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. The Treasurer approved of the execution of these indemnities and by the end of the year under review agreements were with individual societies for execution.
Unfortunately, claims were lodged by three societies which had members who had defaulted on their advances. The claims totalling in excess of $16,000 were in the process of resolution at the end of the year. - 9 -
REGISTRATION OF DOCUMENTS
The registration of 1352 documents was effected during the year.
MINISTRY OF HOUSING ALLOCATION OF FUNDS TO Co-OPERATIVE HOUSING SOCIETIES
The 1986/87 financial year saw the continuation of the Ministry#s Capil
Lending Scheme. A total of six allocations of names from the Centralized
Waiting List were made to societies participating in Capil. Apart from the
first of these allocations, this scheme was restricted to applicants whose
combined family gross income was below $280 per week. If the applicant's
income exceeded this limit they were referred back to the Ministry for
assessment under the Indexed Repayment Loan Scheme (I.R.L.).
The I.R.L. Scheme is a joint venture between the Ministry and four major
banks aimed at increasing the amount of funds available for first mortgage
lending.
The 1986/87 financial year also saw an introduction of the H.O.O.F. (Home
Ownership for the Over Fifties) Scheme to Co-operative Housing Societies.
This Scheme operates on the same basis as the Capil Scheme, except that its membership is restricted to applicants who are 50 years of age and over.
Funding for this scheme is provided by the Estate Agents Board of Victoria.
During the 1986/87 financial year, societies participating in the Capil
lending program, approved 716 loans constituting an expenditure of
$31,922,226 from their budgeted allocation. A further $2,012,000 had been committed but remained undrawn. - 10 -
Co-operative Housing Societies approved four H.O.O.F. loans for a total
expenditure for the 1986/87 financial year of $105,000. In addition
another six loans were awaiting approval at 30 June, 1987 which should
result in expenditure of $362,000 during 1987/88 in addition to any expenditure that may occur as a result of the H.O.O.F. scheme being
continued in the 1987/88 financial year.
INSTITUTIONAL FINANCE MADE AVAILABLE DURING THE YEAR TO CD-OPERATIVE
HOUSING SOCIETIES
$
Commonwealth Savings Bank of Australia 5,526,100 National Australia Savings Bank Limited 20,000,000 Australia and New Zealand Savings Bank Limited 22,950,000 Westpac Savings Bank Limited 17,750,000 State Bank of Victoria 76,200,000 Pyramid Building Society 1,000,000 Bendigo Sandhurst Mutual Permanent Land 1,000,000 and Building Society
$144,426,100
INSPECTIONS
Although no comprehensive inspections were conducted some fourteen partial
reviews were carried out to gather sufficient information to answer
complaints lodged by members of individual societies. Although complaints
covered a number of areas including a members loan account and society
operations, a common thread was a lack of communication between the society and the member. Two complaints remained unresolved at the end of the year.
In addition, reviews of specific areas of societies operations conducted
by the Ministry of Housing have indicated areas of concern that have
resulted in decisive action being taken. - 11 -
Previous inspections have indicated that in some cases deficiencies exist in the administration of both Government and non government housing funds and suggests that there are grounds for an expanded inspection programme.
This has been further borne out by a review of Annual Returns of societies which is an area that is also receiving attention.
ANNUAL RETURNS
The Annual Returns of societies are required to be lodged within three months of the end of the financial year of the societies concerned (or within such other time as the Registrar may permit). The returns of a considerable number of societies were lodged out of time without consent.
It is of concern that many societies have again failed to comply with the
Act in this respect, particularly as some have been consistent offenders.
THE FEDERATION OF HOUSING SOCIETIES OF VICTORIA
Officers of the Registry and representatives of The Federation met on a number of occasions to discuss items of mutual interest and the Registrar attended and addressed the Annual Convention of The Federation in Ballarat.
R.C. TREVETHAN, REGISTRAR OF CO-OPERATIVE HOUSING SOCIETIES - 12 -
STATISTICAL SU~~RY
The following is a brief summary of some of the statistics and information relating to societies registered under the Co-operative Housing Societies
Act 1958 for the year under review.
1. SOCIETIES ON THE REGISTER
The first society formed under the predecessor of the Act was
registered on 15 October 1945 and a total of 2701 societies have
been registered to 30 June 1987.
30 June 1986 30 June 1987
1510 1469
2. SOCIETIES REGISTERED DURING THE YEAR
Eastern Peninsula Heidelberg Amalgamated
Bacchus Marsh (No.1) Victoria Police (No.15)
Bayside No.1 Tarago (No.10)
Bayside No.12 Charter (No.22)
Maryborough and District No.14 Charter (No.23)
Wall ace No. 7 Charter (No.24)
Cobaw Charter (No.25)
Cobden & District Charter (No.26)
Charter (No.27) Bayside No.16
Charter (No.28) Eaglehawk No.20
Baryul Eaglehawk No.21
Dalhousie Seymour Capil - 13 -
Balgrana No.lO Wangaratta Beta
Shepparton & District (No.25) Budapest
C.L.C. Wannon No.l4
Victorian Group (No.6) Murray Valley (No.l3)
Traralgon No.19 Outlook (No,1)
Castlemaine No.8 Moe City No.4
City of Dandenong No.l Mitchell No.lO
Bayside No,14 Kangaroo Flat (Bendigo) No.22
Bayside No.lS Tanti Amalgamated
Maryborough and District No,15 Suburban Amalgamated (No.4)
Kyneton Community Ivandale No.19
Dunkley No.1 Plenty Valley
The Decentralist No,l4 Kangaroo Flat (Bendigo) No.23
Victorian Group (No.4) Berwick (No.12)
Victorian Group (No,5) Apple
Golden City No.12 City of Springvale No.l
Mordialloc No.l
3. GOVERNMENT GUARANTEES
Guarantees granted by the Hon. the Treasurer with respect to loans
(other than those of a temporary nature) raised by societies -
30 June 1986 30 June 1987
Number 858 833 Aggregate Amount $261,060,000 $ 260 • 7 61 ' 100 - 14
4, GOVER,..,MENT INDEMNITIES
30 June 1986 30 June 1987
Number of Indemnities 7,650 7,938 Subsisting Aggregate Amount of $14,612,955 $15,799,521 Indemnities Subsisting
5. *FINANCIAL OPERATIONS OF SOCIETIES
**Income and Expenditure Statement for the year ended 30 June 1986.
EXPENSES $000 INCOME $000 Interest paid on Interest on - borrowing members Loans to members 47,848 subscriptions (i) 433 Other 157 Interest on loans from Management Fees 4,169 Banks 15,915 Insurance Commission 788 Other (ii) 29,788 Other income ( iii) 1 ,212 Salaries and Secretarial Fees 4,542 Directors Fees 170 Computer Service Fees 93 Other Expenditure 1,754 Net Excess of income over expenditure 1,479
$54,174 $54,174 - 15 - ** Balance Sheet as at 30 June l9B6 SHAREHOLDERS FUNDS $000 ASSETS $000 Amounts paid on Amount owing on ordinary shares loans (vii) 555,414 (iv) 7 Cash on hand and Accumulated Funds current (v) 10,82~ 10,834 accounts at banks 3,618 LIABILITIES Deposits with - Loans from - Banks 1,197 Banks 181,507 Other 240 Commonwealth/State Physical Assets 152 Home Builders Other Assets 1,640 Fund (vi) 343,171 Other 20,803 Sundry Creditors 4,979 Provision for income tax 31 Other Liabilities 936
$562,261 $562,261
* Figures gleaned from the Australian Bureau of Statistics, Canberra. Catalogue No. 5633.0. Terminating Building
Societies, Assets, Liabilities, Income and Expenditure Australia
1985-86.
** Note that due to the non-availability of Australian Bureau of Statistics figures at the time of the preparation of this report
these statements of the financial operations of societies are as
at 30 June 1986. - 16 -
EXPLANATORY NOTES
Income and Expenditure Statement
(i) Terminating housing societies normally operate on either an
actuarial or credit fancier basis. The primary difference
between actuarial and credit fancier societies is that in the
former, the repayments of an advance are made by
subscriptions which are not normally offset against the
advance until the sum of total subscriptions plus interest on
these subscriptions equals the advance, whereas credit
fancier societies use an increasing proportion of regular
payments to progressively reduce the amount owing on the loan
to zero. The actuarial society equivalent to the credit
fancier amount owing on loans is' obtained by deducting such
subscriptions (and interest) from gross advances.
(ii) Includes interest on loans from Commonwealth/State Home
Builders' Fund.
(iii) Includes entrance and transfer and withdrawal fees, fines,
and income from investment of surpluses.
Balance Sheet
(iv) For actuarial terminating housing societies, borrowing
members' subscriptions have been offset against amount owing
on loans - also refer (i) above. - 17 -
(v) Includes accumulated surpluses and deficits.
(vi) Refers to loans made to societies through the
Commonwealth/State Home Builders' Fund.
(vii) Net of borrowing members' subscriptions for actuarial
societies also refer (i) above.
lh.d.report.registrar.A Jean Gordon Government Printer Melbourne