MORTGAGES

Grey River Argus, 16 February 1935, Page 5

MORTGAGES

CORPORATION BILL Minister’s Exposition (Per Press Association.) WELLINGTON, February 15. In the House Mr Coates moved the second reading of the Mortgage Corporation of New Zealand Bill. For the last four years, the country had been passing through a difficult period. One main problem was the position of the primary producers, and other sections. The Bill had for an objective the borrowing of money bv the issue of bonds, and it was hoped it would be attractive to the investor and fitting to the requirements of agricul- : ’ and industry, but it was not intended to apply it only to the farming industry. It could apply to any person and any industry. The country could not afford not to endeavour to assist its basic industry, primary production. The corporation would be a moans of finding cheaper money, under more suitable conditions, than any other method the v had been able to find. It would not be monopolist to the exclusion of other lending institutions, but would be a healthy competitor. The present system of lending money did not suit the primary producer. The proper course was to adopt a system of finance that suited the industry, and that was a long term policy. In the present instance 50 years. It was because it would bo necessary to secure money at the low.

est possible rate, that he adopted the proposals. Business people and workers in the city would have the opportunity of seeking loans and any benefits tn farmers would be given to theffi where the system suited them. He believed the proposals had in them the best elements of private and State enterprise. The v could build up a firm strong structure that would have the effect of building up confidence in the bonds proposed to be issued, and

to provide money at the lowest possible interest. The corporation would be free to take un first mortgages on any first Mass rural or urban land. Adequate reserves would be built up. Mortgages handed over by the State Advances Department would be guaranteed by the Crown. The Government held it was not possible to hold out better opportunities to the persons it desired to assist than the proposals he now made. The present bill was the first bill. A rehabilitation bill would follow next week. The Corporation would take over mortgages from the State Advances and Lands Departments and the discharged sol, tiers’ settlement schemes. It was proposed to put two and a-half million in reserve, and to raise a million of capi tai, the Crown subsidising half, and and the public subscribing the other half. There was also reserves that would be aecuring from the repay-

ment of principal and from new business and two per cent, from the borrower. If necessary, further reserves would be found. The Crown would find them. The idea of getting private capital was to give a feeling of confidence to the investor. If the Corporation at any time, were short of lending money, the State would pay securities into the Corporation, and he claimed it would be a perfectly safe investment, for the State. The Bill provided that no man should be put out of his house without the express consent of the Minister. The Bill gave the corporation no exemption from local body rates. A CRITICISM. The committee of financial and commercial interests set up under the ...pices of Associated Chambers of Commerce New Zealand, which recently pubJshed a criticism of the Gov- ■ lament’s proposals for mortgage finance, issued a further comment. It

says: Certain of the committee’s recommendations have been incorporated in the Bill, but some features to which the committee took greatest exception appear in the Bill unchanged. The Committee regrets the State is to become not merely a bondholder, but also a shareholder in the corporation, when the primary object is realisation of the Crown’s present mortgage investments. The Bill does not provide for a fixed dividend on the shares. It may be in future years that the statutory dividend rate will be so low that the market value of shares will be less than par. The use of the term ‘ ‘ cumulative ” does not mean the shareholders will in any way be guaranteed their dividends, or receive any preference over other classes of the corporation’s creditors. The committee considers adequate provision should be made for representation upon the Board of Management of the individual bondholders, if and when they < - one into existence. If it is intended to allow the corporation to make advances otherwise than against mortgages of freeholds then the committee considers the Bill should state so specifically. and name the permissible proportion of such advances, so that intending investors in the Corporation can know where they stand. The Committee says that* so long as the Bill contains the right to advance on stock and chattel securities it must persist in its objection to the Corporation’s bonds being given statutory recognition a s trustee securities.

The committee regards as unsatisfactory the clause providing that the fixing of the consideration for mortgages taken over by tho Corporation from the Crown is to be a matter of mutual agreement between the Corporation and the Minister. The socalled reserve fund is more apparent than real, and should not be taken into account in calculating the maximum bond issue. It takes great exception to the proposal allowing the first mortgagee and his mortgagor to modify a mortgage contract without obtaining the concurrence of the subsequent mortgagees.

Regarding the productivity of rural land being used as a basis of valuation, the committee says this would result in there being in force content noranseously two entirely distinct systems of valuing rural land, th« other system being under the Ruting Act. Concerning eighty per cent, loans, the Committee says the Minister of Finance, may in future be inundated with requests by prospective borrowers who cannot obtain their full wonts from the Corporation, to guarantee the difference between the loans -the corporation is prepared to make any the amounts they wish to borrow. The Committee is not convinced of the necessity for the establishment of the semi-State national corporation, and is not sanguine of its success if established on the lines proposed.