Farmers claim to have been forced off their Northland farms after aggressive banking practices left them with unaffordable loans

Farmers claim to have been forced off their Northland farms after aggressive banking practices left them with unaffordable loans
Bill Guest, Farmers of New Zealand

A group of Northland farmers forced off their land after mortgagee sales with over $100 million involved is fighting back.

Farmers of NZ operations director Bill Guest said up to 30 farmers, mainly in dairy, had been affected and many of them met recently to plan the way forward.

The loans went back up to around 2008 and others more recent. Some were called in after a matter of months the group claims.

“Many were set up to fail by the banks with debt loadings that were unrealistically high and risk analysis procedures were seriously lacking,” he said.

A lot of the cases involved one bank and the one lending agent who later became involved in the mortgagee sale process.

“One particular lender has most of the clients,” Guest told interest.co.nz

“The banks were throwing money around like lollies from Santa at a Christmas parade.”

The 'golden rule' for farm lending was normally 25% of gross income to be allowed for debt servicing, he said.

However, in some of these cases debt to be serviced for these farmer was 100% of gross income and in one extreme case 114%.

“For a dairy farmer at the time of the loan when operating costs were $6.40 a kg/ms the debt was never sustainable,” he said.

Farmers had been granted loans without a valuer ever visiting their property.

“Banks have an obligation to a risk management policy, have an independent valuation and put limits on the amount of debt to equity.”

What had happened in the Northland cases there were either no valuations or the banks had done them themselves, Guest claimed.

He also said commissions were paid to a banking lending staff member on overvalued properties - and that same person gained more commissions in the mortgage sale process.

“One bank in Dargaville is paying $900 an hour to someone to monitor and oversee the exit of a farmer who is being allowed $1,200 a month living expenses ... and all this is being charged to the farm.”   

Banks, he said, were prepared to take some losses on the forced sales as the debts had been written off.

“They make enormous profits from high debt on so called modest interest rates.”

Not all farmers were subjected to mortgagee sales with one lender simply foreclosing and giving the person 30 days to refinance.

“Banks and farms are businesses that work together. Banks support farms by providing capital and cash-flow when it’s needed. Most farmers have a good relationship with their bank. Like all business owners, farmers need to meet their obligations to succeed," says New Zealand Bankers’ Association chief executive Kirk Hope.

“Banks work very hard with customers who find themselves in financial difficulty. People who are having trouble should speak to their bank as soon as possible, and be open with them about the challenges they are facing, so arrangements can be put in place to resolve any issues.

“Mortgagee sales are always the last resort for banks. It's not in anyone’s interests that they occur and banks go to considerable lengths exhausting all other options before making the very difficult decision to proceed with a mortgagee sale.”

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13 Comments

Does anybody in NZ ever take responsibility for THEIR own actions.Lollies thrown out by banks usually mean a visit to the dentist further down the track.Stop blaming the banks unless they held a gun to your head you are to blame for being greedy just like the people who invested in the finance companies because of high interest rates.

There was a time 1980's etc, when banks would organise a commercial valuation for themselves & their client/borrowers.  I remember building a house then & the bank would organise all the milestone valuations & then authorise progress payments. What happened to this service?
Then some bright thinking in the 'user pays' philosophy decided to outsource the valuation to the borrower.
Maybe if banks organised & paid for their own valuation they can lend a little more confidently.

I find the above article rather jubious.

BNZ are very careful about who they lend to for farming and those of us who stretch the margins with our proposals are very carefully scrutinised, and must try very hard to get the lending.  My rural manager has worked through multiple scenairos (her and support temas wages at the banks cost!)  and if we don't show good margin for error (current projections us 50% herd value, 7 - 8% interest sensitivity, +/- 10 % worst year, production, for projections. wages, drawingsd, rent, fert must all be present and accounted for)

I name BNZ because I haven't recently used other banks, but am impressed with my help and backers.

Not meaning to be pedantic , Mr cowboy , but in the English language some words are spelt quite differently , depending upon their context ...
 
... for instance , when referring to money , " jubious " is correctly spelt as " jewbious " ...
 
No need to thank me , glad to have been of help .

GBH, don't let anyone erewhon say you are a have been.
 

.... there's not many people know this , Henri , but Michael Hill originally was gonna brand his chain of ring and bling shops as Ellery ... which sounded nice enough ... but in honour of his religion , Judaism , he tacked on 3 extra letters to create Michael Hill Jewellery ....
 
Not many people know that ...

Really? Is this now a forum for infantile antisemitism?

That's right, a little less observation please. 

Bearing in mind that those of us who could see it coming were just xenophobes. And having said that, that is pretty much how it happened, west too scared to be labelled that instead of putting a bit of resistance
Oh well

dubious.

A combination of typing fast and less proofreading so the blasted in[put window doesn't timeout

And not being able to copy/paste from/to the input window and my spelling checker app doesn't appear to check the contents of the interest.co.nz window.

Dumb borrowers.

Advert on Trade Me regarding a lotto shop in the Hamilton suburb of Dinsdale for sale.It says "Could suit emigrants seeking residency
Üs dumb Kiwis can't operate a lotto shop it appears or cannot afford the exhorbitant asking price.

They didn't include "add legal high sales and you're on a winner"
Time some of the ways people get into this country were reviewed, no-one can convince me we are short of people capable of owning and operating a Lotto shop.