STATE ADVANCES

Wanganui Chronicle, Volume 79, Issue 197, 23 August 1935, Page 8

STATE ADVANCES

TRANSFER OF MORTGAGES WORK OF CORPORATION MINISTERIAL EXPLANATION f Ptr Pr*M AuoHatloa ) INVERCARGILL, Aug. 22. A statement explaining the terms upon which the State Auvauucs mortgages will be transferred to the Mortgage Corporation was issued by t'be Acting-Minister of Finance, the Hon. Adam Hamilton, this evening. “I understand,“ said Mr. Hamilton, “that within a few days the Mortgage Corporation proposes to release iiie prospectus ic-r its first issue oi stock and bonds. At the same time the rate of interest at which the cor- | poration proposes to lend the capital sv borrowed on mortgage securities w.ll be announced, 'inis lending rate wii l determine the extent of the concession available under the Aluiigage Corporation Act to mortgagors whose securities have been transferred from the State Advances office to the corporaixv... x... relevant part ci this Act provides that, at any time within, three years from August I last, any sacn mortgagor has tne light to obtain from the corporation a reduction in the interest rate payable under his mortgage to the rate lixed by tbo corporation for its new business, provided that such mortgagor agrees to the capital amount secured by the mortgage iu tne date of variation being increased by 2 per cent, thereof as a contribuiion io the general reserve fund of the corporation, and that unless the mortgage is already in that form it be converted into a table mortgage. I would like to emphasise, however, that uic additional capital which the corporation proposes to borrow is for new loans under the provisions of the Act, and it is not involved in any way with the transfer of the State Advances mortgages to the corporation. As a matter cf fact, under the provisions ul the Act any ascertained losses arising in respect, of mortgages transferruu from the State have to be borne by tho State and not by the corporation. That is to say, all mortgages transferred from the State are guaranteed 100 per cent by the State. As con sidcraticn for the Slate mortgages taken over the the Act requires tne corporation to issue to (oh State stock up to an amount to be agreed upon, and the difference between tne aggre gate amount of the mortgages transfer ivd aucl the nominal value of the stock is to constitute a contingent liability of tho corporation to the State. When these, provisions were inserted in the Act it was realised ihat He straight-out sale of mortgages to tlie corporaion to issue to the State stock difficulty of aiming* at a fair valuation having regard to (a) Uncertainly as to the prices of primary products and (b) the cost and time involved in making the valuation of all individual securities. Under the provisions 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 more stable, and the cases of mortgagors unable to meet their commitments ai a lower rate, it is anticipated, can be systematically overhauled and the extent c-f losses involved definitely fixed.