
As I said earlier, the plagues of mortgagee sales began in earnest last year as more than a few sales became public. The first of such cases became known back in 2005 but looked like an isolated incident. It took on the form of a plague this year when some 38 cases hit the legal desks of law firms.
In some cases borrowers (mortgagees) were able to refinance and consolidate. Several more were by bank conditions unable to do so and so have had to suffer the heart breaking pain of losing what they had come to regard as their dream home, pack up and leave for either NZ or Australia for their “home” will not return to them for some fifty odd years!! Most of these are working young mothers and fathers who are also up to their ears with car loan repayments, telephone and horrendous electricity bills, rising school fees and the rising costs of feeding a young and growing family. They are all to the last one financially strapped. A loan repayment is missed here and there to buy milk, cereals and clothes for the baby and the rest of the children and possibly help out with the grannies as well. Desperation ate away at each of these families.
To whom could they look to? The government has been well aware of their situation. Instead it stood by nonchalantly, watched with a “serve yourself” attitude and did nothing. In the meantime mortgagee sales proceed and, because of the very high offers, the tendering process keeps the locals out of the loop and the land and the house go to a foreigner, resident or otherwise.
Government should have intervened. I firmly believe that in the entire mortgagee sales debacle that have occurred in the Cook Islands our government should have intervened. In fact I believe that such intervention should be made as an enduring policy no matter the government of the time. Governments elsewhere in the world did so and from a financial and economic – and humanitarian – policy angle, they were compelled to do so. Just as well for we are indirectly beneficiaries of the fight to prevent a world depression.
We too have very good reasons to require and welcome government intervention – depopulation, collapsing businesses (three have been advertised this week), job opportunities, private sector development on our Sister Islands, protection of land ownership and a host of other good down to earth reasons. It is my view, therefore, that the following be instituted as firm enduring policies legislated if necessary to be observed no matter the government of the time.
Firstly, establish a Land Trust Fund managed by BCI or a non-government agency, the funds of which shall be utilised solely for mortgagee sales alleviation. Secondly, require compulsorily that no sale shall take place without the land owner or the owner being given the option to settle first and the settlement shall only be for the amount owing and attendant legal costs. Thirdly, the interest rate on home mortgages be reduced significantly and a maximum should be fixed to be followed by the establishment of a government agency with legislative powers to oversee such rates. Finally, institute measures within government to financially facilitate the Land Trust Fund.
All this must necessarily be preceded by consultation with target groups. Now is the time to begin that process, not later. That is my belief.

Herald Issue 432 05 November
- Yes he did – Obama wins!
- New political party to be launched
- DEMO and CIP in Disarray!
- Briefing omits other relevant points
- Mortgagee sales - woes and alleviaton