An Act to amend certain provisions of title XI of the Merchant Marine Act, 1936, as amended, to facilitate private financing of new ship construction, and for other purposes
PL 83-781 (H.R.9987), enacted 09/03/1954

68 S T A T . ] 
PUBLIC LAW 7 8 1 - S E P T . 3, 1954 
1267 
interest: Provided^ That leases to nonprofit organizations for park 
or recreational purposes may be granted at reduced or nominal con-
siderations in recognition of the public service to be rendered in uti-
lizing the leased premises: Provided further^ That preference shall 
be given to Federal, State, or local governmental agencies, and licenses, 
or leases where appropriate, may be granted without monetary con-
siderations, to such agencies for the use of all or any portion of a res-
ervoir area for any public purpose, when the Secretary of the Army 
determines such action to be in the public interest, and for such periods 
of time and upon such conditions as he may find advisable: Arid 'pro-
vided fv/rther^ That in any such lease or license to a Federal, State, or 
local governmental agency which involves lands to be utilized for the 
development and conservation of fish and wildlife, forests, or other 
natural resources, the licensee or lessee may be authorized to cut tim-
ber and harvest crops as may be necessary to further such beneficial 
uses and to collect and utilize the proceeds of any sales of timber and 
crops in the development, conservation, maintenance and utilization 
of such lands. Any balance of proceeds not so utilized shall be paid 
to the United States at such time or times as the Secretary of the Army 
may determine appropriate. The water areas of all such reservoirs 
shall be open to public use generally, without charge, for boating, 
swimming, bathing, fishing, and other recreational purposes, and 
ready access to and exit from such water areas along the shores of 
such reservoirs shall be maintained for general public use, when such 
use is determined by the Secretary of the Army not to be contrary to 
the public interest, all under such rules and regulations as the Secre-
tary of the Army may deem necessary. No use of any area to which 
this section applies shall be permitted which is inconsistent with the 
laws for the protection of fish and game of the State in which such area 
is situated. All moneys received by the United States for leases or 
privileges shall be deposited in the Treasury of the United States as 
miscellaneous receipts. 
SEC. 210. Title II may be cited as the "Flood Control Act of 1954". 
Approved September 3, 1954. 
Short title. 
Public Law 781 
CHAPTER 1265 
AN ACT 
September 3, 1954 
To amend certain provisions of title XI of the Merchant Marine Act, 1936, as 
[H. R. 9987] 
amended, to facilitate private financing of new ship construction, and for 
other purposes. 
Be it ena.cted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled. That section 1101 
of the Merchant Marine Act, 1986, as amended (U. S. C, title 46, sec. 
" stat. 969. 
1271), is hereby amended to read as follows: 
"SEC. 1101. As used in this title— 
"(a) The term 'mortgage' includes a preferred mortgage as defined 
"Mortgage." 
in the Ship Mortgage Act, 1920, as amended, and a mortgage which 
46us^c'9'84°' 
will become a preferred mortgage when recorded and endorsed as re-
quired by the Ship Mortgage Act, 1920, as amended; 
"(b) The term 'loan' includes any loan or advance of credit other 
"Loan." 
than a mortgage loan; 
"(c) The term 'vessel' includes all types of passenger, cargo, and 
"Vessei." 
combination passenger-cargo carrying vessels, tankers, tugs, towboats, 
barges, and clredges documented under the laws of the United States, 
and fishing vessels owned by citizens of the United States; 
1268 
PUBLIC LAW 781-SEPT. 3, 1954 
[68 S T A T . 
'Mortgagee^ 
"Lender." 
•Mortgagor." 
"Actual cost." 
F e d e r al S h i p 
Mortgage Insurance 
FiuuL 
Authorization of 
Secretary to insure 
mortgage s. 
"(d) The term 'mortgagee' includes the original maker of a loan 
secured by a mortgage and his ^successors and assigns, except that in 
the case of a mortgage involving a trust indenture and an issue of 
bonds or notes thereunder, it means the trustee designated in such 
trust indenture and his successors and assigns as trustee, but does not 
include the holders of the bonds or notes issued under such trust in-
denture ; and the term 'lender' includes the original maker of any loan 
or advance of credit other than a loan secured by a mortgage, and 
his successors and assigns, except that in the case of a loan or advance 
of credit involving a trust indenture and an issue of bonds or notes 
thereunder, it means the trustee designated in such trust indenture and 
his successors and assigns as trustee, but does not include the holders 
of the bonds or notes issued under such trust indenture; 
"(e) The term 'mortgagor' includes the original borrower under 
a mortgage and his successors and assigns approved by the Commis-
sion; and 
"(f) The term 'actual cost' of a vessel as of any specified date means 
the aggregate as determined by the Secretary of Commerce of (i) all 
amounts paid by or for the account of the mortgagor or borrower on 
or before that date, and (ii) all amounts which the mortgagor or bor-
rower is then obligated to pay from time to time thereafter, for the 
construction, reconstruction or reconditioning (including designing, 
inspecting, outfitting, and equipping) of such vessel: Provided^ That 
in no event, except for certain special purpose vessels as provided for 
in subsections (a) and (b) of section 1103 (46 U. S. C. 1273), shall 
the Secretary of Commerce pay as insurance under this title an 
amount in excess of 90 per centum of 75 per centum, or 90 per centum 
of 87% per centum, as the case may be, of the amount paid by or for 
the account of the mortgagor or borrower for the construction, recon-
struction, or reconditioning (including designing, inspecting, outfit-
ting, and equipping) of such vessel." 
SEC. 2. Section 1102 (46 U. S. C. 1272) is amended to read as fol-
lows: 
"There is hereby created a Federal Ship Mortgage Insurance Fund 
(hereinafter referred to as the 'fund') which shall be used by the Sec-
retary of Commerce as a revolving fund for the purpose of carrying 
out the provisions of this title, and there shall be allocated to such fund 
the sum of $1,000,000 out of funds made available to the Secretary of 
Commerce under the appropriation authorized by section 1109 (46 
U. S. C. 1279). Moneys in the fund shall be deposited in the Treas-
ury of the United States to the credit of the fund or invested in bonds 
or other obligations of, or guaranteed as to principal and interest by, 
the United States." 
SEC. 3. Section 1103 (46 U. S. C. 1273) is amended to read as fol-
lows: 
"(a) The Secretary of Commerce, upon application by the mort-
gagor, is authorized to insure as hereinafter provided the interest on 
and 90 per centum of the unpaid balance of the principal of, any mort-
gage offered to him which is eligible for insurance as hereinafter pro-
vided and, upon such terms as the Secretary of Commerce may pre-
scribe, is authorized to make commitments to insure any such mort-
gage prior to the date of execution or disbursement thereon: Pro-
vided^ That in the case of special purpose vessels certified by the Sec-
retary of Defense to be essential to national defense, the Secretary 
of Commerce may insure 100 per centum of the principal of and inter-
est on any such mortgage eligible for insurance as hereinafter pro-
vided and upon such terms as the Secretary of Commerce may pre-
scribe. 
68 S T A T . ] 
PUBLIC LAW 781-SEPT. 3, 1954 
1269 
Instirance 
c o n -
tracts. 
Pledge of U. S. 
A g g r e g a t e un-
paid 
p r i n c i p a l . 
Eligibility. 
"(b) The Secretary of Commerce, upon application by the bor-
rower, is authorized to insure as hereinafter provided the interest on 
and 90 per centum of the unpaid balance of the principal of, any loan 
offered to him which is eligible for insurance as hereinafter provided 
and, upon such terms as the Secretary of Commerce may prescribe, 
is authorized to make commitments to insure any such loan prior to 
the date of execution or disbursement thereon: Provided^ That in the 
case of special purpose vessels certified by the Secretary of Defense 
to be essential to national defense, the Secretary of Commerce may 
insure 100 per centum of the principal of and interest on any such 
loan eligible for insurance as hereinafter provided and upon such 
terms as the Secretary of Commerce may prescribe. 
"(c) Each insurance contract made under this section shall run to 
the mortgagee or lender and be for the benefit of such mortgagee or 
lender and the holders of the obligations secured by the mortgage or 
evidencing the loan, and if the mortgagee or lender is a trustee under 
a trust indenture, for the benefit of the holders of the bonds or notes 
issued under such trust indenture. 
"(d) The faith of the United States is solemnly pledged to the 
payment of the interest on and 90 per centum of the unpaid balance 
of the principal amount of each mortgage and loan insured under this 
title. 
"(e) The aggregate unpaid principal amount of the mortgages 
and loans insured under this section and outstanding at any one time Hmitationl 
shall not exceed $1,000,000,000." 
SEC. 4. Section 1104 (46 U. S. C. 1274) is amended to read as 
follows: 
"(a) To be eligible for insurance under this title a mortgage, 
excepting as otherwise provided in section 1106 (46 U. S. C. 1276)— 
"(1) shall have a mortgagee approved by the Secretary of 
Commerce as responsible and able to service the mortgage prop-
erly; and a mortgagor approved by the Secretary of Commerce 
as possessing the ability, experience, financial resources, and other 
qualifications necessary to the adequate operation and mainte-
nance of the mortgaged property; 
"(2) shall involve an obligation in a principal amount which 
does not exceed 75 per centum of the actual cost of the vessel, 
such actual cost to be determined by the Secretary of Commerce 
prior to the execution of the mortgage and such determination 
to be conclusive for the purpose of determining the principal 
amount of the mortgage: Provided^ however^ That in the case 
of a vessel, the size and speed of which are approved by the 
Secretary of Commerce, which is eligible for mortgage aid under 
section 509 of this Act and in respect of which the minimum 
downpayment by the mortgagor required by that section would 
be 1 2 ^ per centum of the cost of such vessel, the obligation 
may be in an amount which does not exceed 87^/2 per centum of 
such actual cost; or, in the case of vessels purchased pursuant 
to the Merchant Ship Sales Act of 1946, as amended, for exclusive 
use on the Great Lakes, involve an obligation in a principal "°*« 
amount which does not exceed 75 per centum of the net purchase 
price of such vessels plus 75 per centum of the amounts expended 
for altering, modifying, converting, and equipping such vessels 
in excess of that purchase price, or 75 per centum of the amount 
which the Secretary of Commerce estimates will be the value 
of such vessel so purchased for exclusive use on the Great Lakes 
when the reconstruction or reconditioning is completed, which-
ever is the lesser; 
46 u s e 1159. 
60 Stat. 41. 
SOUSCapp. 1735 
note 
1270 
PUBLIC LAW 781-SEPT. 3, 1954 
[68 STAT. 
"(3) shall secure bonds, notes, or other obligations having 
maturity dates satisfactory to the Secretary of Commerce but not 
to exceed twenty years from the date of its execution; 
"(4) shall contain amortization provisions satisfactory to the 
Secretary of Commerce requiring periodic payments by the 
mortgagor; 
"(5) shall secure bonds, notes or other obligations bearing in-
terest (exclusive of premium charges for insurance) at a rate 
not to exceed 5 per centum per annum on the amount of the 
unpaid principal at any time, or not to exceed 6 per centum per 
annum if the Secretary of Commerce finds that in certain areas 
or under special circumstances the mortgage or lending market 
demands it; 
" (6) shall provide, in a manner satisfactory to the Secretary of 
Commerce, for the application of the mortgagor's periodic pay-
ments to amortization of the principal of the mortgage, exclusive 
of the amount allocated to interest; 
"(7) shall contain such terms and provisions with respect to 
the construction, reconstruction, reconditioning, maintenance, 
purchase of a vessel for use on the Great Lakes pursuant to the 
souscapp. 1735 
Merchant Ship Sales Act of 1946, as amended, or operation of 
the property, repairs, alterations, payment of taxes, insurance, 
delinquency charges, revisions, foreclosure proceedings, anticipa-
tion of maturity, additional and secondary liens, and other mat-
ters pertinent to the security as the Secretary of Commerce may 
prescribe; 
"(8) shall secure a loan made to aid in financing, including 
payment of loans previously made to finance, and reimbursement 
of the mortgagor for expenditures previously made for, construc-
tion (including designing, inspecting, outfitting, and equipping) 
46 use 1151 et 
^f vessels under title V of this Act, as amended, or the purchase 
by citizens of the United States of vessels for use on the Great 
^^50 use app. 1735 
Lakcs pursuaut to the Merchant Ship Sales Act of 1946, as 
amended, or the construction, reconstruction, or reconditioning 
(including designing, inspecting, outfitting and equipping), sub-
sequent to the enactment of this title, of vessels owned by citizens 
of the United States which are designed principally for com-
mercial use (a) in the coastwise or intracoastal trade; (b) on the 
Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes 
of the United States; (c) in foreign trade; or (d) in the fishing 
trade or industry; 
"(9) shall provide that the mortgagor shall pay to the mort-
gagee the amount required for the payment of each mortgage 
insurance premium charge at least sixty days before the payment 
of such premium charge to the Secretary of Commerce is due, and 
shall further provide that the failure of the mortgagor to make 
such payment shall be a default under the mortgage; 
"(10) may, in the case of a passenger vessel having the ton-
nage, speed, passenger accommodations and other characteristics 
set forth in title V of this Act, as amended, with the approval of 
the Federal Maritime Board, provide that the sole recourse 
against the mortgagor of the United States as assignee of the 
mortgage for the payment of the principal of, and interest on, 
the mortgage and the bonds, notes or other obligations secured 
thereby shall be limited to repossession of the vessel and the as-
signment of insurance claims and that the obligation of the mort-
gagor for such principal and interest shall be satisfied and dis-
charged by the surrender of the vessel and all right, title and inter-
est therein to the United States: Provided, That the vessel upon 
46 use 1151 et 
aeq. 
68 S T A T . ] 
PUBLIC LAW 781-SEPT. 3, 1954 
1271 
surrender shall be (i) free and clear of all liens and encumbrances 
whatsoever except the lien of the preferred mortgage, (ii) in 
class and (iii) in as good order and condition, ordinary wear and 
tear excepted, as when acquired by the mortgagor, except that 
any deficiencies with respect to freedom from encumbrances, con-
dition and class may, to the extent covered by valid policies of 
insurance, be satisfied by the assignment to the United States of 
claims of the mortgagor under such policies; and 
"(11) shall contain such other provisions as may be agreed 
upon between the mortgagor and mortgagee, which are not in-
consistent with the provisions of the preceding paragraphs of 
this subsection (a) and which are not disapproved by the Sec-
retary of Commerce. 
"(b) To be eligible for insurance under this title a loan— 
"(1) shall be made by a lender approved by the Secretary of 
Commerce to a borrower approved by the Secretary of Com-
merce as possessing the ability, experience, financial resources 
and other qualifications necessary to the adequate operation and 
maintenance of the property; 
"(2) shall be made to aid in financing, including payment of 
loans previously made to finance, and reimbursement of the bor-
rower for expenditures previously made for construction (includ-
ing designing, inspecting, outfitting and equipping) of vessels 
under title V of this Act, as amended, or for the construction, 
reconstruction or reconditioning (including designing, inspect-
ing, outfitting and equipping) subsequent to the enactment of 
this title, of vessels owned by citizens of the United States which 
are designed principally for commercial use (a) in the coastwise 
or intercoastal trade; (b) on the Great Lakes or on bays, sounds, 
rivers, harbors, or inland lakes of the United States; (c) in 
foreign trade; or (d) in the fishing trade or industry-; 
"(3) shall be payable prior to or simultaneously with the exe-
cution of the mortgage; 
"(4) shall provide that no advance shall be made thereunder 
unless the sum of such advance and the principal amount of all 
other advances under insured loans then outstanding at the time 
of said advance shall be less than 75 per centum of the actual cost 
of such vessel, such actual cost to be determined by the Secretary 
of Commerce and such determination to be conclusive for the 
purpose of determining the principal amount of the loan; 
"(5) shall provide that the borrower shall pay to the lender 
the amount required for the payment of each loan insurance 
premium charge at least sixty days before the payment of such 
premium charge to the Secretary of Commerce is due, and which 
shall further provide that the failure of the borrower to make 
such payment shall give the lender the right to mature the loan; 
"(6) shall bear interest at an average interest rate not to ex-
ceed the maximum rate permitted by paragraph (5) of sub-
section (a) of this section; and 
"(7) shall contain such other provisions as may be agreed 
upon between the borrower and the lender which are not incon-
sistent with the provisions of the preceding paragraphs of this 
subsection (b) and which are not disapproved by the Secretary 
of Commerce. 
"(c) No commitment to insure a mortgage or loan shall be made 
by the Secretary of Commerce unless he finds, at or prior to the time 
such commitment is made, that the property or project with respect 
to which the mortgage or loan will be executed will be, in his opinion, 
Loansa 
46 use 
seq. 
1151 fit 
Interests 
Restrictions. 
1272 
PUBLIC LAW 781-SEPT. 3, 1954 
[68 S T A T . 
Authority of Sec-
retary to fix pre-
mium charge* 
Investigation of 
^plications, etc. 
Deposits. 
Defaults. 
economically sound, and no mortgage or loan, unless made pursuant 
to a prior commitment, shall be insured unless the Secretary of Com-
merce finds, at or prior to the time the insurance becomes effective, 
that the property or project with respect to which the mortgage or 
the loan is executed will be in his opinion economically sound. 
"(d) The Secretary of Commerce is authorized to fix a premium 
charge for the insurance of mortgages and loans under this title. In 
the case of any mortgage insured under section 1103 (a) (46 U. S. C. 
1273 (a)), such charge shall not be less than one-half of 1 per centum 
per annum nor more than 1 per centum per annum of the average 
principal amount of the mortgage outstanding. In the case of loans 
insured under section 1103 (b) (46 U. S. C. 1273 (b)), such charge 
shall not be less than one-quarter of 1 per centum per annum nor 
more than one-half of 1 per centum per annum of the average prin-
cipal amount of the loan outstanding. Premium payments shall be 
made when moneys are first advanced under the mortgage or loan 
agreement and on each anniversary date thereafter. 
All such pre-
mium charges shall be computed and shall be payable to the Secretary 
of Commerce under such regulations as the Secretary of Commerce 
may prescribe. 
"(e) The Secretary of Commerce shall charge and collect such 
amounts as he may deem reasonable for the investigation of applica-
tions for insurance, for the appraisal of properties offered for insur-
ance, for the issuance of commitments, and for the inspection of such 
properties during construction, reconstruction, or reconditioning: 
Provided, That such charges shall not aggregate more than one-half 
of 1 per centum of the original principal amount of the mortgage or 
loan to be insured. Unless otherwise agreed, the charge for any such 
services shall be paid by the mortgagor or the borrower. 
"(f) All moneys received under the provisions of sections 1101-
1109 (46 U. S. C. 1271-1279) of this title shall be deposited in the 
fund." 
SEC. 5. Section 1105 (46 U. S. C. 1275) is amended to read as follows: 
"(a) (1) In the event of any act or failure to act which gives the 
mortgagee the right to foreclose, any such events being herein called 
defaults, and failure on the part of the mortgagor to remove and 
remedy the default within thirty days, the mortgagee shall have the 
right (i) in the case of a default in respect of the payment of principal 
or interest or the payment of any amount to provide for the payment 
of premium charges for mortgage insurance, to demand at or before 
the expiration of sixty days after any such default, and (ii) in the 
case of any other default, to demand at any time during the continu-
ance of such default, payment by the Secretary of Commerce of the 
insured portion of the unpaid principal amount of said mortgage and 
of the unpaid interest thereon to the date of payment: Provided^ That 
an assignment of the mortgage and of the obligations secured by the 
mortgage be tendered to the Secretary of Commerce at the time such 
demand is made. The Secretary of Commerce may at any time during 
the continuance of any default notify the mortgagee in writing, speci-
fying the default, that by reason of such default the Secretary of Com-
merce intends to terminate the insurance contract sixty days after such 
notice is received by the mortgagee, and the mortgagee shall be en-
titled to demand payment by the Secretary of Commerce as above pro-
vided at any time during said sixty-day period, whether or not the 
default is removed and remedied, and if the mortgagee shall fail to 
make such demand, the insurance contract may be terminated by the 
Secretary of Commerce on or after the expiration of such period. 
Within a period of thirty days from the date of any such demand, 
the Secretary of Commerce shall accept the assignment and promptly 
68 S T A T . ] 
PUBLIC LAW 781-SEPT. 3, 1954 
1273 
Rights of lender. 
pay to the mortgagee the insured portion of the unpaid principal 
amount of said mortgage and unpaid interest thereon to the date of 
payment: Provided, That, except in any case in which the Secretary 
of Commerce has given notice of intention to terminate the insurance 
contract pursuant to the foregoing provisions, the Secretary of Com-
merce shall not be required to accept such assignment if prior to the 
expiration of said thirty-day period he shall find that there was no 
default or that such default was removed and remedied prior to any 
such demand. 
"(2) In the event of an act or failure to act which gives the lender 
the right to mature the loan, any such events being herein called de-
faults, and failure on the part of the borrower to remove and remedy 
the default within thirty days, the lender shall have the right (i) in 
the case of a default in respect of the payment of principal or interest 
or the payment of any amount to provide for the payment of premium 
charges for loan insurance, to demand at or before the expiration of 
sixty days after any such default, and (ii) in the case of any other 
default, to demand at any time during the continuance of such default, 
payment by the Secretary of Commerce of the insured portion of the 
unpaid prmcipal amount of said loan and of the unpaid interest 
thereon to the date of payment: Provided^ That an assignment of the 
loan agreement and of the obligajtions evidencing such loan be tend-
ered to the Secretary of Commerce at the time such demand is made. 
The Secretary of Commerce may at any time during the continuance 
of any default notify the lender in writing, specifying such default, 
that by reason of such default the Secretary of Commerce intends to 
terminate the insurance contract sixty days after such notice is re-
ceived by the lender, and the lender shall be entitled to demand pay-
ment by the Secretary of Commerce as above provided at any time 
during said sixty-day period, whether or not the default is removed 
and remedied, and if the lender shall fail to make such demand, the 
insurance contract may be terminated by the Secretary of Commerce 
on or after the expiration of such period. 
Within a period of thirty 
days from the date of any such demand, the Secretary of Commerce 
shall accept the assignment and promptly pay to the lender the insured 
portion of the unpaid principal amoimt of said loan and unpaid inter-
est thereon to the date of payment: Provided^ That, except in any case 
in which the Secretary of Commerce has given notice of intention to 
terminate the insurance contract pursuant to the foregoing provisions, 
the Secretary of Commerce shall not be required to accept such assign-
ment if prior to the expiration of said thirty-day period he shall find 
that there was no default or that such default was removed and reme-
died prior to any such demand. 
"(b) Any amount required to be paid by the Secretary of Commerce 
^^^^ paymenu 
pursuant to subsection (a) of this section shall be paid in cash. 
"(c) (1) In the event the Secretary of Commerce shall accept 
the assignment of a mortgage upon the default of the mortgagor 
pursuant to subsection (a) (1) of this section, he may institute fore-
closure proceedings and in connection therewith repossess the mort-
gaged vessel forthwith and, subject to the provisions of section 1104 
(a) (10) (46 U. S. C. 1274 (a) (10)), take such other action against 
the mortgagor that, in his discretion, may be required to protect 
the interests of the United States and of the mortgagee, as they may 
appear. Any suit may be brought in the name of the United States 
or in the name of the mortgagee and the mortgagee shall make avail-
able to the United States all records and evidence necessary to prose-
cute any such suit. If the Secretary of Commerce shall determine 
that the interests of the United States do not require foreclosure 
of the mortgage, he may make such agreement with the mortgagor 
Foreclosure pro-
ceedings. 
1274 
PUBLIC LAW 781-SEPT. 3, 1954 
[68 S T A T . 
A c t i o n against 
borrower. 
as in the opinion of the Secretary of Commerce will result in remedy-
ing the defaults. 
The Secretary of Commerce shall have the right 
in his discretion to accept a conveyance of title to and possession 
of the vessel from the mortgagor, and in the event of a sale under 
foreclosure proceedings, may purchase the vessel for an amount not 
greater than the unpaid principal amount of such mortgage and 
unpaid interest thereon. 
In the event the Secretary of Commerce 
shall receive through the sale of the vessel an amount of cash in 
excess of any payment made to the mortgagee under subsection (a) 
(1) of this section and the expenses of collection of such amount, 
he shall pay to the mortgagee such cash amount to the extent that 
the mortgagee has not been made whole through other sources for 
amounts advanced to the mortgagor but in no event shall such pay-
ment to the mortgagee exceed 10 per centum of the unpaid principal 
amount of mortgage and the interest thereon, and any excess of the 
amounts thus due the Government and the mortgagee shall be paid 
to the mortgagor. 
"(2) In the event the Secretary of Commerce shall accept the 
assignment of a loan agreement upon the default of a borrower pur-
suant to subsection (a) (2) of this section, he shall take such action 
against the borrower or any other parties liable under the loan agree-
ment or the obligations evidencing ^ c h loan thereunder that, in his 
discretion, may be required to protect the interests of the United 
States and of the lender as they may appear. 
Any suit may be 
brought in the name of the United States or in the name of the 
lender and the lender shall make available to the United States all 
records and evidence necessary to prosecute any such suit. The Sec-
retary of Commerce shall have the right in his discretion to accept 
a conveyance of title to and possession of the property from the bor-
rower, and may purchase the property for an amount not greater 
than the unpaid principal amount of such loan and unpaid interest 
thereon. In the event the Secretary of Commerce shall receive through 
the sale of the property an amount of cash in excess of any payment 
made to the lender under subsection (a) (2) of this section and the 
expenses of collection of such amount, he shall pay to the lender such 
cash amount to the extent that the lender has not been made whole 
through other sources for amounts advanced to the borrower but in 
no event shall such payment to the lender exceed 10 per centum of 
the unpaid principal amount of loan and the interest thereon, and 
any excess of the amounts thus due the Government and the lender 
shall be paid to the borrower. 
"(d) Notwithstanding any other provision of law relating to the 
opV^ra^e,**^ leii acquisitiou, handling or disposal of property by the United States, 
property. 
^.|^^ Secretary of Commerce shall have the right in his discretion to 
complete, recondition, reconstruct, renovate, repair, maintain, operate, 
charter, or sell any property acquired by him pursuant to the assign-
ment as provided in this section and may place the mortgaged vessel 
in the national defense reserve or may sell the same upon competi-
tive bids for not less than the minimum sales price provided by the 
Merchant Marine Act, 1986, as amended. The buyer shall be required 
to make cash payment to the Secretary of Commerce of not less than 
25 per centum of the sales price, and the balance shall be paid in 
equal annual installments over the remaining period of the expected 
useful life of such vessel. Interest at the rate of 314 per centum per 
annum shall be paid on all such installments of the purchase price 
remaining unpaid. 
"(e) Any contract or commitment of insurance entered into by 
the Secretary of Commerce under the provisions of this title shall 
not be terminated, canceled, or otherwise revoked for any reason, 
Right of Secre-
46 use 1101 et 
aeq. 
68 
S T A T . ] 
PUBLIC LAW 781-SEPT. 3, 1954 
1275 
except as provided in section 1105 of this title, and shall be conclusive 
evidence that the mortgage or loan complies fully with the provisions 
of this title and of the approval of the principal amount, interest 
rate, and all other terms of the mortgage or loan and of the mortgagor 
or borrower and of the mortgagee or lender; and any contract or 
commitment of insurance so entered into shall be incontestable from 
the date as of which such contract or commitment is entered into, 
except for fraud, duress, or mutual mistake of fact.-' 
SEC. 6. Section 1106 (46 U. S. C. 1276) is amended to read as fol-
lows : 
"No provision of this title shall be construed to authorize the Sec-
retary of Commerce to insure a mortgage securing any loan or ad-
vance made prior to the enactment of this title, and no mortgage shall 
be insured for refinancing in whole or in part any existing mortgage 
indebtedness except— 
"(1) where a substantial portion of the total amount to be 
secured by the new mortgage, not to extend beyond the maturity 
date of the original mortgage, shall be applied to new construc-
tion, reconditioning, or reconstruction of one or more of the 
mortgaged vessels: Provided, 
however^ That the aggregate 
amount of all mortgages insured under this paragraph and out-
standing at any one time shall not exceed $20,000,000, and provided 
that all of the eligibility requirements of section 1104 (46 IJ, S. C. 
1274) not inconsistent with this paragraph are complied with; 
"(2) where the Secretary of Commerce has insured a mort-
gage under the provisions of this title, and the mortgagor there-
after makes application to the mortgagee or another lender for 
an additional loan or advance for reconditioning or reconstruct-
ing the mortgaged property, the Secretary of Commerce may 
insure a new mortgage, not to extend beyond the maturity date 
of the original mortgage, in the amount of the principal outstand-
ing balance of the original mortgage plus the amount of the addi-
tional loan, provided the amount of the additional loan is with-
in the limits of paragraph (2) of subsection (a) of section 1104 
(46 U. S. C. 1274) and the new mortgage conforms to the eligi-
bility requirements of all the other paragraphs of said subsec-
tion (a); 
"(3) where the Secretary of Commerce has insured a mort-
gage under the provisions of this title, the Secretary of Com-
merce may insure a new mortgage for the purpose of refunding 
such mortgage: Provided^ That the principal amount of the new 
mortgage shall not exceed the then unpaid principal amotint 
of the original mortgage; that the interest rate on the new mort-
gage shall not be higher than the interest rate on the original 
mortgage; that the maturity date of the new^ mortgage shall not 
be later than the maturity date of the original mortgage; and 
that the new mortgage shall otherwise conform to the eligiliility 
requirements of subsection (a) of section 1104 (46 U. S. C. 1274) ; 
or 
"(4) the Secretary of Commerce may insure mortgages given 
to finance the purchase of vessels theretofore acquired by the fund 
under the provisions of section 1105 (46 U. S. C. 1275) and to 
secure loans or advances made for reconditioning and reconstruc-
tion of such vessels." 
SEC. 7. Section 1107 (46 U. S. C. 1277) is amended to read as 
follows: 
"Whoever, for the purpose of obtaining any loan or advance of 
credit from any person, partnership, association, or corporation with 
the intent that such loan or advance of credit shall be offered to or 
46 use 1275. 
Prior loans; re-
financing. 
False statement, 
etc. 
1276 
PUBLIC LAW 781-SEPT. 3, 1954 
[68 S T A T . 
46 u s e 1228. 
Rules and regu-
lations. 
Appropriation. 
accepted by the Secretary of Commerce for insurance, or for the pur-
pose of obtaining any extension or renewal of any loan, advance of 
credit, or mortgage insured by the said Secretary of Commerce, or 
the acceptance, release, or substitution of any security on such a loan, 
advance of credit, or for the purpose of influencing in any way the 
action of the said Secretary of Commerce under this title, makes, 
passes, utters, or publishes, or causes to be made, passed, uttered, or 
published any statement, knowing the same to be false, or alters, 
forges, or counterfeits, or causes or procures to be altered, forged, or 
counterfeited, any instrument, paper, or document, or utters, pub-
lishes, or passes as true, or causes to be uttered, published, or passed 
as true, any instrument, paper, or document, knowing it to have been 
altered, forged, or counterfeited, or willfully overvalues any security, 
asset, or income, shall be guilty of a misdemeanor and punished as 
provided under the first paragraph of section 806 (b) of this Act." 
SEC. 8. Section 1108 (46 U. S. C. 1278) is amended to read as 
follows: 
"The Secretary of Commerce is authorized and directed to make 
such rules and regulations as may be deemed necessary or appropriate 
to carry out the purposes and provisions of this title." 
SEC. 9. Section 1109 (46 U. S. C. 1279) is amended to read as 
follows: 
"There is hereby authorized to be appropriated the sum of $1,000,-
000 and such further sums as may be necessary to carry out the pro-
visions of this title." 
Approved September 3, 1954.