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terms as the Secretary may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon: Provided, That the aggregate amount of principal obligations of all mortgages insured under this title and outstanding at any one time shall not exceed $350,000,000, of which not to exceed $50,000,000 shall be insured and outstanding prior to June 30, 1942, and not to exceed $150,000,000 shall be insured and outstanding prior to June 30, 1943: Provided further, That the aggregate amount of the principal obligations of the mortgages upon property in any State insured under this title shall not be a greater percentage of such $350,000,000 than the number of tenant farmers residing in such State is of the total number of tenant farmers residing in the United States. "(b) To be eligible for insurance under this section a mortgage shall

“(1) have been made by a farmer who owns no interest in any real property (other than that covered by such mortgage, or occupied by him as a residence and from which he does not derive any substantial part of his livelihood) (A) as security for the purchase price, or part of the purchase price, of a farm upon which he is conducting, or proposes to conduct, farming operations, or (B) as security for the payment of an indebtedness incurred for the purpose of refinancing a mortgage covering a farm upon which he is conducting, or proposes to conduct, farming operations: Provided, That such mortgages shall not be accepted for insurance until rules and regulations with respect to the eligibility of mortgagors have been prescribed by the Secretary, with the approval of the President:

“(2) involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Secretary shall prescribe) not in excess of the reasonable value of the farm, and necessary repairs and improvements thereon, as certified by the county committee pursuant to section 16;

“(3) have a maturity satisfactory to the Secretary, but not to exceed forty years from the date of the execution of the mortgage;

“(4) contain complete amortization provisions satisfactory to the Secretary requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Secretary, such periodic payments to be made to the Secretary as collection agent for the mortgagee;

"(5) bear interest at not to exceed 3 per centum per annum on the amount of the principal obligation outstanding at any time;

“(6) provide, in a manner satisfactory to the Secretary, for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest) to amortization of the principal of the mortgage;

(7) contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves, variable payments, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Secretary may in his discretion prescribe;

“(8) be accompanied by an agreement by the mortgagee (not binding upon the Secretary as an assignee) that he will accept the benefits provided by section 14 in lieu of any right of foreclosure which he may have against the mortgaged property ;

“(9) contain such covenants as the Secretary shall prescribe to assure that the farm will be maintained in repair, and waste and exhaustion of the farm prevented; and

“(10) contains a covenant by the mortgagor not to mortgage, lease, or otherwise dispose of his interest in the mortgaged property to any person until the Secretary has approved the acquisition of such interest by such

person. "(c) The Secretary shall make no premium charge for the insurance of mortgages under this title, but shall be authorized to collect such charges, fees, and reserves as may be prescribed pursuant to paragraphs (2) and (7) of subsection (b) of this section. If the Secretary finds upon the presentation of a mortgage for insurance that the mortgage complies with the provisions of this section, such mortgage may be accepted for insurance by endorsement or otherwise as the Secretary may prescribe.

“(d) The Secretary shall promptly remit to the mortgagee under any mortgage insured under this title any sums collected by him as agent for the mortgagee.

The Secretary shall promptly advise any such mortgagee of any default by the mortgagor.

“(e) If the Secretary finds, with respect to any locality, that the mortgage market there prevailing will not absorb mortgages eligible for insurance under this section, he shall be authorized, within the limitations of subsection (a), to accept such mortgages for the account of the farm mortgage insurance fund in exchange for, or with the proceeds of, interim debentures issued in the name of such fund. Such debentures shall have the same incidents as debentures issued under section 14, but shall have such maturities, bear such rates of interest, and be issued in such manner as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Any mortgages so accepted for the account of the farm mortgage insurance fund shall, as soon as a market therefor is found, be sold by the Secretary, with the approval of the Secretary of the Treasury, and the proceeds used to retire a corresponding amount of interim debentures, in which event such mortgages shall become subject to all of the provisions of this title as fully as though they had been originally insured pursuant to this section.

(f) Any contract of insurance executed by the Secretary under this section shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of any holder thereof from the date of the execution of such contract, except for fraud or misrepresentation of which such holder has actual knowledge.

"PAYMENT OF INSURANCE

"SEC. 14. (a) In any case in which the mortgagor under a mortgage insured under section 13 shall be in default for not less than six months, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon assignment to the Secretary of (1) all rights and interests arising under the mortgage so in default; (2) all claims of the mortgagee against the mortgagor or others, arising out of the mortgage transaction; (3) all policies of title or other insurance and all surety bonds and othar guarauties and any and all claims thereunder; (4) any balance of the mortgage loan not advanced to the mortgagor; (5) any cash or property held by the mortgagee, or to which it is entitled, as deposit made for the account of the mortgagor and which has not been applied in reduction of the principal of the mortgage indebtedness; and (6) all records, documents, books, papers, and accounts relating to the mortgage transaction. Upon such assignment the Secretary shall issue to the mortgagee debentures having a total face value equal to the value of the mortgage. For the purposes of this subsection, the value of the mortgage shall be determined, in accordance with rules and regulations prescribed by the Secretary, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of default, the amount of all unpaid interest and the amount of all payments which have been made by the mortgagee for taxes, special assessments, water rates, which are liens prior to the mortgage, and insurance on the property mortgaged, and by deducting from such total amount any amount received on account of the mortgage after such default. If the collections from any mortgagor who is making variable payments are less than the current periodic payment due under the insured mortgage, which deficiency is not covered by previous prepayments, and such mortgagor is not in default in his variable payments and has complied with all of the terms and conditions of the insured mortgage, the Secretary, in lieu of issuing debentures, as hereinabove provided, for the full amount of such mortgage, shall pay to the mortgagee the amount of such deficiency, less the amount of any such prepayments, which payment shall be advanced out of the farm tenant mortgage insurance fund for the account of the mortgagor. Such advance shall be repaid to the fund out of the first available collections received from the mortgagor, with interest thereon at the rate fixed in the insured mortgage.

"(b) The Secretary may at any time, under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instruments secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

"(c) Debentures issued under this section shall be in such form and denominations in multiples of $50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by

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the Secretary with the approval of the Secretary of the Treasury, and may be in coupon or registered form. Any difference between the value of the lortgage determined as herein provided and the aggregate face value of the debentures issues, not to exceed $50, shall be adjusted by the payment of cash by the Secretary to the mortgagee.

"(d) The debentures issued under this section to any mortgagee with respect to mortgages insured under section 13 shall be executed in the name of the farm-tenant mortgage insurance fund as obligor, shall be signed by the Secretary by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date the mortgage was acquired by the Secretary and shall bear interest from such date at a rate determined by the Secretary, with the approval of the Secretary of the Treasury, at the time the mortgage was offered for insurance, but not to exceed 3 per centum per annum, payable semiannually, on the 1st day of January and the 1st day of July of each year, and shall mature three years after the 1st day of July following the maturity date of the mortgage in exchange for which the debentures were issued. Such debentures shall be fully and unconditionally guaranteed as to principal and interest by the United States. In the event that the Secretary fails to pay upon demand, when due, the principal of or interest on any debentures issued under this section, the Secretary of the Treasury shall pay to the holders the amount thereof, which is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such debentures. The Secretary of the Treasury is authorized to purchase any interim debentures issued pursuant to section 13 (e), and for such purchases may use as a public debt transaction the proceeds from the sale of any securities hereafter issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such debentures shall be treated as public debt transactions of the United States.

"(e) In any case in which the mortgagor shall violate any covenant or condition of his mortgage, the Secretary may require an assignment of such mortgage, together with the incidents thereto as enumerated in subsection (a) of this section, in exchange for debentures to be issued in accordance with this section,

"PROCEDURE WITH RESPECT TO MORTGAGES ASSIGNED TO SECRETARY

"SEC. 15. (a) Upon accepting the assignment of any mortgage the Secretary shall ascertain whether or not the mortgagor desires to remain in possession of the mortgaged property. If the mortgagor does not desire to retain possession of the mortgaged property or if the Secretary is unable to make the findings prescribed by the sentence immdiately following the Secretary may proceed to foreclose the mortgage: Provided, That foreclosure proceedings shall not be instituted if the mortgagor conveys to the Secretary full title to the mortgaged property subject only to the mortgage lien. If the mortgagor desires to remain in possession of the mortgaged property and if the Secretary finds that the mortgagor (1) has made reasonable efforts to meet all defaulted payments and to comply with the other covenants and conditions of his mortgage and (2) will probably be able to meet such defaulted payments before, or within five years after, the maturity date, the Secretary shall enter into an agreement with the mortgagor providing for the payment of such defaulted payments together with interest thereon at such times not later than five years after the maturity date as the Secretary may deem to be within the probable future means of the mortgagor. Should any mortgagor with whom the Secretary has entered into any such agreement thereafter fail to meet any payments the Secretary may proceed to foreclose the mortgage: Provided, That foreclosure proceedings shall not be instituted if the mortgagor conveys to the Secretary full title to the mortgaged property subject only to the mortgage lien.

“(b) Any property acquired by the Secretary pursuant to the provisions of subsection (a) shall be sold to farmers upon such terms as the Secretary may deem advisable. If, pursuant to the provisions of section 51, the Secretary shall bid for and purchase any property foreclosed under subsection (a), the net amount realized from the sale of any such property and in collecting such claims, after deducting all expenses incurred by the Secretary in handling,

dealing with, and disposing of such property and in collecting such claims, exceeds the face value of the debentures issued and the cash paid for the assignment of the mortgage upon such property plus all interest paid on such debentures, then so much of such excess as does not exceed the total amount of the payments made by the mortgagor upon the purchase price of such property shall be paid to the mortgagor of such property, less any amounts owing to the Secretary under section 3 (e) of title I or otherwise.

"COUNTY COMMITTEES

"SEC. 16. (a) The county committee established under section 42 shall

“(1) receive listings of farms in the county from any persons desiring to sell such farms to farm tenants;

“(2) receive applications from farm tenants desiring to finance the acquisition of farms by means of mortgages insured by the Secretary under this title and advise such farm tenants of the available listed farms; and

“(3) examine and appraise farms which farm tenants desire to acquire or the mortgage indebtedness upon which they desire to refinance by means

of mortgages insured under this title. "(b) If the committee finds that an applicant is eligible to receive the benefits of this title, that by reason of his character, ability, experience, and training he is likely to carry out successfully undertakings required of him under a mortgage which may be insured under this title, and that the farm with respect to which the application is made is of such character that there is a reasonable likelihood that the insuring of a mortgage with respect thereto will carry out the purposes of this title, it shall so certify to the Secretary. The committee shall also certify to the Secretary the amount which the committee finds is the reasonable value of the farm, and where advances are to be made by the mortgagee for the construction of repairs and improvements, the amount of such advances which the committee finds is economically justified on the basis of the income which can be realized from the operation of the farm.

"(c) No certification under this section shall be made with respect to any farm in which any member of the committee or any person related to such member within the third degree of consanguinity or affinity has any property interest, direct or indirect, or in which they or either of them have had such interest within one year prior to the date of certification.

"(d) No mortgage made by any person or with respect to any farm shall be insured under this title unless certification as required under this section has been made with respect to such person and such farm by the committee: Provided, That no mortgage shall be insured with respect to any farm unless it is of such size as the Secretary determines to be sufficient to constitute an efficient farm management unit and to enable a diligent farm family to carry on successful farming of a type which the Secretary deems can be successfully carried on in the locality in which the farm is situated.”.

SEC. 2. (a) Subsection (b) of section 40 of the Bankhead-Jones Farm Tenant Act is amended by striking out “or title II, or both,” and inserting in lieu thereof a comma and the following: "title IA, or title II,".

(b) Subsection (a) of section 42 of such Act is amended by inserting after "title I" the following: “or title IA".

(c) Subsection (a) of section 50 of such Act is amended by inserting after "title I” a comma and the following: "title IA,".

SEC. 13. Section 3 of such Act is amended by inserting therein a new subsection to follow immediately after subsection (d) thereof and to read as follows:

“(e) Mortgagors whose mortgages are insured under title IA may be granted loans under this title for (1) the construction of necessary repairs and improves ments upon the mortgaged property, or (2) to enable such mortgagors to meet payments of principal and interest due upon such mortgages. Any such loan shall comply with all of the requirements of this title, except that the mortgage or deed of trust securing such loan may be junior to the mortgage insured under title IA."

SEC. 14. The last sentence of paragraph "Seventh" of section 5136 of the Revised Statutes, as amended, is further amended by inserting, after the words “National Housing Act”, the following: "or which are insured by the Secretary of Agriculture pursuant to title IA of the Bankhead-Jones Farm Tenant Act.”

SEC. 15. Section 35 of chapter III of the Act entitled "An Act to regulate the business of life insurance in the District of Columbia", approved June 19, 1934 (48 Stat. 1152), is amended by inserting in paragraph 3 (a), after the words "Federal Housing Administrator”, the following: "or which are insured by the Secretary of Agriculture pursuant to title IA of the Bankhead-Jones Farm Tenant Act”.

SEC. 16. Section 4 of said Act is amended by adding at the end thereof the following words : "Provided, That, if the amount thus determined for any State or Territory, other than the Territory of Alaska or the District of Columbia, shall be less than $100,000, the allotment for such State or Territory shall be increased to $100,000, and the amounts determined for the remaining States and Territories shall be adjusted accordingly: Provided further, That the funds so allotted to any such State or Territory may be loaned to enable the borrower to refinance an existing mortgage or mortgages on a farm personally operated and occupied by him and for necessary repairs and improvements thereon, in cases where the Secretary determines that such refinancing is necessary and will enable the borrower successfully to operate the farm, and that the borrower cannot obtain credit for such refinancing from any other Federal agency or federally incorporated lending institution. Such loans shall comply with, and be subject to, all the provisions of this title."

Senator BANKHEAD. Whom do you want to examine?
Senator Taft. Mr. McDonald wants to make a statement.

STATEMENT OF STEWART MCDONALD, DEPUTY FEDERAL LOAN

ADMINISTRATOR

Mr. McDonald. Senator, I am now the Deputy Federal Loan Administrator.

Since the reorganization bill the Federal Housing Administration was placed under the Federal Loan Agency for the purpose of coordinating its policies with those of the governmental housing agencies, and Mr. Jesse Jones appointed me Deputy Federal Loan Administrator, with these specific duties, which I have assumed, and for which I receive no compensation.

I have followed the F. H. A. very closely and have been fortunate enough to have as my successor as Administrator, Mr. Ferguson, who is thoroughly familiar with all phases of the act.

The Federal Housing Administration is now operating at an increase of about 20 percent over the amount of business it did at the corresponding period last year. It is paying all its own expenses without any assistance this year from the United States Government, and in addition to that will lay up a surplus of about $9,000,000 which will be added to the mortgage insurance fund under section 203. The fund is now approximately $30,000,000.

Senator BANKHEAD. How much of that $30,000,000 did the Government contribute?

Mr. McDONALD. $10,000,000.

The most useful activity I think of the Federal Housing Administration is its general influence in the development of construction of small homes; particularly in the laying out of new suburbs and the maintenance of standards of construction.

It issures the owner acquiring a small home a good value on a very easy payment basis and at the same time it assures that the city has a development which will not rapidly disintegrate into a slum.

For that reason I think that phase of the Federal housing activity is one that is especially meritorious.

I want to say that I have gone over these amendments very carefully and in general policy they have the approval of the Federal

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