Victorian Registrar of Co-Operative Housing Societies
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VICTORIAN REGISTRAR OF CO-OPERATIVE HOUSING SOCIETIES ANNUAL REPORT 1987. VICTORIA Report ofthe REGISTRAR OF CO-OPERATIVE HOUSING SOCIETIES for the Year ended 30 June 1987 Ordered by the Legislative Assembly to be printed MELBOURNE JEAN GORDON GOVERNMENT PRINTER 1987-88 No.98 VICTORIA Co-OPERATIVE HOUSING SOCIETIES Forty-Second Annual Report of the Registrar Financial year ended 30 June 1987 The Honourable the Attorney-General This report, which is submitted pursuant to section 71 of the Co-operative Housing Societies Act 1958 covers the financial year ended 30 June 1987. A brief statistical summary of some of the operations of co-operative housing societies, to the close of the year under review, is presented in a supplement to this report. REGISTRAR'S STATEMENT Following the appointment of Gordon Lewis as Victoria's Government Solicitor I assumed the position of Registrar in June 1987 coinciding with my appointment as Commissioner for Corporate Affairs. I can also report that the integration of Registry staff into the Corporate Affairs Office has now been successfully completed. My predecessors have referred to prevailing economic conditions and have highlighted the fact that borrowers from co-operative housing societies are not insulated from the effects of the deregulation of the financial sector, the resultant fierce competition and general economic factors. 2 - One of the most significant influences on the lending of societies during the year was the decision of the Federal Government to deregulate all lending other than residential lending effected prior to April 2, 1986. The banks saw the opportunity to utilise societies as funding intermediaries but at rates of interest above that which would attract a Treasurer's guarantee. This resulted in borrowers facing interest rates of up to 15.5 per cent. which, when coupled with the society's management fee, saw members' commitments at historic highs, These circumstances had a number of effects both on societies and on borrowers. Societies found themselves in direct competition with the deregulated bank lending and that of building societies for a share of the lending market and members faced onerous monthly payments. In addition, as no Treasurer's guarantees were executed, there were no indemnities available, and borrowers were faced with the additional cost of a mortgage guarantee insurance premium. The commitment of the institutional lenders to societies as funding intermediaries was again underlined by a total of $144,426,100 being committed, with the State Bank of Victoria again leading the way with loan accommodation in excess of $76 million. It was pleasing to see the return of other lenders with the National Australia, ANZ, Westpac and Commonwealth Banks providing a substantial funding boost. In my comments above I alluded to the paucity of funds made available at or below the guarantee rate and in fact only $5 million was at a rate which attracted a Treasurer's guarantee, the traditional second tier of housing society lending. - 3 - Societies are aware of the problems faced by some borrowers in meeting commitments and also of the need to commit loan accommodation within time frames imposed by lenders. As a result they have strongly supported innovative mortgage instruments and flexible lending techniques which have the eminently desirable outcome of increasing the access of Victorian families to housing finance at an affordable cost. Whilst the Co-operative Housing Societies Act 1958 remained unaltered during the year, I am aware that a group of practitioners from The Federation of Housing Societies of Victoria continued to meet to draft amendments to the Act and their final report will be considered with other submissions. In this way it is hoped to ensure that a modern and functional Act can be prepared for the industry. An amendment to the Regulations during the year increased the amount able to be charged for the valuation of a property offered as security for an advance. Again the Victorian Co-operative Housing Council continued to meet and discussed many items of interest and relevance to societies and proved to be a valuable source of advice to the Minister and to me. A summary of some of the major topics appears later in this report. In addition, the National Meetings of Registrars included items of relevance to co-operative housing societies on their agenda. Industry re-structuring and reform continues to be an object pursued by both the Government and the industry and it is pleasing to see that the amalgamation process has continued to be exercised by societies seeking a leaner and more cost effective structure. It is intended that the redrafting of the Act I referred to above will facilitate a less complicated process of amalgamation. - 4 - In concluding these remarks it seems appropriate to look briefly to the coming year and indications are that the flow of funds will continue unabated as lenders take advantage of the cost effective lending of societies. Reducing interest rates should also make the placement of funds more readily achievable and will hopefully lead to more affordable repayments for existing borrowers and a wider access to the pool of funds available to satisfy the home ownership aspirations of Victorian families. LEGISLATION AND REGULATIONS The Co-operative Housing Societies Act 1958 was not amended during the year. However the Co-operative Housing Societies (General) Regulations 1984 were amended with effect from 27 May 1987. At that time, Regulation 38 was amended to effect an increase in the valuation and inspection fees able to be charged for properties submitted as security for an advance by the members of co-operative housing societies. VICTORIAN CD-OPERATIVE HOUSING COUNCIL At the commencement of the year under review the members of the Council were - Registrar of Co-operative Housing Societies Mr. F. Elzink, - Nominee of the Treasurer Mr. A.F. Collins, - Persons appointed by the Minister from persons Mr. G.W. Cunningham, nominated by The Federation of Housing Societies Mr. R.K. O'Neill, of Victoria Mr. M.J. O'Mullane, - 5 - Mr. R.B, Maybury, Persons appointed by the Minister as having special Mr. A.v. Cahir, expertise The Chairperson of the Council is one of the members nominated by the Minister and the person presently nominated is the Registrar. The term of office of the above named members expired during the course of the year and the Minister appointed Mr. K.W. Falconer the Senior Manager, Commercial Accounts, of the Business Finanee Department, State Bank of Victoria to replace Mr. Maybury whose term had expired. Apart from attending to its statutory obligations the Council directed its attention to a variety of matters relevant to co-operative housing societies. Some issues of importance discussed by the Council were - Valuation and Inspection Fees Following recommendations by the Council, fees able to be charged for a first and subsequent inspection of a property offered as security for an advance were increased with effect from May 1987. Management Fees After a recommendation from the Council and after discussion with the Ministry of Housing, societies funded under the CAPIL scheme were notified that a monthly management fee equal to 1.5 per cent of the members income at the start of the loan could be charged. - 6 Application for Advance Forms The Council considered a draft Application for Advance Form and following its comments the form was adopted for use by all societies. Guarantees and Indemnities A number of matters were considered which included Interest Rates The bulk of the funds made available by institutions continued to be at interest rates well above that at which a Treasurer's guarantee was available. The Council continued to explore mechanisms that would allow ready adjustment of the rate in response to fluctuations in market rates as well as making recommendations on the appropriate rate from time to time to the Treasurer. Maximum Loan Size Following recommendations from the Council the maximum loan for which an indemnity was available was increased from $60,000 to $70,000. 7 Indemnities Proposals that indemnities be replaced by an undertaking that either the Ministry of Housing or the Department of Management and Budget reimburse a society when a claim is made were considered and the Council recommended that they be included in any discussions relating to the redrafting of the Act. REGISTRATION OF SOCIETIES During the year fifty-seven societies were registered, a number as a result of the amalgamation process but the majority reflecting the continuing flow of funds from institutional lenders. A list of societies registered appears in the supplement to the report. AMALGAMATIONS A total of fifty-eight societies formed the basis of amalgamations which were effected during the year to form fifteen new societies. The number of societies amalgamated since the inception of the pilot scheme on amalgamation in November 1977 has risen to eight hundred and twenty-nine at the close of the year. The amalgamation process, which is strongly supported by societies and the Government provides a more efficient administrative structure and produces a lower cost per member. 8 - LIQUIDATIONS During the year under review forty societies finalised winding-up procedures and were struck from the Register, A further two hundred and thirty-three had successfully completed their objects and were. in the course of winding-up. GUARANTEES AND INDEMNITIES As mentioned above the bulk of funds made available during the year under review were at a rate above that which would attract a guarantee, Only four guarantees (including additional guarantees) totalling $5,426,100 were executed during the year. However, early indications are that a greater number of guarantees will be executed in the forthcoming year. The Council recommended the execution of indemnities for 288 members totalling $1,186,566.