MORTGAGE BONDS

Sun (Auckland), Volume III, Issue 690, 15 June 1929, Page 12

MORTGAGE BONDS

INTERESTING AUCKLAND VENTURE In New Zealand today real estate mortgages are not viewed with the high esteem among the investing public that their real attraction merits. The reason for this is not hard to assess. Apart from being restricted to the man of comparatively large means, indifferent handling and placing of mortgagees in the past have been responsible for losses sufficient to shake the faith of many investors. In the United States of America these factors were recognised and combated about forty years ago when the first of the mortgage bonds investment companies came into being. Today, these companies have wide interests in the States, and have played a big part in its development. A mortgage company makes a loan much on the same lines as the building societies at present operating ill New Zealand, ouly after making a careful investigation as to the value of the property, and the margin of safety over and above the amount of the mortgage. After the loan has been made, the company issues bonds or certificates of various denominations ranging from £2O up to the amount of the loan. The purchasers of the bonds have, as security, the first mortgage given by the person to whom the loan was made. In this way the company is really the trustee for the purchasers of the bonds. It collects the interest, keeps the property under review, and, in fact, undertakes all the duties, per the medium of a skilled staff, at present falling upon the mortgage bolder or his solicitors. Making it a specialty, however, costs are cut to a comparatively low level, and a greater state of efficiency is reached. Mortgage loan bonds issued by oldestablished, well-managed corporations in U.S.A. are looked upon as gilt-edge security and have a high negotiable value. In view of the above it is interesting to note that a company is in process of formation in Auckland having as its principal object the dealing in mortgage bond finance. Under the name “The First National Bond Corporation, Ltd.,” the company' has au authorised capital of £250,000. It is proposed to issue 100,000 cumulative 6 per cent, preference shares and 100.000 ordinary shares, holding 50,000 ordinary shares in reserve. As it is the first big venture of its kind in the Dominion the progress of the company should be watched with considerable interest.