STATE ADVANCES

Wanganui Chronicle, Volume 79, Issue 183, 7 August 1935, Page 8

STATE ADVANCES

MORTGAGE CORPORATION TRANSFER OF MANY SECURITIES CONCESSIONS TO MORTGAGORS WELLINGTON. Aug. 6. No deci-ion has yet been made as to the inle cst rate Io be charged by the Mortgage (’or | nation on new business, hut h ?s anticipated by Ministers of the Crown that, in most cases, mortgagors who hold State advances which have been transferred as securities to the corporation will obtain a substantial concession on the rates they are now paying. An explanatory statement on the position was made yesterday by the Acting Prime. Minister. Hon. Sir Alfred Ransom, who said that the Mortgage Corporation of New' Zealand Act. which was passed last session, provided for the transfer of the mortgages of the State Advances Office aiyl of G>e Lands iDepartment to the corporation. This did not mean, however, that all the mortgages referred to had to he transferred to the corporation, for the Act contained provision whereby any specified security or classes of secuii.v may be excluded from the transfer. A" Ordcr-in-Council fixed August 1 as tne date upon which mortgages vested in the State Advances superintendent were to be transferred to the corporation. Payments to Corporation “This means,” added the Minister, “that from the date mentioned all of the State Advances mortgages, excepting loans under the Housing Act, 1919, loans to employers for workers’ dwellings, fruit, preserving industry advances, cold storage advances, fishing industry promotion advances, and repatriation loans will vest in the Mortgage Corporation. As from this date all payments in respect of Slate Advances mortgages other than those excluded as mentioned will be payable to the Mortgage Corporation. “So far as the mortgagors are concerned, there is a change of mortgagee and nothing more, as until such mortgagors themselves otherwise elect, all Hie terms, conditions and privileges which they now enjoy under the contract made with the State Advances superintendent will continue, but he enforceable against the Mortgage Cor-

poration. “Such mortgagors, however, if they agree to avail themselves of it, are given a valuable concession under the Mortgage Corporation Act, which provides that at any lime within three vears from August .1, any such mortgagor has the right to obtain from the corporation a reduction in the interest rate payable under ■ <s mortgage to the rate fixed by the curporation for its new business, provided that such mortgagor agrees to the capital amount secured by the mortgage at the date of the variation being increased by 2 per cent, as a contribution to the general reserve fund of the corporation, and that unless the mortgage is already* in that form it be converted ?nto a table mortgage. Rate of Interest Not Yet Fixed “I am advised that the chairman oi the board of the corporation expects

to be in a position at an early date to make an announcement as to the interest rate to be charged by the corporation on its new business, as every endeavour is being made to complete the essential organisation and machinery to enable the corporation to commence its lending business as soon as possible. As soon as the announcement is made the mortgagors concerned will know- the amount of the concession that is available to them. 1 anticipated that in most cases mortgagors will obtain quite a substantial concession on the rates they are now paying, and it should be bol’ne in mind I that .State Advances mortgagors, in common with all other mortgagors, have already received the beneflv of the reduction in rates made by the Government in terms of the National Expenditure Adjustment Act, 1932. A State Guarantee “As consideration for the mortgages transferred to it, the Act requires the corporation to issue to the Minister ol Finance stock lor such amount, at such rate of into re.’* and on such other terms as ma.y be agreed to by the corporation | and the Minister, with the proviso that | the rate of interest on stock shall, if necessary, be ail justed as from the date of issue so that the stock held by th». State shall bear the same rate of interest as the bonds or stock issued to the public “The difference between the aggregate amount of the mortgages transferred and the nominal value oi , the stouk is, in terms of the Act, to constitute a contingent liability of the corporation to the Crown. Any capital losses suffered by the corporation in respect of the mortgages transferred is to be written off against this contingent liability. This provision means in effect that these mortgages are

guaranteed by the State. Individual Securities “When these provisions were inserted in the Act it was realised that a straight-out sale of the mon gages to the corporation was nut poss’bm uw'ng to the difficulty of arriving at a fair valuation having regard to (a) the uncertain tv as to the prices of primary products, and (b) the cost and time involved in making a valuation of all the individual securities. “Under the provision* adopted the real value of the. mortgages will be ascertained by experience over a period of years during which it is hoped economic conditions will become mure stable, aud cases of mortgagors unable to meet their commitments al the lower interest rate anticipated can be sys tematical.y overhau.ed and the exten' of the Josses involved definitely fixed. In the meantime Hie fact that the Statu is to receive the net profits ol the corporation after paying working expenses ami dividends on capital will ensure that, either in the rorm of interest on stock or profits, 1 lie State will receive the full net amount earned by the mortgages.”