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instruments, or upon involuntary transfer or sale, the Secretary may declare the amount unpaid immediately due and payable, and that, without the consent of the Secretary, no final payment shall be accepted, or release of the Secretary's interest be made, less than five years after the making of the loan; and

(7) contain the provisions for refinancing specified in section 1018 (c) of this title.

(c) Except as provided in paragraph (6) of subsection (b) of this section, no instrument provided for in this section shall prohibit the prepayment of any sum due under it.

(d) No provision of section 203 of Title 11, otherwise applicable in respect to any indebtedness incurred under sections 1001-1005d of this title by any beneficiary thereof, shall be applicable in respect of such indebtedness until such beneficiary has repaid at least 15 per centum thereof. (As amended Aug. 14, 1946, ch. 964, § 5, 60 Stat. 1072.)

Act Aug. 14, 1946, cited to text, amended section by increasing the interest rate from 3 per centum to 3% per centum.

§ 1004. Equitable distribution of loans and mortgage insurance-In making loans and insuring mortgages under sections 10011005d of this title, the amount which is devoted to such purposes during any fiscal year shall be distributed equitably among the several States and Territories on the basis of farm population and the prevalence of tenancy, as determined by the Secretary: Provided, That there may be distributed to each State such amounts as are necessary to insure mortgages or finance loans pursuant to all bona fide applications from veterans qualified under section 1001 of this title: Provided further, That there may be disbursed in any fiscal year to each State or Territory such amount not in excess of $100,000 as is determined by the Secretary to be necessary to finance loans in such State or Territory under sections 1001-1005d of this title. (As amended Aug. 14, 1946, ch. 964, § 5, 60 Stat. 1972.)

Act Aug. 14, 1946, cited to text, amended section by adding provisions.

§ 1005. Appropriations. To carry out the provisions of sections 1001-1005d of this title with respect to tenant-purchase loans, there is authorized to be appropriated not to exceed $50,000,000 for each fiscal year beginning with the fical year ending June 30, 1947, and such further sums as may be necessary in carrying out the provisions of said sections during such fiscal year, with respect to tenant purchase loans and insured mortgages. (As amended Aug. 14, 1946, ch. 964, § 5, 60 Stat. 1072.)

Act Aug. 14, 1946, cited to text, amended section generally to provide for appropriations.

§ 1005a. Farm tenant mortgage insurance fund; appropriation; disposition of excess; use; annual report.-(a) There is created a fund, to be known as the "farm tenant-mortgage insurance fund" (in sections 1001-1005d of this title referred to as the "fund"), which shall be used by the Secretary as a revolving fund for carrying out the provisions of said sections with respect to mortgages insured under section 1005b of this title and to mortgages accepted for the account of the fund under section 1005c of this title. There is authorized to be appropriated to the Secretary the sum of $25,000,000 to constitute such fund.

(b) Moneys in the fund not needed for current operations shall be deposited with the Treasurer of the United States to the credit of the fund or invested in direct obligations of the United States or obligations guaranteed as to principal, and interest by the United States. The Secretary may purchase, with money in the fund, any notes issued by the Secretary to the Secretary of the Treasury to obtain money for the fund.

(c) All amounts deposited in or credited to the fund and the proceeds of investments of amounts in the fund shall be used only for purposes to which the fund is specifically authorized to be devoted under sections 1001-1005d of this title and shall not be diverted to any other use.

(d) The Secretary shall include in his annual report a complete statement with respect to the status of the fund. (Aug. 14, 1946, ch. 964, 5, 60 Stat. 1072.)

§ 1005b. Insurance of mortgages-Authorization to Secretary.— (a) The Secretary is authorized, upon application of a prospective mortgagor or mortgagee under a first mortgage eligible for insurance under sections 1001-1005d of this title, to insure such mortgage and to make commitments for the insurance of any such mortgage prior to the date of its execution.

(b) Aggregate amount of mortgages.-The aggregate amount of principal obligations on all mortgages insured under sections 10011005d of this title, on all mortgages with respect to which commitments to insure have been made, and on all mortgages accepted for the account of the fund and not disposed of under section 1005d of this title shall not exceed $100,000,000 in any one fiscal year. With respect to any fiscal year, the amount available for insurance, commitment and acceptance of mortgages under sections 1001-1005d of this title shall be distributed among the several States and Territories on the basis provided in section 1004 of this title and preferences shall be given to mortgages executed by veterans qualified under section 1001 of this title.

(c) Eligibility provisions.-In order for a mortgage to be eligible under sections 1001-1005d of the title

(1) the person obligated to pay thereunder shall be a person who would be eligible under section 1001 of this title for a loan under sections 1001-1005d of this title;

(2) the farm mortgaged shall be one with respect to which, under section 1001 (c) of this title, a loan could be made under sections 1001-1005d of this title;

(3) there shall be an appropriate certification by the county committee as required by section 1002 of this title;

(4) the mortgage instruments shall comply with section 1003 (b) of this title, except that the base rate of interest shall be 22 per centum per annum;

(5) the principal obligation (and fees and other charges chargeable under subsection (d) of this section) shall not exceed 90 per centum of the reasonable value of the farm and necessary repairs and improvements thereon, as such values are certified by the county committee pursuant to section 1002 (b) of this title;

(6) the mortgage instruments shall contain a covenant to pay to the Secretary the initial and annual charges provided for in sub

sections (d) and (e) of this section, and a covenant to pay to the Secretary, as collection agent for the mortgagee, the amounts payable by the mortgagor to the mortgagee under the mortgage; and

(7) the mortage instruments shall contain a stipulation (not binding upon the Secretary) that the holder of the mortgage will accept the benefits provided by section 1005c of this title in lieu of any right of foreclosure which he may have against the property and any right to a deficiency judgment against the mortgagor on account of the mortgage.

(d) Payment of initial fees; disposition.-The Secretary shall require the payment by the mortgagor or mortgagee of such initial fees for inspection, appraisal, and other charges as it finds necessary and such amounts may be included in the principal obligation of the mortgage, and the payment of such delinquency charges and default reserves as it finds necessary. The proceeds of such fees shall be deposited in the Treasury for use for administrative expense as provided in subsection (e) (2) of this section.

(e) Collection of initial charge; disposition.-(1) The Secretary shall collect from the mortgagor, upon insurance of the mortgage, an initial charge of 1 per centum of the principal obligation of the mortgage and annually thereafter when payment of an installment of principal and interest is due, a charge of 1 per centum of the principal obligation remaining unpaid after such installment is paid, without taking into account delinquent payments or prepayments. If the principal obligation of the mortgage is paid in full in less than five years after the time when the mortgage was entered into, the Secretary may require payment by the mortgagor of a charge equal to the amount of the last annual charge required of the mortgagor.

(2) One-half of the amount paid as charges in pursuance of this subsection shall be the premium for insurance and shall be deposited in the fund and may be used only for purposes to which the fund may be devoted, the other half of the amounts so paid shall be deposited in the Treasury to the credit of the Secrtary and shall be available only for administrative expenses to carry out the provisions of sections 1001-1005d of this title, relating to mortgage insurance.

(f) Payment of sums to mortgagee; payment of full amount; repayments to fund.—(1) The Secretary shall promptly remit to the mortgagee under any mortgage insured under sections 1001–1005d of this title any sums collected by it as agent for the mortgagee. The Secretary shall promptly advise any such mortgagee of any default. by the mortgagor.

(2) If within thirty days after the due date of any installment the mortgagor under an insured mortgage has failed to pay to the Secretary the amount due, the Secretary shall notwithstanding the amount paid is less than the interest and principal due, pay the amount of such principal and interest to the mortgagee, less the amount of any previous prepayments.

(3) Payments to mortgagees under paragraph (2) of this subsection shall be advanced out of the fund for the account of the mortgagor. Such advances 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, and shall be added to subsequent installments.

(g) Insurance contract as incontestable.-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.

(h) Release of mortgagor.-The Secretary may, at any time, for good cause shown and 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.

(i) Assignment of mortgage.-The holder of any mortgage insured under sections 1001-1005d of this title may, upon notice to the Secretary, assign such mortgage together with the accompanying note and contract of insurance and the assignee thereof shall thereupon become entitled to all the benefits of such contract of insurance: Provided, That no such assignment shall be binding upon the Secretary until notice thereof has been given the Secretary and the Secretary has acknowledged receipt of such notice. (Aug. 14, 1946, ch. 946, § 5, 60 Stat. 1072.)

§ 1005c. Payment of insurance upon default; issuance of notes; purchase of notes by Treasury; assignment of mortgage.—(a) In any case in which the mortgagor under a mortgage insured under section 1005b of this title is in default for more than twelve months, the mortgagee shall be entitled to receive the benefit of the insurance as provided in this section, upon assignment to the Secretary of (1) all the mortgagee's 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 other guaranties and any and all claims thereunder relating to the mortgage or the mortgaged property; (4) any balance of the mortgage loan not advanced to the mortgagor; and (5) any cash or property held by the mortgagee, or to which he 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 upon transfer to the Secretary of such originals or copies of records, documents, books, papers and accounts relating to the mortgage transaction, as the Secretary prescribes. Upon such assignment and transfer, the Secretary shall pay to the mortgagee, in cash, an amount equal to the value of the mortgage and the note and mortgage shall thereupon become a part of the fund. 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, and other payments in discharge of liens which are 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 indebtedness after such default.

(b) If there should not be sufficient cash in the fund to enable the Secretary to make payments to mortgagees as provided in subsection (a) of this section, the Secretary may make and issue notes to the Secretary of the Treasury to obtain funds to make such payments. Such notes shall be signed by the Secretary or by his duly authorized representatives and shall be negotiable. Such notes shall bear interest, payable semiannually, at a rate equal to the average rate of interest, computed to the end of the calendar month next preceding the date of issue, borne by all interest bearing obligations of the United States then forming a part of the public debt, and shall have such maturities as the Secretary may determine with the approval of the Secretary of the Treasury.

(c) The Secretary of the Treasury is authorized to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purchases may use as a public debt transaction the proceeds from the sale of any securities issued under sections 745, 747, 752-754b, 757b, 757c, 758, 760, 764-766, 769, 771, 773, 774 (2) and 801 of Title 31, and the purposes for which such securities may be issued under said sections, are extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States.

(d) In any case in which the mortgagor violates any covenant or condition of his mortgage, the Secretary may require the mortgagee to assign such mortgage, together with the incidents thereto, upon payment of the value of the mortgage determined in accordance with this section. (Aug. 14, 1946, ch. 964, § 5, 60 Stat. 1072.)

§ 1005d. Procedure with respect to mortgages in default; disposition of realized amounts.-(a) Upon accepting the assignment of any insured mortgage, the Secretary shall ascertain whether or not the mortgagor (which term as used in this section shall include the mortgagor or his heirs or assigns) desires to remain in possession of the mortgaged property. If the mortgagor does not desire to remain in possession of the mortgaged property or if the Secretary is unable to make the findings prescribed by the next sentence, the Secretary may proceed to foreclose the mortgage. 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 within five years after the maturity date or dates. of the defaulted payments, the Secretary may 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 or dates 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 such agreement thereafter fail to meet any payments, the Secretary may proceed to foreclose the mortgage.

(b) Amounts realized under section 1025 of this title on account of property which was subject to an insured mortgage shall be deposited in the fund. Amounts payable by the Secretary under section 1024 (a) of this title as taxes, with respect to such property, shall be paid out of the fund. (Aug. 14, 1946, ch. 964, § 5, 60 Stat. 1072.)

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