MORTGAGE LAW

Wanganui Chronicle, Volume 79, Issue 199, 26 August 1935, Page 8

MORTGAGE LAW

ISSUE OF DEBENTURES BORROWING AND LENDING [ Per Press Association. ] WELLINGTON, 4Aig. ‘25. The chairman of the Board of Management of the Mortgage Corporation of New Zealand, Sir William Hunt, announces that an agreement in principle has been reached in regard to the amount of stock to be issued to the Government in consideration for State mortgages now vested in the corporation. All interest due but unpaid in respect of mortgages up to the date of transfer belongs to the Crown, but arrangements have been made whereby tne corporation will, as far as possible, collect arrears of interest, and to enable this to be done the amount of arrears as at the date of transfer will be added to the contingent liability to the State. The proportion of accrued interest as at tne date of transfer, as well as the difference between the nominal amount of stock ” tc- be issued to the Government and the aggregate amount of mortgage taken over, will also be added to the contingent liability account. The contingent liability will remain until the real value of mortgages can be ascertained by experience over a period of years. The directors have given consideration to interest rates both from the borrowing and lending point of view, and it has been decided for the initial notation to make available an issue of stock and debentures to a total of £500,000, with a currency of 25 years, the corporation retaining the right to i edeem such issue at the expiration of 20 years. The interest rate has been fixed at £3 7s 6d per cent. x The same interest rate in the terms of the Act ‘ will apply to the stock to be issued to the Government. Investing the Proceeds As required by the enabling Statute, proceeds from the issue will be in- . \ested on first mortgage of satisfactory securities. The xamimum term us regards good farm lands will be 45 years, but the applicant will be given the opportunity to state the term desired by him and his request will be carefully weighed by the Board c-i Management after a proper inspection of his proposed security nas been first obtained. A like opportunity will be available to the town and suburban mortgagor applicant although other considerations have to be taken into account in the determination of the term for this class of security. The Board of Management is desirous of making arrangements in each case that will be satisfactory both to the borrower and to the lender having regard to all circumstances. Lending Rate It will be the aim of the ooard to offer money to both town and country borrowers at the lowest interest rate consistent with sound lending principles, and after careful consideration of all relevant matters, it has been decided to announce a lending rate of -* 1-8 per centum per annum for the n . eys available from the fiist deben!l »*s ue. Where an applicant desires hi contr bution to the reserve fund to be added to the loan, and a maximum i of 45 years is granted, t\e extra • -t will be only 2s per cent, per an- ' a. For shorter terms for periods • ■‘•lOm 25 years to 35 rears, rhe extra cost would be between 2s 7d and 2s 2d per cent, per annum. On a 45-year term, the annual instalments required to pay both interest and principal, including provision for the reserve fund, would he approximately 5 per cert. All State mortgagors transferred to the corporation have the right to require a variation of their present interest rates to the corporation’s lending rata announced above, provided they agree to contribute 2 per cent, o’ the outstanding principal to the reserve fund, either by cash or an addition to the mortgage.