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On page 6, line 2, strike out beginning with the word "said" down through the word "and" in line 3 and insert in lieu thereof "Federal Land Bank of Baltimore or".
On page 6, line 6, strike out beginning with the word "bank" down through the word "Corporation" in line 8 and substitute in lieu thereof "said bank or the said corporation".
On page 6, line 9, strike out the quotation marks after the word. "Commission" and add the following paragraph:
"(d) For the purposes of this section, the terms 'Puerto Rican Hurricane Relief Commission', 'Hurricane Relief Commission' and 'Commission' shall be deemed to refer to the department, bureau or other agency of the Government having charge of the administration of this resolution."
EXPLANATION OF THE RESOLUTION
This resolution, with the exception of the foregoing amendments, is identical with the resolution, House Joint Resolution 344, which was favorably reported by this committee in the Seventy-Third Congress, second session, and passed the House (under suspension of the rules) on June 4, 1934, was reported favorably by the Senate Committee on Territories and Insular Affairs on June 8, 1934 (S. Rept. 1336), but failed to receive consideration by the Senate prior to adjournment.
The resolution is intended to provide an expedient method for the enforcement of real estate liens under mortgages heretofore or hereafter taken by the Federal Land Bank of Baltimore or in the name of the Land Bank Commissioner on behalf of the Federal Farm Mortgage Corporation, in cases where the United States has a subordinate lien through loans made by the Puerto Rican Hurricane Relief Commission under provisions of the joint resolution approved December 21, 1928.
Several thousand loans were made by the Federal Land Bank of Baltimore to farmers in the island of Puerto Rico before the enactment of the legislation creating the Puerto Rican Hurricane Relief Commission. In more than 1,400 cases the loans made by that Commission are secured by second mortgages, which constitute liens subordinate and junior to the land-bank mortgages. It is legally impossible for the Federal Land Bank to institute any proceedings which will result in giving it clear title to these properties unless the United States gives its express consent to an adjudication of its liens.
The so-called "Graham Act" (46 Stat. L. 1528, Mar. 4, 1931) gave express consent to the adjudication of liens of this type in State courts and in the United States district courts, but did not, in its terms, consent to such adjudication in the insular courts of Puerto Rico. As a result, the right of such courts to adjudicate the liens of the United States was brought into question by the United States Government. Notwithstanding the fact that the United States has recently dismissed its appeal from a decision of the Supreme Court of Puerto Rico which held that the term "State court", as used in the Graham Act, includes the insular courts of Puerto Rico, there is still a possibility that the right of such courts to adjudicate liens of the United States may be brought into question.
The right of the United States District Court for Puerto Rico to adjudicate any of these liens where the amount involved is less than
$3,000 is also subject to serious technical objection. Moreover, the cumbersome and expensive equity procedure in that court, and the redemption period of 1 year to which the United States would be entitled under proceedings in that court, make recourse to it for foreclosure purposes practically prohibitive even if the jurisdictional question were not presented. Because property which has been abandoned or which is operated negligently in the island of Puerto Rico deteriorates very rapidly, the existence of a period of redemption is abnormally detrimental to the interests of mortgagees. Consequently no period of redemption is provided for in this legislation. Since the only expedient method available to the Federal Land Bank of Baltimore to protect its rights in the island of Puerto Rico is through the insular courts, it has been practically without protection in this regard since the creation of the liens in favor of the Puerto Rican Hurricane Relief Commission. This situation has prevented the making of new loans in Puerto Rico by the Federal Land Bank, either on its own behalf or on behalf of the Land Bank Commissioner, and has created a bad psychological effect upon many Puerto Rican borrowers who are able to pay but who have failed to do so. It has also prevented the Federal land bank from enforcing its rights in cases where borrowers are committing malicious waste, or where they have abandoned their farms and permitted the land to go into jungle. The committee has been advised that the Farm Credit Administration, which exercises general supervisory authority over the Federal land banks, does not desire this legislation for the purpose of enabling the Federal land bank to foreclose mortgages on land in Puerto Rico except in cases where such action is fully justified under a reasonable and liberal policy; but that this legislation is considered necessary in the development on the part of the Federal Land Bank of Baltimore and the Land Bank Commissioner of a sound lending program for the island of Puerto Rico.
The Federal Land Bank of Baltimore is also experiencing difficulty in extending to its borrowers the benefits of loan reamortizations, due to the fact the Puerto Rican Hurricane Relief Commission has no apparent authority to agree that such reamortizations will not impair the status of the land-bank mortgages as prior liens. Hence, this resolution also contains a provision expressly authorizing the Hurricane Relief Commission to waive any priorities which may accrue to it by virtue of reamortization agreements entered into between the Federal Land Bank of Baltimore and its borrowers, so that the bank may be safeguarded against the probability of the lien of the Hurricane Relief Commission becoming first and paramount in such cases. The resolution will add to the "Joint resolution for the relief of Porto Rico", approved December 21, 1928, a new section, no. 7.
Subsection (a) of such new section confers jurisdiction upon the insular courts of the Island of Puerto Rico in mortgage foreclosure cases brought by the Federal Land Bank of Baltimore or the Federal Farm Mortgage Corporation where the United States, through the Hurricane Relief Commission, has or claims a lien. The Federal Farm Mortgage Corporation is included because, under section 3 of the Federal Farm Mortgage Corporation Act, approved January 31, 1934, all mortgages taken by the Land Bank Commissioner prior to that time were transferred to the Corporation and loans made by the Land Bank Commissioner after that date are made by him on
behalf of that Corporation. This subsection provides for the United States the same rights as those provided in the so-called "Graham Act", entitled "An act to permit the United States to be a party defendant in certain cases", enacted March 4, 1931, except that the United States is given no period of redemption. This subsection provides, in addition, that if the Federal Land Bank of Baltimore or the Federal Farm Mortgage Corporation acquires any property through action brought under its provisions, any amounts over and above the investment of the land bank or the Corporation, which are received upon the ultimate disposition of such property, shall be paid to the Hurricane Relief Commission, to the extent of its lien.
Subsection (b) gives authority to the Hurricane Relief Commission to waive any priorities it may have or claim which arise out of reamortization agreements entered into between the Federal Land Bank of Baltimore and any of its borrowers who are also indebted to the commission.
Subsection (c) provides a method of extinguishing the lien of the Hurricane Relief Commission without judicial proceedings. In cases where the proceeds from the sale of the property would be insufficient to satisfy in whole or in part the lien of the United States or where the claim of the United States has been satisfied, or where by the lapse of time or otherwise it has become unenforceable, the commission may so report to the Comptroller General, who may certify that the lien of the United States has been released. This subsection contains substantially the same provisions as those in subsection (a) respecting the matter of payments to the Hurricane Relief Commission, to the extent of its lien, if land acquired under this subsection by the Federal land bank or the Federal Farm Mortgage Corporation is subsequently resold at more than the amount of the investment in such land.
Subsection (d) defines the terms "Puerto Rican Hurricane Relief Commission", "Hurricane Relief Commission", and "Commission" for the purposes of this section.
EXPLANATION OF AMENDMENTS
The committee amendments to this resolution strike out the references to the Land Bank Commissioner, all of which are unnecessary and inappropriate. The provisions of the Federal Farm Mortgage Corporation Act, approved January 31, 1934, vested in the Federal Farm Mortgage Corporation the legal and equitable title to all mortgages taken by the Land Bank Commissioner prior to that time and also vests in the Corporation the legal and equitable title to all mortgages taken subsequent to that date by the Commissioner on behalf of the Corporation. These provisions make the Corporation the real party in interest; and consequently, in giving effect thereto, it is the practice of the officers of the Farm Credit Administration who are charged with its administration not to join the Commissioner with the Corporation in any suit affecting security held by it.
The amendments to lines 3 to 4 on page 2, 6 to 7 on page 2, 21 to 23 on page 4, and 6 to 8 on page 6 (except as otherwise mentioned) are clarifying and do not change the substance. The new paragraph added at the end of the resolution is also clarifying.
The following letter was addressed to the Chairman of the Committee on Insular Affairs by Gov. W. I. Myers, of the Farm Credit Administration:
Hon. JOHN MCDUFFIE,
FARM CREDIT ADMINISTRATION,
Chairman Committee on Insular Affairs,
House of Representatives.
DEAR MR. MCDUFFIE: You will doubtless recall that during the last session of Congress, at the request of the Farm Credit Administration, you introduced a measure (H. J. Res. 344) intended to provide an expedient method for the enforcement of real-estate liens in Puerto Rico under mortgages heretofore or hereafter taken by the Federal Land Bank of Baltimore and by the Land Bank Commissioner and the Federal Farm Mortgage Corporation in cases where the United States has a subordinate lien through loans made by the Puerto Rican Hurricane Relief Commission under the provisions of the joint resolution approved December 31, 1928. This resolution was reported favorably in both the House and the Senate and passed the House, but was not voted on by the Senate due to the congested condition of the calendar at the close of the session.
The procedural difficulties which this legislation was intended to remedy still exist, notwithstanding the fact that the United States has recently dismissed its appeal from the decision of the Supreme Court of Puerto Rico, which held that the term "State court" as used in the Graham Act, included the insular courts of Puerto Rico. The Farm Credit Administration is, therefore, very desirous of seeing this legislation adopted during the present session of Congress. As you know, the Secretary of War, the Secretary of the Treasury, and the Secretary of Agriculture, constituting the Puerto Rican Hurricane Relief Commission, have signed an order supporting the Farm Credit Administration in its attempt to secure this legislation, or legislation of a like nature. It is our suggestion that the proposed legislation be introduced in the Seventy-fourth Congress in a form identical to House Joint Resolution No. 344. The comments contained in House Report No. 1717 could, with some slight revision, be used in connection with the reintroduced proposal.
I sincerely recommend this proposed legislation for the consideration of your committee and trust that you will find it possible to take the matter up at an early date. We shall be pleased to furnish any additional information and assistance which you may desire.
I am enclosing for your convenient reference a copy of House Joint Resolution No. 344 and a copy of House Report No. 1717.
W. I. MYERS, Governor. Likewise, the following letter was sent to the present Chairman of the Committee on Insular Affairs by Gov. W. I. Myers, of the Farm Credit Administration, urging consideration of House Joint Resolution 129:
Hon. LEO KOCIALKOWSKI,
FARM CREDIT ADMINISTRATION,
Chairman Committee on Insular Affairs,
House of Representatives.
DEAR MR. KOCIALKOWSKI: I refer to H. J. Res. 129, introduced by Congressman McDuffie on January 23, 1935, which pertains to the foreclosure of mortgages on properties in Puerto Rico on which the Puerto Rican Hurricane Relief Commission holds a junior lien.
An extreme emergency exists relative to the situation which this legislation is intended to remedy. As you are aware, the Federal Land Bank of Baltimore is practically powerless to act to protect its interest in properties in Puerto Rico on which it holds first mortgages and on which the Puerto Rican Hurricane Relief Commission holds junior liens, unless and until the Congress gives the consent of the United States to be made a party defendant in any suit brought for the purpose of securing an adjudication respecting such junior liens. In many instances the debtor, realizing this fact, has rented his farm and the tenant is gradually destroying the assets. There are cases, also, where the debtor himself
is doing the same thing. Furthermore, many debtors have become lax in making payments and have permitted delinquencies to mount up, although many of them can well afford to make the payment.
I trust that you will find it possible to take this matter up with your committee at an early date. I shall appreciate it, also, if you will notify us as to the time when the matter will come before the committee and will permit us to have representatives present at the hearing in order that we may suggest a technical amendment to the resolution.
W. I. MYERS, Governor.