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HOUSE PURCHASE DEPARTMENT:

ADMINISTRATION & POLICY

(continued)

 

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Bank Committee: October 19th 1936 (continued)

 

With reference to the portion of the report dealing with the revision of policy for granting house purchase advances, the Chairman of the Sub-Committee emphasised the main points of the scheme, which he explained was for the guidance of the staff and not intended for general publication. The Committee considered the various provisions thereof and it was agreed to alter the last paragraph of Clause 2 by inserting after the words "not exceeding 20 years" the words "as the House Purchase Sub-Committee (who may delegate this power to their Chairman) may sanction", instead of the words "as the Chairman of the House Purchase Sub-Committee may sanction".

 

With reference to paragraph 4 (Undertaking by Builder to take back property in default by Mortgagor) the Town Clerk submitted the following report:

 

19th October, 1936

 

ADVANCES BY THE BANK - BUILDING ESTATES

 

Since the meeting of your House Purchase Sub-Committee on Monday last I have given consideration to the question of Builders taking over mortgages in the event of default by the Mortgagors in the early years of the loan.

 

There are three possible methods, videlicet:

 

1. By making the builder a party to the Mortgage as Surety.

This method is not likely to be adopted as no builder is likely to be found who will commit himself for the payment of the principal sum and interest in default by the Mortgagor.

 

2. By Second Mortgage to the Builder of the difference between 80% and 90%.

The objection to this method is that the builder would not be bound to take over the property in the event of default by the Mortgagor.

 

3. By requiring the builder to enter into a Deed of Covenant to repay to the Corporation the principal, interest and costs owing to the Corporation on the security if default is made by the borrower before the Mortgage debt is reduced by the usual monthly repayments to __ % of the valuation, the consideration for this being the Corporation's acquiescence to the Builder's request to advance to the purchasers of his houses sums in excess of 80% of the valuation.

 

The deed could possibly be in the nature of an omnibus deed, to which could be added as occasion arose particulars of each property and the amount advanced, etc, etc, thereby obviating the necessity for a fresh deed in respect of each advance.

 

This last method (No 3) seems to me the most efficacious.

 

I have prepared a draft of the proposed deed, which accompanies this report.

[Draft report replaced by an amended version - submitted to the Committee on December 21st 1936]

 

The Town Clerk was authorised to adopt the suggestion No 3 in his report as to requiring the builder to enter into a deed of covenant, on the understanding, however, that the builder in addition should be required to deposit collateral security as indicated in paragraph 3 of the Bank scheme.

 

5777  RESOLVED:- That the scheme outlined in the foregoing report of the House Purchase Sub-Committee, as above amended, for revising the procedure for granting house purchase advances, be approved and adopted, and that the officers concerned be instructed to take the necessary steps to bring the scheme into operation forthwith; also that the instructions previously given by the Bank Committee or the House Purchase Sub-Committee regarding house purchase procedure be amended or rescinded in conformity with the scheme.

 

5778  RESOLVED:- That, in regard to the following transitional cases, the following instructions be given:

 

(1) That builders, who are collaborating with the Bank in respect of advances already arranged, be informed of the adoption of the new scheme and be given one month's notice of the revised terms before the same take effect.

 

(2) That builders who have not yet signified their acceptance of the terms already offered by the Bank be notified of the withdrawal of such terms forthwith.

 

(3) That offers already made to ordinary applicants for House Purchase advances in accordance with the previous terms and conditions be available for acceptance within a period of one month from the respective date of such offers.

 

5779   RESOLVED:- That, subject to the consent of the Solihull Urban District Council, the arrangements indicated in the foregoing report for the proposed transfer of 504 mortgages from that Council in accordance with the procedure and conditions therein contained be approved, and that the Town Clerk and General Manager be directed to take any necessary steps for giving effect to such transfer, and the Town Clerk be instructed to enter into any necessary agreements, affixing the Corporate Seal thereto, where required.

 

T H I S   D E E D     is made the                  day

 

of                                                       193       BETWEEN

 

of

 

(hereinafter called "the Guarantor" which expression shall include his executors administrators and assigns) of the one part and THE LORD MAYOR ALDERMEN AND CITIZENS OF THE CITY OF BIRMINGHAM (hereinafter called "the Corporation") of the other part

 

WHEREAS the Guarantor is interested in the development of a building estate known as the

                     Estate and to facilitate the sale of the houses on the said estate has requested the Corporation as and when the houses are sold to advance to certain of the Purchasers thereof on Mortgage from the funds of the Municipal Bank (hereinafter called "the Bank") sums in excess of the amount which would normally be advanced by the Corporation on security of the said houses under the rules of the Bank.

 

AND WHEREAS the Corporation have agreed subject to the approval of the Committee of the Bank to make such advances upon the Guarantor making the cash deposits hereinafter referred to and entering into the covenant hereinafter contained.

 

NOW THIS DEED WITNESSETH as follows:

1. Subject to the approval as aforesaid of the Committee of the Bank in each case the Corporation will advance (if required) to each purchaser of a house erected on the said Estate as aforesaid a sum to be agreed upon by the Corporation and the Purchaser being in excess of the normal amount of advances in accordance with the rules of the Bank.

 

2.  In consideration of the Corporation making such advances as aforesaid the Guarantor hereby agrees with the Corporation as follows:

1. That he the Guarantor will on the completion of each Mortgage deposit with the Corporation as a collateral or additional security a sum (hereinafter referred to as "the deposited sum") equal to the amount by which the advance made exceeds the normal advance

2. The deposited sum shall be held by the Corporation until the amount advanced shall be reduced to 75% of the valuation of the mortgaged property upon the happening of which event the deposited sum shall be repaid to the Guarantor together with interest thereon at the current rate of interest paid by the Bank on deposits

3. If a Borrower shall at any time make default in payment in accordance with the terms of the Mortgage and the Corporation after duly exercising all or any of the powers vested in them as Mortgagees for recovering the principal and interest secured thereby shall have failed to recover the full amount of such principal and interest for the time being outstanding with any costs incurred then the Corporation shall be at liberty to reimburse themselves such loss out of the deposited sum and shall refund any balance to the Guarantor

 

3. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that if a Borrower shall at any time make default in payment in accordance with the terms of the Mortgage as aforesaid within the periods hereinafter mentioned the Corporation may instead of exercising their powers as Mortgagees request the Guarantor to take over the Mortgage and the Guarantor hereby covenants with the Corporation that he will upon such request repay to the Corporation all principal money and interest owing up to the time of such default together with any costs and the stamp duties on the Transfer and will tale from the Corporation a Transfer of the Mortgage debt and the security therefor. The periods within which the Guarantor may be requested to take over the Mortgage are as follows:

20 years reducing loan   - 3 years

25   "           "          "    - 4 years

20   "     equated     "    - 5 years

25   "           "          "    - 6 years

 

4. The neglect or forbearance of the Corporation to require or enforce payment of any monies secured by the intended Mortgages or any of them or the giving of time or other indulgences by the Corporation to the Borrower or any of them shall not in any way prejudice or affect the liability of the Guarantor hereunder or the security of the Corporation on the said intended deposits Provided however that the Corporation shall furnish the Guarantor from time to time with particulars of any Borrower who may be in arrear with his payments.

 

           IN WITNESS &c.,

The Committee reviewed the question of requiring the Builder to enter into a personal covenant to take over the property in addition to depositing collateral security and in this connection a suggestion was made by the Lord Mayor that, if it was desired to enforce the personal covenant, something in the nature of a collateral pool system might be devised so as to obviate the builder making a deposit in each individual case.

 

After discussion it was:

5816   RESOLVED:- That consideration of this question be referred back to the House Purchase Sub-Committee.

 

House Purchase Sub-Committee: January 18th 1937

 

Transfer of Mortgages from Solihull Urban District Council.

 

Your Sub-Committee have had before them a report of the General Manager with regard to the carrying out of the Transfer of 453 Mortgages from the Solihull Urban District Council as authorised by your Committee on the 19th October last. The work in connection with the Transfer, which was of considerable magnitude, involving a sum of £173,429. 0. 7d, has been carried out very successfully and all the Mortgagors concerned have enrolled themselves as depositors.

 

There still remain thirteen mortgages under the Housing Act 1923 to be dealt with as soon as satisfactory terms can be arranged with the Public Works Loan Board.

 

It is understood that a report of the Town Clerk as to the completion of the Transfers will be submitted at the meeting of your Committee on Monday next.

 

Your Sub-Committee have expressed their appreciation of the expeditious and efficient manner in which the Transfers have been carried out by the officers concerned in the Town Clerk's Department and the Municipal Bank.

 

Report of the Town Clerk: January 14th 1937

 

Minute No 5779

Solihull - Transfer of Mortgages

 

In accordance with the instructions contained in the above Minute I have to report that I have completed the transfer of 453 Mortgages from the Solihull Urban District Council to the Corporation.

 

I have made the following payments:

 

Consideration payable on the Transfer	£173,429.  0. 7.
Interest on quarterly Mortgages from   25th December 1936 to 11th January 1937	288. 15. 8.
Interest on monthly Mortgages from    1st January 1937 to 11th January 1937	33.  6. 7.
Solicitors' charges as agreed	237. 16. 6.
Stamp Duty	43.  7. 6.

Bank Committee: March 15th 1937

 

On Minute No 5779, the Town Clerk submitted the following report as to the transfer of a further thirteen mortgages from the Solihull Urban District Council to the Corporation:

 

15th March, 1937

 

Solihull Second Transfer of Mortgages.

 

In accordance with instructions I have to report that I have completed the transfer of thirteen Mortgages from the Solihull Urban District Council to the Corporation. I have made the following payments:

 

Consideration payable on the Transfer	£4,716.   7. 8.
Interest on above amount from   1st to 10th March, 1937	5.   4. 8.
Solicitors' charges	6. 16. 0.
Stamp Duty	1.   4. 0.

 

5899  RESOLVED:- That Minute No 5779 be discharged.