Mortgage Corporation

Hawke's Bay Tribune, Volume XXV, Issue 67, 2 March 1935, Page 6

Mortgage Corporation

(To the Editor.) Sir.— There is considerable confusion of terms in the .Mortgage toiporation Bill which provides, in para 38, for transfer of “stock” to Government in consideration ot cession of about £.50,0*10,000 in mortgages, interest on the “stock” to be similar to that on “stock or bonds” issued to the public. “Shares ‘ ol £.500,(XX) value are to be issued to the public and the amount ol capital may be increased by shareholders’ resolution. This capital is a species ot debenture stock, carrying one-third more interest than the first issue ot bonds, since it is to be at 4 per cent, and is intended to rate f per cent, above bonds. Unless the Government “stock” issued against mortgages is not to count in the permissible ‘‘bonds’’ issues ot fifteen times the capital and reserves, there will be practically nothing to be issued against private mortgages Government “stock” will presumably be saleable and the rate ot interest to be paid thereon will dictate what mortgagors will have to pay. If the original share capital is considered as “stock,” the State may receive 4 per cent over all its “stock” and bare interest charged to mortgagors by the corporation could not be less than 5 per cent., or with amortisation and rebate, 6| per cent. State mortgagors will nominally have freedom to remain under their old contracts, but removal ot legislation protecting those contracts and reducing interest thereon may he expected to compel them to execute fresh contracts, in which case they must add 2 per cent, to their mortgages for the benefit of the Corporation’s Reserve Fund, a total of £’1,000,600. This will

be the real reserve, as the beneficiary ownership of th© £2,.500,000 aecuritiaa ol the local authorities branch practically remains with tho Government* the corporation merely acting as collector of money for the State and >•- cemng as a collection le© tho difference, it any, between the annual interest receivable on tho securities and the average annual rate received from the corporation’s securities. (It ia conceivable that the corporation may lose if interest rates rise.) Why then is the almost negligible amount ot £500,0U0 private share capital being raised, with voting privileges, with one third more interest, endangering tho bonds issues, and, with hosts et complications? The State appoints all the first directors and much is left to be mutually arranged between those directors and the State. Even the transfers of Government mortgages may be back-dated. Limitation of bonds to fifteen times £3,506,000 precludes any immediate possibility of dealing extensively in private mortgages, so that the scheme resolves itself into an offer of preferential treatment to subscribers ot half a million of private capital to enable the transfer ot nominal control to tho corporation. — Yours, etc., A. E. ROBINSON. Auckland, Feb. 28.