Case Information

*1 Iionorablo P. C. IWanson,

Eax-&ing Commissioner

Austin, Texas

3oar Sir- .

Opinion NO. O-1812 Ran Dui.liiiq and loan association6 -- Xigible invmtnents -- I?. ll. A., Tit13 1, ClZSS 3 insured mortqges.

'de have ~OIW letter of January 18, 1940, .ad~is- ing as follows:

*Your attention Is respectfully CiiroCted to the provisions of Sub- section 2 of the lIuildi.ng and Loan Act, Subeeotfon 3 of the Building

and Loan Act, Section 3Sa anc'3Sb of the Building and Loan Act, all relat- w to invostn#nt of funds of build- ing and loan associations in loans insured by the National Housing Ad- ministrator, and all Qffective prior to July 1, 1030.

"Sffoctive July 1, 1939, Sub- section B of Section 1703, Title 12 of the U.9.C.A (a prt of Title 1 of the B. H. Act) 171~s amtied so as to autborizo insurance to the extent of 16 of loans, not Gxcaeding $2,500.

00 iu mount, m&e for tho puqose of erecting inpovooients on lancl owned by, or (with cortnin rsstrictions) Imld utier lease 13s t&3 borrolfer.

'Iliis ametinont ~3laces no linit on the procnta,ge of the value of tilt3 p-op-wty to 58 lOanEd.

Honorable P. C. Wanson - ?agc 2

Upon this statczsnt you subtit for a l,opal opinion the follovin~ question:

*tiy a buil&ing and loan assccia- tion, orgnniz& md existing m&r the law of State of Texas, invest fun&s of such association in Title 1, Class 3 loans, as above defined?.

It is the opinion of this departmnt that your inquiry should be answered in the negative.

Under &ate of Seytefier 27, 1939, your then of- fice counsel retiered you an opinion, ::o. 882, saying:

.In ny opinion such loans are not eligibla loans umler our Building J5 Loan Statutes. &2i$ciing Si Loan Association8 am quasi public corporations zml ore lirnitsd in their powers of investment by the term of the statutes regOating then. Section 39 of the Euil&i.ng & Loan Associations Act deals r?ith the subject of investmnt of funcls. It specifically enumrates the eligible securities and, therefore, by necessary implication for- bids all others. Those portions of Sec- tion 38 dealing specifically aith respect to the Xational ilousing Act, all require such loans to be insured under the pro- visions of that Act. Such requircrmnts are found in Subdivisions 2, 3 and 5 of Section 38.

mutier the povisions of the Xation- al Bowing Act, as ammded June 3, 1839,~ the provision for insurance coverage is not a ifull coverage, but extenris only to 19$, for which reason such partially in- surcd loans do not meet the requirement of full insurance conteqlated by tha &uildinr; 5 Loan Associations Act.

OIt nil1 be borne in tind that at t&z tird.? of the zmen&3ent of cur 3uilb- inp L:. Loan Associations Act specifically au&&zing invzstmnt in loans insured *3 Xionqrablz d; C. Branson - Page 3

under the Xationsl Housing Act, the dot provided for full ccverage. The National ilousing Act has been aDended in this respect but the Building & Loan Associations Act, from which our associations obtain their authority to invest, has not been amlrled car- reepoadingly.

=Even as late as the 46th fiegisla- ture (1939) the N. Li. A. loans as eligi- ble tivestxients, were liberalized to the extent of 9% of the appraised valu- ation of the proparty, but they were not liberalized so as to dispense with the full insurance coverage existing at the time our Uuil&in,r: & Loan Associa- tions Plot authorized such loans in 1935." Later, an& mder date of January 18, 1940, your present office counsel r wsxainerl the question ati &vised you as follows:

'C f *

SSf'feotive Xay 9, 1939, the Tesas Legislature added Section 38-s, which provides that until 1943 a building and loan association may lend not oxaeeding g($ on real estate, provid3cl *the loan is insured by the F&era1 Housing Adminis- trator.'

'For the reasons above mentioned, it is w opinion that associations are not authorized to invest in Title 1, Class 3 loans. Obviously one cannot be categorical in an opinion of this nature, but we can absolutely be cer- tain that an association is lidted in that it cannot leml Eore than SO$ of the appraised value on any character of loan, even though insured fully by the r'ederal Uousins .Zkiinistrr.tor.*

, Bonorable P. c. 233ranson - ?age 4

it is not a question of the Soundness of the investmrlt, rather it is a auestion of statutory con- struction nit& respect to 0iigibie invcstsmnts. Thhis is a utter exclusively for the Legislature. Ye oan- not question its r&3dom.

Vary trulg yours OS-ER