MORTGAGE PLAN

New Zealand Herald, Volume LXXII, Issue 22197, 26 August 1935, Page 13

MORTGAGE PLAN

CORPORATION FINANCE lending RATE OF 4J LONG PERIOD ADVANCES FIRST ISSUE OF BONDS £500,000 AT *3/7/0 An initial lending rate (if Ii per cent for the money available from its first issue of bonds is announced by the Mortgage Corporation of New Zealand. The corporation is making its first (tublie issue of bonds with a flotation of £500,000 at par at per cent, repayable on September 1, 1960, or within five years earlier at its option. A good deal of consideration has been given by the directors to the borrowing and lending interest rates, according to a statement issued by Sir William U. Hunt, chairman of the board j of management. A careful survey of the mortgage loan position has been made and the board is satisfied that all reasonable precautions have been taken ami an adequate margin of safety provided. Full provision has been made for working expenses, interest on debentures and stock and dividend on share capital. Sir William states: —" As required by the enabling statute, proceeds from tho issue will be invested on first mortgages of satisfactory securities. The maximum term as regards good farm lands will i be 45 years, but the applicant will be given the opportunity to state the term desired by him. A similar opportunity will be available to the town and suburban mortgagor applicant. The first lending late will be 4{ per cent and where an applicant desires his contribution to the reserve fund to be added to the | 0 , and a maximum term of 45 years is granted, the extra cost will be 2s per cent per annum. For shorter terms, for periods from 25 years to 35 years, the extra cost woidd be between 2s 7d and 2s 2d per cent. On a 45-year term, the annual instalments required to pay both / interest and principal, including provision for the reserve fund, would be approximately o per cent. Position of State Mortgagors " All State mortgagors transferred to the corporation have the right to require a variation of their present interest rates to the corporation's lending rate, provided they agree to contribute 2 per cent of the outstanding principal to the reserve fund, either by cash or an addition to the mortgage. No doubt full advantage will be taken of this concession by all mortgagors transferred to the corporation from the State. " The corporation has the power to advance on flat mortgage for a term of five years with the limit of one renewal for a further five years. It is expected ' that this facility will in some cases be availed of by applicants desiring meantime a flat mortgage followed by a table one at the expiry of the term of the flat mortgage. Only one contribution to the reserve fund 'is called for and that on the execution of the first security." , . -In an announcement published in the Herald on' Friday, the acting-Minister of Finance, the Hon. A. Hamilton, said the amount of State Advances mortgages involved in the transfer to the corporation was approximately £36,400,000, in consideration for which it had been agreed that tho corporation should issue to th'e State stock to the amount of approximately £29,400,000, the remaining £7,000,000 to rank as a contingent liability. Arrangement With Crown Sir William Hunt states: " All interest due but unpaid in respect of the mortgages up to tho date of transfer belongs to the Crown, but arrangements have been made under which the corporation will as far as is possible collect arrears of interest and the amount of the arrears as at the date of the transfer will be added to the contingent liability. A proportion of accrued interest as at the date of transfer, as well as the difference between the nominal amount of the stock to be issued to the Government and the aggregate amount of the mortgages taken over will also be added to the contingent liability account. " The contingent liability will remain until the real value of the mortgages can be ascertained by experience over a period of years. However, the corporation is adequately safeguarded from any loss in respect to mortgages taken over. As regards the nominal amount of stock to be issued to the Government in payment for the mortgages takt>n over, an agreement between the corporation and the Government has been reached regarding the terms and conditions. The stock will _ have long-term maturity dates and will be redeemable in manageable parcels ' 'with suitably-spread dates. The first of these parcels will coincide as regards maturity with the first issue to the public, and the other parcels will mature subsequently." Details o:f Bond Issue

. The issue of bonds to the public is in the form of debentures in denominations of £2O, £4O, £IOO, £.500 and £IOOO, or more, and stock in amounts of £4O or more in multiples of £2O. Interest is payable half-yearly, on March 1 and September 1 each year, the first payment of £1 13s 9d per £IOO being due on March 1, 1936. The list of applications opens to-dav and clones on or before September 10. The maturity date of the issue is 1955-60, ""t the corporation has the power at any time to purchase securities for cancellation, either on the market or by arrangement with the holder. The issue is an authorised trustee investment. • William Hunt states that the issue gives the public "the opportunity 10,, nest funds in an established concern which will promote a new era of nortgage finance in the Dominion by linking long-term mortgages to easilvegotiable securities. One great adantage i s that the debentures and • Wl " to the holders a floating arge o\er a large number of mortgages, instead of the security of one Mortgage only, supported further bv « rn | e cpital and a substantial generiil reserve fund."