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ness is in excess of the productive value of the mortgaged farm, or that the payments periodically due on such indebtedness exceed the normal farm income available for such payments, he shall be entitled to refinance his mortgage indebtedness as hereinafter provided.

(b) Each such application shall be filed with the committee of the county in which the farm is located, shall be in such form and accompanied by such records and data covering the farm and its crop yields as the Governor may prescribe, and shall include a covenant by the applicant that, upon the approval of the application, and in consideration of the refinancing benefits to be made available to him, he will comply with all the conditions hereinafter set forth.

(c) If the committee finds that the application has been filed in good faith, and that the mortgage indebtedness is in excess of the productive value of the mortgaged farm, or that the payments periodically due on such indebtedness exceed the normal farm income available for such payments, and that the applicant, by reason of his character, ability, and experience is likely successfully to carry out the undertakings required of him, it shall so certify to the Governor; and no mortgagor shall be entitled to such refinancing benefits unless such certification has been made by the committee.

SEC. 11. (a) Upon receiving any certification required by section 10 of this Act, the Governor shall make such further investigation as he may deem necessary with respect to the matters covered by such certification. If, after such investigation, the Governor is satisfied that all the requirements of section 10 of this Act have been met, he shall refinance the mortgage to which such certification relates.

(b) Any mortgagor who is indebted to the Corporation shall be entitled to receive the refinancing benefits herein provided immediately upon the approval by the Governor of his application for such benefits.

(c) Any mortgagor who is indebted to a Federal land bank shall be entitled to receive such benefits upon the approval by the Governor of his application for such benefits and the assignment of his mortgage by such bank to the Corporation. Upon receiving notice from the Governor that any mortgagor's application for such benefits has been approved, the Federal land bank shall assign his mortgage to the Corporation and the Corporation shall deliver to such bank, in exchange for such mortgage, cash or bonds issued or held by such Corporation in an amount equal to the value of the property covered by such mortgage as agreed to by the Governor and such bank. Any losses or gains subsequently incurred or realized on account of the sale or other disposition of the property covered by any mortgage so assigned shall be shared equally by such bank and the Corporation.

(d) Any mortgagor who is indebted under a mortgage on his farm property to any creditor other than the Corporation or a Federal land bank, shall be entitled to receive such benefits upon the approval by the Governor of his application for such benefits and the assignment of such mortgage to the Corporation with the consent of the holder of such mortgage. The Corporation shall deliver to such holder, in exchange for the mortgage so assigned, cash or bonds issued or held by the Corporation in an amount not in excess of the value of the property covered by such mortgage as determined by the Governor.

Sec. 12. (a) Any mortgagor who is entitled to the refinancing benefits herein provided shall, as a condition to obtaining such benefits, forthwith convey to the Corporation full title to the property covered by his mortgage free and clear of all liens and encumbrances. Such conveyance shall constitute a waiver by the mortgagor of all rights of redemption under the mortgage, and the acceptance of such conveyance by the Corporation shall constitute a full release and satisfaction of the mortgage debt. Upon receiving such conveyance, the Corporation shall enter into a lease with the mortgagor which shall

(1) be for a period of not to exceed five years at a rental agreed upon between the parties thereto, which shall, so far as practicable, be in accordance with the rental arrangements prevailing in the locality, and may be either on a cash basis or for a share of the crop;

(2) be in such form and contain such covenants as the Governor shall prescribe to assure the payment of the agreed rental, and to assure that the farm will be maintained in repair and that waste and exhaustion of the property will be prevented;

(3) provide that the tenant, or the Corporation on his behalf out of the rental fixed under paragraph (1) hereof, shall pay taxes and assessments on the farm to the proper taxing authorities, and, unless otherwise provided for by the Governor, shall insure and pay for insurance on farm buildings; and

(4) provide that upon the assignment, sale, or other disposition of the lease, or any involuntary transfer or sale thereof, or upon default in the performance of, or failure to comply with, any covenant or condition contained in

the lease, the Governor may terminate the lease. (b) If the tenant complies with all of the terms and conditions of his lease and gives notice to the Corporation of his desire to purchase the property covered by such lease, the Corporation shall, as of the date of termination of the lease, or at such time prior thereto as the Governor shall approve, convey the property to the tenant at a price to be determined by the Governor on the basis of its productive value or for the amount of the mortgage indebtedness on such property at the time it was conveyed to the Corporation, whichever shall be less. The tenant shall be entitled to credit toward the amount of such purchase price all rental payments made by him in excess of such amount as will compensate the Corporation (1) for interest on such purchase price during the period of the lease at the rate currently payable on loans made by the Federal land bank of the district in which the property is located, as determined pursuant to section 2 of this Act, and (2) for any expenditures made by the Corporation for current repairs or maintenance during the period of the lease which are necessary to preserve such property. In determining the productive value of the property as the basis for such purchase price, there shall be excluded any increases in the value of the property attributable to expenditures by the tenant.

(c) Upon such conveyance of any property by the Corporation, the purchaser shall deliver to the Corporation a first mortgage or deed of trust to secure the payment of the purchase price which shall

(1) provide for the payment of the purchase price within an agreed period of not more than forty years from the date of the conveyance;

(2) provide for the payment of interest on the unpaid balance of the purchase price at the rate of interest currently payable on loans made by the Federal land bank of the district in which the property is located, as determined pursuant to section 2 of this Act;

(3) provide for the payment of such purchase price, together with interest thereon, in installments in accordance with amortization schedules prescribed by the Governor;

(4) be in such form and contain such covenants as the Governor shall prescribe to secure the payment of the purchase price, together with interest thereon, to protect the security, and to assure that the farm will be maintained in repair, and waste and exhaustion of the property will be prevented;

(5) provide that the purchaser shall pay taxes and assessments on the property to the proper taxing authorities, and, unless otherwise provided for by the Governor, shall insure and pay for insurance on farm buildings; and

(6) provide that upon the assignment, sale, or other disposition of the property, or of any interest therein, without the consent of the Governor, or upon default in the performance of, or failure to comply with, any covenant or condition contained in the mortgage or deed of trust, or upon the involuntary transfer or sale of the property, the Governor may declare the amount unpaid immediately due and payable, or may rescind the conveyance. In event of any such rescission, the Corporation shall refund to the purchaser from the Corporation all principal payments theretofore made by him,

less the amount of any damages to the property occasioned by his fault. (d) No provision of section 75, as amended, or of chapters XI, XII, and XIII of the Act entitled "An Act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1988 (U. S. C., 1934 ed., title 11, sec. 203; supp. IV, 1938, title 11, sec. 203; and chs. XI, XII, and XIII), shall in any way affect, apply to, extend, or impair any obligation incurred by any person pursuant to this section.

REPURCHASE OF FORECLOSED PROPERTY

SEC. 13. (a) Any farmer whose property was acquired under foreclosure by any Federal land bank or by the Corporation and has not been disposed of by such bank or the Corporation, and who is aggrieved by the refusal of such bank or the Corporation to permit him to repurchase the foreclosed property, shall be entitled to appeal to the committee of the county in which the property is located, and such appeal shall be in such form and accompanied by such records and data covering the property and its crop yields as the Governor may prescribe, and shall include a covenant hy the person so appealing that, upon the allowance of his appeal, and in consideration of the benefits to be made available to him, he will comply with all the conditions hereinafter set forth.

(b) If the county committee finds that the appeal has been taken in good faith, that the foreclosure of the mortgage was occasioned by causes beyond the control of the person so appealing, and that such person, by reason of his character, ability, and experience, is likely successfully to carry out the undertakings required of him, it shall so certify to the Governor; and no such person shall be entitled to the benefits herein provided unless such certification has been made by the committee.

(c) Upon receiving any such certification, the Governor shall make such further investigation as he may deem necessary with respect the matters covered by such certification. If, after such investigation, the Governor approves the findings of the committee the person so appealing shall be entitled to lease and purchase the foreclosed property, and if such property is held by a Federal land bank such bank shall convey such property to the Corporation, on the same terms and conditions as those provided in section 12 of this Act in the case of property covered by mortgages which are refinanced under such section.

VARIABLE PAYMENTS AND ADJUSTMENT OF FARM UNITS

Sec. 14. (a) The Governor may provide for the payment of any obligation or indebtedness under sections 10 to 13, inclusive, of this Act, or of any loan heretofore or hereafter made under the Federal Farm Loan Act, as amended, or the Emergency Farm Mortgage Act of 1933, as amended, by means of a system of variable payments under which amounts in addition to the require payments may be collected in periods of above-normal production or prices and employed to reduce the required payments in periods of subnormal production or prices.

(b) Whenever the Governor finds that any property otherwise eligible for refinancing or repurchase under the provisions of sections 10 to 13, inclusive, of this Act, is either too large or too small to constitute an efficient farm-management unit, or requires land or building improvements necessary to enable a diligent farm family to carry on successful farming of a type which the Governor deems can be successfully carried on in the locality in which the property is situaated, he is authorized, on behalf of the Corporation, to make the improvements so found to be necessary or to adjust the size of such property. For thejpurpose of making such adjustment, the Governor may either subdiv the property into smaller units or purchase such additional land as may be required to make the property an efficient farm-management unit.

REAMORTIZATION OF COMMISSIONER LOANS

SEC. 15. Notwithstanding the provisions of section 32 of the Emergency Farm Mortgage Act of 1933, as amended, the Governor is authorized to provide for the repayment of any loans heretofore or hereafter made pursuant to the provisions of such section, on the same amortization basis as that provided in the case of loans by Federal land banks under paragraph second of section 12 of the Federal Farm Loan Act, as amended. The Governor shall ascertain the extent to which any loan heretofore made pursuant to the provisions of such section 32, as amended, is being amortized over such a short period, as to cause hardship to the borrower, and shall provide for the reamortization of any such loan over a period, not to exceed 40 years, which he finds will be consistent with the protection of the security interest of the Government and the full repayment of such loan.

FORECLOSURES AND DEFICIENCY JUDGMENTS

Sec. 16. No foreclosure proceedings or suits for a deficiency judgment shall hereafter be instituted by any Federal land bank or by the Corporation on any mortgage executed pursuant to section 12 of this Act, or executed to secure any loan made pursuant to the Federal Farm Loan Act, as amended, or the Emergency Farm Mortgage Act of 1933, as amended, if the mortgagor conveys and delivers to such bank or to the Corporation, as the case may be, full title and possession to the mortgaged property free and clear of all liens and encumbrances: Provided, That the Governor may also require the mortgagor to pay, or agree to pay, upon terms and with security satisfactory to the Governor, an amount determined by the Governor to be equal to the amount of any damages to the mortgaged property resulting from the willful or negligent act or omission of such mortgagor. Upon such conveyance and delivery the Federal land bank or the Corporation, as the case may be, shall release the mortgagor from all liability on account of the mortgage. Upon the failure or refusal of the mortgagor to pay or agree to pay the amount so determined, the Federal land bank or the Corporation, as the case may be, may foreclose the mortgage and otherwise pursue the remedies available to it by law.

PENALTIES

SEC. 17. (a) Whoever makes any material representation, knowing it to be false, for the purpose of influencing in any way the action of any farm-debt adjustment committee, or any officer or employee of the Farm Credit Administration, upon any application, lease, contract, or appeal under this Act, or upon any change in or extension of any such application, lease, contract, or appeal shall be punished, upon conviction thereof, by a fine of not more than $1,000, or by imprisonment for not more than one year, or both.

(b) No officer, attorney, or employee of the Government shall be the beneficiary of or receive any fee, commission, gift, or other consideration directly or indirectly, for or in connection with any transaction or business under this Act other than such salary, fee, or other compensation as he may receive as such officer, attorney, or employee. Any person violating any provision of this section or section 9 (d) shall, upon conviction thereof, be punished by a fine of not more than $1,000, or by imprisonment for not more than one year, or both.

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RIGHT TO AMEND

SEC. 18. (a) The right to alter, amend, or repeal this Act, or any part thereof, is expressly reserved.

(b) Any provision of the Federal Farm Loan Act, as amended, the Emergency Farm Mortgage Act of 1933, as amended, or other law, inconsistent with the provisions of this Act, is hereby repealed.

It has been found necessary to go into the legal phases of the socalled certificate plan, and in the meantime there has been so much interest in the farm credit program and in the method of handling and the method of financing that it was thought wise to have some hearings on that particular subject. Several of us have been working along the line of suggestions, some of which have been discussed before the committee and have been discussed by members individually, and H. R. 8748 is the result. Similar bills have been introduced in the Senate by two or three Senators, and I have asked Dr. Black and his department to explain the bill, and also to answer any questions which the committee may desire to ask in reference to the way it will function, or the way other matters are handled in connection with farm credit administration.

Now, Dr. Black, if you would like, we will permit you to go first through the bill and explain how it is to operate, in order to get the complete picture before the committee and then submit to questions, or, if you prefer, submit to questions as you go along. like to make an explanation of the bill first, a brief explanation?

Would you

STATEMENT OF A. G, BLACK, ACTING GOVERNOR, FARM CREDIT

ADMINISTRATION

Mr. Black. I think perhaps that might be the best way to proceed, Mr. Chairman.

The CHAIRMAN. You do not have copies of an outline or anything of that kind to submit to the members of the committee?

Mr. BLACK. No; I have not.

The CHAIRMAN. All right, Dr. Black, will you kindly make an explanation of the bill so that the picture may be before the committee?

Mr. Black. The bill proposes that interest rates be permanently reduced to 3 percent per annum on all loans now outstanding from either the land banks or the Farm Mortgage Corporation; that until June 30, 1946, new loans would be made at a contract rate of 3 percent and that after June 30, 1946 the rate on new loans would be related to the cost of money for making such loans, but at no time would

the rate be more than 1 percent above the cost of the loan funds. I suppose the 1946 date is included in the bill because it would permit the refunding of outstanding farm-loan bonds by that time. If the rate were related to the interest rate on outstanding obligations before then there would be a rather heavy deficit piled up because of the fact that bonds are already outstanding for which the loan income would not be sufficient to pay the interest.

Mr. HOPE. At this point I think there should be placed in the record a statement showing the outstanding bonds and the amount of interest carried by those bonds.

Mr. BLACK. The rate of interest? Do you mean the rate of interest or the amount?

Mr. HOPE. The amount of each issue.

The CHAIRMAN. I think it would be well for you to place in the record here or a little later the rate of interest on the various bonds and when they are callable, and in what amount, so that we may have the entire picture.

Mr. BLACK. I have such a statement and it can be placed in the record.

(The statement follows:)

Holders of all consolidated Federal farm-loan bonds outstanding callable in 1943,

1944, 1945, and 1946, as of Dec. 31, 1939

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Mr. HOPE. Right at this point also, I would like to ask if there is any estimate as to what this provision would cost the Federal Government per annum in the way of subsidy?

Mr. BLACK. We have made a very hasty calculation of that.

The interest subsidies, under present legislation, amounted last year to about $36,000,000. The interest subsidy under this provision would have amounted to $29,700,000. There would have been a saving to the Treasury of $6,300,000 over the present subsidy.

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