MORTGAGE FINANCE

Taranaki Daily News, 6 November 1934, Page 7

MORTGAGE FINANCE

PROPOSED CORPORATION PREPARING FOR MEASURE MINISTER’S ASSURANCES NO NEED FOR ANY FEARS

By Telegraph—Press Association. Wellington, Last Night During the summer recess the Finance Minister, the Rt. Hon. J. G. Coates, proposes to concentrate on the proposed national mortgage corporation with a view to having legislation ready when Parliament resumes in February. In announcing this in the House of Representatives to-night Mr. Coates made it plain that there was no intention of establishing anything in the nature of a monopoly of mortgage business. “While on the subject of finance,” said Mr. Coates in moving the second reading of the Appropriation Bill, “there is one other matter that I would like to mention, and that is the national mortgage corporation proposal referred to in the budget. Time did not permit of it being dealt with this session, but I propose to concentrate on it during the recess with the view of having legislation ready when Parliament resumes. So far the proposal has been dealt with only in broad outline, and general discussion of the matter would be premature until definite proposals can be submitted. At the same time I would like to take this opportunity of removing one or two misconceptions that appear to exist. PERMANENT OBJECTIVE. “The permanent objective that the Government has in mind is a soundly organised system of long-term mortgages finance based on the well-known mortgage bond system extensively used in other countries, that will create a standard agricultural investment through which capital can confidently flow into the farming industry. By largely obviating risks normally involved in individual mortgage investments and providing a security which is practically as liquid as Government stock, capital will be obtained at cheaper rates. That is the essence of the idea. “Concurrently and in conjunction with the mortgage corporation other measures will be proposed for dealing with the pressing problem of financial rehabilitation of the fanners and others whose position has been rendered untenable as a result of the heavy fall in the prices of primary products. I cannot give any details in regard to this aspect of the matter at present, as the methods by which rehabilitation is to be achieved are still under consideration. “I can say quite definitely, however, that each case will be dealt with on its merits and there will be nothing in the nature of a general writing down or other reductions by legislation. Given suitable machinery, I have no doubt’’that the bulk of the cases can be dealt with by mutual arrangement between the parties concerned, and I could stress this aspect of the matter. The remainder will be dealt with by the appropriate judicial machinery. “So far as the national mortgage corporation is concerned various proposals have been suggested, but people should not jump to conclusions that any particular features of these proposals are going to be adopted. Judgment should be suspended until the Government is able to bring down a considered scheme.

CONFIDENCE NECESSARY. “It is fully realised that the success of the project depends upon obtaining the confidence of investors in mortgage bonds, and the House and the people can rest assured that the corporation will be organised on sound lines. Furthermore, there is no intention of establishing anything in the nature of a monopoly of mortgage business, and if the parties concerned prefer it they will be able to continue making contracts for individual mortgages.

“We do feel, however, that proper organisation can narrow the margin that exists between the market rate for mortgages and for good stock exchange securities, and in the interests of the whole Dominion we propose to set up the organisation. This organisation will, it is hoped, stabilise lower rates of interest, but provided the concerns at present doing mortgage business are willing to do that business at market rates of interest, having regard to the nature of the security offered, there is no warrant for the statements made that their business is to be taken away from them. “As was indicated in the budget the mortgage problem is the last major item remaining to be dealt with in the financing rehabilitation of the Dominion. The difficulties to be overcome are recognised, but we cannot hold back on that account, as the job must be done. When it is done, however, our financial stability will be greatly increased to the lasting -benefit of investors and the community generally.”