B-130891, APRIL 4, 1957, 36 COMP. GEN. 697

B-130891: Apr 4, 1957

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PROVIDED THE ACTION IS NECESSARY TO TITLE I AND IS IN THE BEST INTERESTS OF THE GOVERNMENT. THAT THE NOTE AND MORTGAGE WERE ACQUIRED THROUGH PAYMENT OF A LOSS TO AN INSURED FINANCIAL INSTITUTION UNDER THE PROVISIONS OF TITLE I OF THE NATIONAL HOUSING ACT. YOU ADVISE THAT THE TITLE I PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION IS SELF-SUPPORTING AND RECEIVES FUNDS FROM PREMIUMS PAID BY INSURED LENDING INSTITUTIONS BUT THAT AUTHORIZATION BY CONGRESS TO EXPEND THESE FUNDS IS REQUIRED. IT IS PROBABLE THAT THE FEDERAL HOUSING ADMINISTRATION COULD ULTIMATELY REALIZE ENOUGH FROM THE PROPERTY IN QUESTION TO REIMBURSE HIM FOR THE AMOUNT DUE ON THE TITLE I LOAN AND FOR ALL EXPENSES INCLUDING THE AMOUNT NECESSARY TO REDEEM THE PROPERTY.

B-130891, APRIL 4, 1957, 36 COMP. GEN. 697

HOUSING - LOANS - FORECLOSURE TO PROTECT JUNIOR LIEN IN VIEW OF THE BROAD AUTHORITY VESTED IN THE FEDERAL HOUSING COMMISSIONER TO CARRY OUT THE PROGRAM IN TITLE I OF THE NATIONAL HOUSING ACT, 12 U.S.C. 1702 ET SEQ., THE COMMISSIONER MAY REDEEM REAL PROPERTY ON WHICH THE GOVERNMENT HOLDS A SECOND MORTGAGE, PROVIDED THE ACTION IS NECESSARY TO TITLE I AND IS IN THE BEST INTERESTS OF THE GOVERNMENT, AND HE MAY EXPEND FUNDS AVAILABLE FOR TITLE I PURPOSES TO ACCOMPLISH THE REDEMPTION. COMP. GEN. 1034, MODIFIED.

TO THE ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY, APRIL 4, 1957:

ON FEBRUARY 28, 1957, YOU REQUESTED OUR DECISION WHETHER THE FEDERAL HOUSING COMMISSIONER HAS AUTHORITY TO ADVANCE THE FUNDS NECESSARY TO REDEEM CERTAIN REAL PROPERTY UPON WHICH THE COMMISSIONER HOLDS A SECOND MORTGAGE.

YOUR LETTER INDICATES THAT THE COMMISSIONER HOLDS A SECOND MORTGAGE ON A FARM IN NORTH DAKOTA AS SECURITY FOR A NOTE HAVING A PRINCIPAL BALANCE THEREON OF $1,612.15, AND THAT THE NOTE AND MORTGAGE WERE ACQUIRED THROUGH PAYMENT OF A LOSS TO AN INSURED FINANCIAL INSTITUTION UNDER THE PROVISIONS OF TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1702-1706. YOU ADVISE THAT A FIRST MORTGAGE ON THE FARM HAS BEEN FORECLOSED AND THAT THE UNITED STATES ATTORNEY FOR THE DISTRICT OF NORTH DAKOTA ADVISES THAT THE FEDERAL HOUSING COMMISSIONER HAS THE RIGHT TO REDEEM THIS PROPERTY. YOU SAY THAT THE AMOUNT NECESSARY TO REDEEM WOULD BE $4,538.45 PLUS SMALL ADDITIONAL AMOUNTS FOR INTEREST AND POSSIBLE TAXES.

YOU REPORT THAT THE PROPERTY HAS BEEN EXAMINED BY THE NORTH DAKOTA OFFICE OF THE FEDERAL HOUSING ADMINISTRATION AND THAT THE DISTRICT DIRECTOR OF THE ADMINISTRATION REPORTS THAT THE PROPERTY HAS A REASONABLE VALUE OF $9,500 AND THAT THE CHIEF VALUATOR IN THE FEDERAL HOUSING ADMINISTRATION OFFICE RECOMMENDS THAT THE COMMISSIONER EXERCISE HIS RIGHT OF REDEMPTION. YOU ADVISE THAT THE TITLE I PROGRAM OF THE FEDERAL HOUSING ADMINISTRATION IS SELF-SUPPORTING AND RECEIVES FUNDS FROM PREMIUMS PAID BY INSURED LENDING INSTITUTIONS BUT THAT AUTHORIZATION BY CONGRESS TO EXPEND THESE FUNDS IS REQUIRED. YOU SAY THAT EVEN WITH THE UNCERTAINTIES SURROUNDING THE SALE OF FARM LAND, IT IS PROBABLE THAT THE FEDERAL HOUSING ADMINISTRATION COULD ULTIMATELY REALIZE ENOUGH FROM THE PROPERTY IN QUESTION TO REIMBURSE HIM FOR THE AMOUNT DUE ON THE TITLE I LOAN AND FOR ALL EXPENSES INCLUDING THE AMOUNT NECESSARY TO REDEEM THE PROPERTY.

APPARENTLY YOUR DOUBT IN THE MATTER ARISES BECAUSE OF OUR DECISION OF MAY 25, 1937, A-86198, 16 COMP. GEN. 1034, IN WHICH WE HELD, QUOTING FROM THE SYLLABUS:

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.

THE NATIONAL HOUSING ACT, AS AMENDED, DOES NOT SPECIFICALLY AUTHORIZE THE FEDERAL HOUSING ADMINISTRATION TO REDEEM REAL PROPERTY TO PROTECT A JUNIOR LIEN IN A CASE WHERE THE PRIOR LIEN HOLDER HAS FORECLOSED HIS MORTGAGE. HOWEVER, IT DOES VEST BROAD AUTHORITY IN THE FEDERAL HOUSING COMMISSIONER. THUS, SECTION 1 OF TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1702, PROVIDES, IN PART, THAT:

* * * THE COMMISSIONER * * * MAY MAKE SUCH EXPENDITURES * * * AS ARE NECESSARY TO CARRY OUT THE PROVISIONS OF THIS SUBCHAPTER ( TITLE I) AND SUBCHAPTERS II, III, VI-VIII, AND X OF THIS CHAPTER, WITHOUT REGARD TO ANY OTHER PROVISIONS OF LAW GOVERNING THE EXPENDITURE OF PUBLIC FUNDS. * * * ( ITALICS ADDED.) THAT SECTION ALSO AUTHORIZES THE COMMISSIONER TO SUE AND BE SUED IN ANY COURT OF COMPETENT JURISDICTION, STATE OR FEDERAL. SECTION 2 (C) (2) OF TITLE I, 12 U.S.C. 1703 (C) (2), AUTHORIZES THE COMMISSIONER TO DEAL WITH, COMPLETE, RENT, ETC., ANY REAL PROPERTY CONVEYED TO "OR OTHERWISE ACQUIRED BY HIM" AND TO PURSUE TO FINAL COLLECTION BY WAY OF COMPROMISE "OR OTHERWISE," ALL CLAIMS AGAINST MORTGAGORS ASSIGNED BY MORTGAGEES TO THE COMMISSIONER IN CONNECTION WITH SUCH REAL PROPERTY BY WAY OF DEFICIENCY OR OTHERWISE.

IT IS CLEAR FROM THE ABOVE QUOTED PORTIONS OF SECTION 2 THAT THE COMMISSIONER HAS THE AUTHORITY TO ACQUIRE PROPERTY IN CONNECTION WITH CARRYING OUT THE PURPOSES OF TITLE I AND TO EFFECT COLLECTION OF CLAIMS AGAINST MORTGAGORS BY COMPROMISE "OR OTHERWISE.' SECTION 2, (12 U.S.C. 1702 (G) (, ALSO AUTHORIZES AND DIRECTS THE COMMISSIONER TO MAKE SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO CARRY OUT THE PROVISIONS OF TITLE I.

IN CONNECTION WITH THE REDEMPTION OF REAL PROPERTY, SECTION 505 OF THE ACT OF APRIL 20, 1950, 64 STAT. 81, 12 U.S.C. 1701K, PROVIDES AS FOLLOWS:

THE RIGHT TO REDEEM PROVIDED FOR BY SECTION 2410 (C) OF TITLE 28, SHALL NOT ARISE IN ANY CASE IN WHICH THE SUBORDINATE LIEN OR INTEREST OF THE UNITED STATES DERIVES FROM THE ISSUANCE OF INSURANCE UNDER THIS CHAPTER ( NATIONAL HOUSING ACT, AS AMENDED), OR THE ISSUANCE OF GUARANTIES OR INSURANCE UNDER THE SERVICEMEN'S READJUSTMENT ACT OF 1944, AS AMENDED.

IN VIEW OF THE BROAD AUTHORITY GRANTED THE FEDERAL HOUSING COMMISSIONER BY THE ABOVE-QUOTED PORTIONS OF SECTIONS 1 AND 2 OF TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, WE SEE NO LEGAL OBJECTION TO THE COMMISSIONER'S EXPENDING FUNDS TO REDEEM REAL PROPERTY TO PROTECT A JUNIOR LIEN HELD BY HIM ON SUCH PROPERTY PROVIDED (1) HE DETERMINES SUCH ACTION IS NECESSARY TO CARRY OUT THE PROVISIONS OF TITLE I AND THAT SUCH REDEMPTION IS IN THE BEST INTERESTS OF THE GOVERNMENT (CF.34 COMP. GEN. 47), AND (2) THAT THE REDEMPTION IS NOT PURSUANT TO 28 U.S.C. 2410 (C).

IT APPEARS FROM THE FILE IN THE ZIMMERMAN CASE THAT THE RIGHT OF REDEMPTION WHICH IS PROPOSED TO BE EXERCISED IS A RIGHT ARISING PURSUANT TO THE STATUTES OF THE STATE OF NORTH DAKOTA ( NORTH DAKOTA REVISED CODE OF 1943, VOLUME 3, TITLE 28, JUDICIAL PROCEDURE CIVIL, SECTIONS 2401 AND 2402, AND TITLE 32, JUDICIAL REMEDIES, CHAPTER 32, SECTION 1918). HENCE, IT DOES NOT APPEAR THAT 12 U.S.C. 1701K WOULD PRECLUDE REDEMPTION IN THE INSTANT CASE. THEREFORE, AND IN VIEW OF WHAT HAS BEEN STATED ABOVE, IF, IN THE INSTANT CASE (OR IN SIMILAR CASES), THE FEDERAL HOUSING COMMISSIONER DETERMINES IT NECESSARY TO REDEEM THE PROPERTY IN QUESTION TO CARRY OUT THE PROVISIONS OF TITLE I, AND THAT THE REDEMPTION IS IN THE BEST INTERESTS OF THE GOVERNMENT, WE WOULD NOT OBJECT TO THE EXPENDITURE OF FUNDS MADE AVAILABLE TO CARRY OUT TITLE I PROVISIONS TO DO SO. TO THE EXTENT THAT 16 COMP. GEN. 1034 IS CONTRARY TO THE FOREGOING, IT NO LONGER NEED BE FOLLOWED.