MORTGAGE FINANCE

King Country Chronicle, Volume XXVIII, Issue 4633, 8 December 1934, Page 5

MORTGAGE FINANCE

PROPOSED NATIONAL CORPORATION.

DETAILS EXPLAINED BY MR, COATES.

A full explanation of the Government's proposals in connection with the establishment of a National Mortgage Corporation in New Zealand is given by the Minister of Finance (the Rt. Hon. J. G. Coates) in a pamphlet released for publication this week. The first indication of th ; Government’s intention was given by Mr. Coates when he made his Budget speech during the last session of Parliament, and the consideration of legislation moviding for the establishment of the corporation will be the main business before Parliament when it resumes in February next. In the pamphlet Mr. Coates stoesses the need for providing a permanent form of assistance for mortgagors who find themselves in difficulty in renewing flat mortgages. The guiding principle of the mortgage corporation will be service and not profit, and it is proposed to frame its constitution on the lines of the Reserve Bank. Loans will be made by the corporation on first mortgages only, and for an amount not exceeding 70 per cent, of the value of the security. It is proposed to merge the lending operations of the State Advances Office, the Lands Department, and the Rural Intermediate Credit Board in the corporation. Mr. Coates also announces details of important proposals for the financial rehabilitation of the farmer, including the establishment of a special Court of Review to deal with cases in which no agreement is possible between mortgagor and mortgagee. Guiding Principle.

The guiding principle of this national institution will be service, and not profit. In this respect the Mortgage Corporation will be analagous to the Reserve Bank. The corpoi'ation will be a body corporate -with a capital of £1,000,000 to be offered for public subscription. Dividends will be limited, probably to 4i ner cent, per annum cumulative.

As in the case of the Reserve Bank the directorate normally will be partly elected by the shareholders and partly appointed by the State. In the first instance, the whole board will be appointed by the State with provision for l’etirement in rotation in order to secure continuity of nolicy. A directorate of seven and also a Treasury representative ex officio, is proposed. The latter is advisable to obviate conflict in the issue of corporation bonds and the Government securities on the market and to assist in safeguarding the large amount of State capital, over £5,000,000, represented in the State mortgages to be transferred to the corporation. The fact that the State will be by far the largest creditor of the corporation justifies the State in appointing a majority of the board. Accordingly, it is proposed that the shareholders should elect three directors, leaving the State to appoint four, including the chairman.

State Directors.

Two of the directors appointed by the State will be practically joint general managers with seats on the board. They will be full-time officers drawing salai'ies, but no fees,, and appointed for a period of, say, seven years. Joint managers are proposed in view l of the large scale of the corporation’s operations. Probably one will be drawn from the Public Service and one from the commercial world. The remainder of the board will be elected or appointed for a period. Under the board the necessary administrative organisation will be built up. An essential requirement will be an expert field staff, which will not only inspect and report upon properties when loans are required, but will keep in touch with mortgagors and supply regular reports on every property involved. This, of course, can only be done economically if the corporation is operating on a large scale. However, if the, mortgages of the State Advances, Lands Department, etc., are taken over as it is intended, this will be assured from the outset. As a considerable proportion of the properties in the Dominion would be involved, the field force could probably be organised on a provincial and district basis. Object of Corporation. The primary object of the corporation is lending on long-term mortgage on land. Experience of State lending departments during the last few years, however, has clearly demonstrated that at times the only satisfactory way of protecting the land mortgage is to provide finance for stock. Accordingly, it is intended to empower the corporation to lend on the security of stock and chattels. Needless to say as a national institution the facilities of the corporation will be available to town and country alike. Thei'e is, however, no intention of creating anything in the nature of a monopoly of this class of business. Mortgage finance on certain terms will be offered by the corporation, and it will be open to anybody to accept the offer. But if any person can obtain better terms outside or for any other reason prefers to go elsewhere, he will be free to do so.