HUGE TRANSFER.

Manawatu Standard, Volume LV, Issue 177, 26 June 1935, Page 7

HUGE TRANSFER.

THE NEW CORPORATION. INTEREST RATES POSSIBILITIES. (By Telegraph.—Special to Standard.) WELLINGTON, June 26. The Secretary to the Treasury (Mr A. D. Park) relinquishes that position at tlie end of June to take up his new duties as one of the manag-ing-directors of the Mortgage Corporation of New Zealand. This will mark the commencement of practical operations, which begin with the negotiations for the transfer of the State Advances mortgages, Soldier Settlement advances and local bodies’ loans liled by the State Advances Office, to the Mortgage Corporation. The aggregate amount involved is in excess of fifty millions. A proportion of the securities taken over will not rank up to the standard on which the Corporation will do business, but it is amply covered by the provisions of the statute, which enable the board of directors to negotiate with the Minister of Finance regarding terms, the State undertaking liability for possible losses where the securities are at present doubtful. The corporation is also empowered to make future advances in excess of its settled scale in cases where the. Minister of Finance undertakes liability ..for loss in respect of the advance beyond what the corporation would regard as its “safe” limit.

STAFF OF THE CORPORATION.. Practically the whole staff of tlio State Advances Office will transfer to the Mortgage Corporation, and cpntinue to administer the business which is being transferred. It is intended during the coming session .to pass legislation safeguarding the rights of the public servants transferring to this semi-private corporation. They will bo able to enjoy the same superannuation privileges as the ordinary public servant, and will have the right, also, of transferring back to the Government service within a certain period, probably two years. A section of the Lands Department’s head office staff is employed in the control of the soldier settlers’ mortgages, and although these securities are being transferred to tlio now organisation, it is not expected that there will be a general move of Lands Department officials in the same way. FUTURE INTEREST RATES It is somewhat early to forecast the rate of interest oil advances which the corporation will adopt, lor not only will it be unable to take fresh business until sonic date late in August (the State Advances office meanwhile dealing with this work), but the directors will require to test the open market with a bond issue. Upon the results of this issue will largely depend the interest rate to be fixed, lhe statute empowers the corporation to charge one per cent, more than the interest rate of its bonds. If it obtains money at 3i 'per cent, the maximum rate to borrowers will be 4) per cent. Many of the existing State Advances mortgages bear a higher rate than 4J per cent, and when the transfer of these securities is completed it will be open to present mortgagors to raise this question with the corporation, and secure any benefit which may arise from reduced interest. As explained officially by tlie Minister of Finance: “State mortgages would in the first instance be taken over at existing rates of interest and repayment tables but in order to give mortgagors the benefit of the lower interest rates now ruling those at present paying interest above the corporation s leading rate could he offered new table mortgages for suitable periods at the latter rate for the amount then due. plus 2 per cent, thereof as a contribution to the reserve fund. Those able to pay nre=ent charges would gain some relief at the expense of the State, but they could get that right now by exercising their right to pay off in a lump sum. In any case it would not bo equitable to exclude them from the benefit of the market rate of interest. As part compensation for the loss to tlie State thereby occasioned, tliese mortgagors would contribute to the Reserve .Fund. and thereby benefit the State indirectly.”