A-86198, MAY 25, 1937, 16 COMP. GEN. 1034

A-86198: May 25, 1937

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LIENS - PURCHASE OR DISCHARGE - PRIVATE PROPERTY ASSIGNED TO FEDERAL HOUSING ADMINISTRATION FEDERAL HOUSING ADMINISTRATION FUNDS ARE NOT AVAILABLE FOR THE PURCHASE OR DISCHARGE OF PRIOR LIENS UPON REAL OR PERSONAL PROPERTY ACQUIRED BY ASSIGNMENT FROM LENDING INSTITUTIONS UPON PAYMENT TO SUCH INSTITUTIONS OF INSURANCE ON DEFAULTED OBLIGATIONS SO SECURED. READS IN PART AS FOLLOWS: "THE ADMINISTRATOR * * * MAY MAKE SUCH EXPENDITURES * * * AS ARE NECESSARY TO CARRY OUT THE PROVISIONS OF THIS TITLE AND TITLES II AND III. WITHOUT REGARD TO ANY OTHER PROVISIONS OF LAW GOVERNING THE EXPENDITURE OF PUBLIC FUNDS * * *" AN EXPRESSION OF YOUR OPINION IS REQUESTED AS TO WHETHER. THE ADMINISTRATOR IS AUTHORIZED TO MAKE DISBURSEMENTS FOR THE PURPOSE OF PROTECTING LIENS IN SUCH SITUATIONS AS HAVE BEEN OUTLINED IN THIS LETTER.

A-86198, MAY 25, 1937, 16 COMP. GEN. 1034

LIENS - PURCHASE OR DISCHARGE - PRIVATE PROPERTY ASSIGNED TO FEDERAL HOUSING ADMINISTRATION FEDERAL HOUSING ADMINISTRATION FUNDS ARE NOT AVAILABLE FOR THE PURCHASE OR DISCHARGE OF PRIOR LIENS UPON REAL OR PERSONAL PROPERTY ACQUIRED BY ASSIGNMENT FROM LENDING INSTITUTIONS UPON PAYMENT TO SUCH INSTITUTIONS OF INSURANCE ON DEFAULTED OBLIGATIONS SO SECURED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, FEDERAL HOUSING ADMINISTRATION, MAY 25, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 11, 1937, AS FOLLOWS:

IN CARRYING OUT THE PROVISIONS OF TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, THE FEDERAL HOUSING ADMINISTRATOR FROM TIME TO TIME BECOMES THE HOLDER OF LIENS UPON REAL OR PERSONAL PROPERTY, SUCH AS MORTGAGES, CHATTEL MORTGAGES, DEEDS OF TRUST, AND SIMILAR SECURITY DEVICES GIVEN TO SECURE ADVANCES MADE BY LENDING INSTITUTIONS INSURED PURSUANT TO THE PROVISIONS OF THE ACT. TITLE TO SUCH SECURITY BECOMES VESTED IN THE ADMINISTRATOR UPON PAYMENT BY HIM OF INSURANCE AS TO DEFAULTED SECURED OBLIGATIONS AND THE SIMULTANEOUS ASSIGNMENT TO HIM OF THE SECURITY TAKEN BY THE LENDING INSTITUTION. IN MANY INSTANCES, THE SECURITY SO HELD BY THE ADMINISTRATOR REPRESENTS A JUNIOR LIEN, SUCH AS A SECOND MORTGAGE OR A JUDGMENT SECURED SUBSEQUENT TO THE RECORDING OF A FIRST MORTGAGE, MECHANIC'S LIEN AND THE LIKE, IN FAVOR OF OTHER PARTIES.

IN ORDER TO PROTECT THE SECURITY HELD BY THE ADMINISTRATOR, IT MAY BECOME DESIRABLE TO PURCHASE OR OTHERWISE DISCHARGE SUCH PRIOR LIENS.

SECTION 1 OF TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, READS IN PART AS FOLLOWS:

"THE ADMINISTRATOR * * * MAY MAKE SUCH EXPENDITURES * * * AS ARE NECESSARY TO CARRY OUT THE PROVISIONS OF THIS TITLE AND TITLES II AND III, WITHOUT REGARD TO ANY OTHER PROVISIONS OF LAW GOVERNING THE EXPENDITURE OF PUBLIC FUNDS * * *"

AN EXPRESSION OF YOUR OPINION IS REQUESTED AS TO WHETHER, UNDER THE ABOVE -QUOTED SECTION OF THE NATIONAL HOUSING ACT OR OTHERWISE, THE ADMINISTRATOR IS AUTHORIZED TO MAKE DISBURSEMENTS FOR THE PURPOSE OF PROTECTING LIENS IN SUCH SITUATIONS AS HAVE BEEN OUTLINED IN THIS LETTER.

THE QUOTED PROVISION OF SECTION 1 OF TITLE I OF THE NATIONAL HOUSING ACT, 48 STAT. 1246, HAS REFERENCE TO THE ADMINISTRATION OF THE ACT AND HAS NO APPLICATION TO THE QUESTION PRESENTED HERE. IN THE LAST SENTENCE OF SAID SECTION 1, THE EXPENDITURES REFERRED TO THEREIN ARE CLASSIFIED AS ,COMPENSATION, EXPENSES, AND ALLOWANCES.' THE OPERATIONS AUTHORIZED BY SAID SECTION 1 ARE SET OUT IN SECTIONS 2 AND 3 OF TITLE I. OTHER OPERATIONS ARE PROVIDED FOR IN TITLES II AND III.

WHILE BY THE ACT OF APRIL 3, 1936, 49 STAT. 1187, 1188, THE ADMINISTRATOR IS GIVEN THE POWER, UNDER REGULATIONS TO BE APPROVED BY THE SECRETARY OF THE TREASURY, TO ASSIGN, SELL, OR OTHERWISE DISPOSE OF ANY EVIDENCE OF DEBT, CONTRACT, CLAIM, PROPERTY, OR SECURITY ASSIGNED TO OR HELD BY HIM IN CONNECTION WITH OPERATIONS UNDER TITLE I OF THE ACT, A CAREFUL EXAMINATION OF THE PROVISIONS OF THE NATIONAL HOUSING ACT AND ITS AMENDMENTS HAS FAILED TO DISCLOSE ANY PROVISION OF LAW AUTHORIZING IN EXPRESS TERMS OR BY NECESSARY IMPLICATION THE PURCHASE OR DISCHARGE OF PRIOR LIENS IN ORDER TO PROTECT INFERIOR LIENS WHICH MAY HAVE BECOME THE PROPERTY OF THE FEDERAL HOUSING ADMINISTRATION AS A RESULT OF AUTHORIZED INSURANCE, LOANS, OR ADVANCES. IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR APPROPRIATED FUNDS MAY NOT BE DISBURSED FOR THE PURPOSE OF PROTECTING LIENS IN SUCH SITUATIONS AS THOSE OUTLINED IN YOUR LETTER. THE CONGRESS HAVING MADE NO SUCH PROVISION FOR PROTECTING JUNIOR LIENS--- WHICH PROTECTION, IN MOST INSTANCES, WOULD SERVE ONLY TO POSTPONE EVENTUAL LOSS- -- IT WOULD APPEAR THAT THE FUNDS MADE AVAILABLE TO THE ADMINISTRATION MAY NOT BE USED FOR SUCH PURCHASE OR DISCHARGE OF THE PRIOR LIENS.