MORTGAGE FINANCE

Waikato Times, Volume 118, Issue 19664, 26 August 1935, Page 8

MORTGAGE FINANCE

CORPORATION’S PLANS.

FLOTATION OF £500,000. LENDING RATE OF 4 i-3 PER GENT. Details of the lending proposals of the Mortgage Corporation of New Zealand are given In a statement Issued to-day by Sir William. D. Hunt, chairman of the board of management. The rate to be charged upon loans made by the corporation will be 4 1-8 per cent, and the first publlo Issue of bonds will be made with a flotation of £500,000 at par at 3 3-8 per cent repayable on September 1, 1960, or within five years earlier at its option.

Sir William states: “A -careful survey of the mortgage loan position has been made and the board of management is satisfied that all reasonable precautions have been taken and an adequate margin of safety provided. Full provision has been made for working expenses, interest on debentures and stock and dividend on share capital. The contingent liability will remain until the real value of the mortgages can be ascertained by experience over a period of years. “ As required, by the enabling statr ute, proceeds from the issue will be invested on first mortgages of satisfactory securities. The maximum term as regards "good farm lands will be -55 years, but the applicant will be given the opportunity to state the term desired by him. A similar opporr trinity will be available to the town and suburban mortgagor applicant. The first lending rate will be 4 1-8 per cent and where an applicant desires his contribution to the reserve fund to toe added to the loan and a maximum term of 45 years is granted, the extra cost will be 2s per cent per annum. Transferred State Mortgage*. “ For shorter terms, for periods from 25 years to 35 years, the extra cost would 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 5 per cent. • “ 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 fable 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." Arrears on Crown Lands. In an announcement on Thursday, 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, ih consideration for which it had been agreed that the corporation should issue to the Stale stock to the amount of approximately £29,400,000, the remaining £7,000,000 to rank as a contingent, liability. Sir William Hunt states: “All Interest due but unpaid in respect of the mortgages up to the 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. Redemption of Debentures. “ 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 tn payment for the mortgages taken 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 -f these parcels will coincide as regards maturity with the first issue to the public, and the other parcels will mature subsequently. "The issue of bonds to the public is in the form of debentures in denominations of £2O £4O, £IOO, £SOO and £IOOO, or more, and stock in amounts of £4O or more in multiples of £2O. Interest is payable halfyearly, on March 1 and September i each year, the first payment of £i 13s <M per £IOO being due on March 1, 1936. The list, of applications opens to-day and closes on or before September 10. The maturity date of the issue is 1955-60, but the corporation has the power at any time to purchase securities for eaneeliation, either on the market e» by arrangement with the holder. The issue is an authorised trustee investment." Sir William Hunt states that the issue gives the public “the opportunity to invest, funds in an established concern which will promote a new era of mortgage finance in the Dominion by linking long-term mortgages to easily-negotlable securities. One great advantage is that the debentures and stock will give to the holders a floating charge over a large number of mortgages, instead of the security of one mortgago only, supported further tv the share capital and a substantial general reserve fund.”