IionorabloP. C. IWanson,
Eax-&ingCommissioner
Austin, Texas
3oar Sir-.
Opinion NO. O-1812
Ran Dui.liiiqand loan association6
-- Xigible invmtnents --
I?. ll. A., Tit13 1, ClZSS 3
insured mortqges.
'dehave ~OIW letter of January 18, 1940, .ad~is-
ing as follows:
*Your attention Is respectfully
CiiroCtedto 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 the insurance to the extent
of 16 of loans, not Gxcaeding $2,500.
00 iu mount, m&e for tho puqose of
erecting inpovooients on lanclowned
by, or (with cortnin rsstrictions)
Imld utier lease 13s t&3 borrolfer.
'Iliis
ametinont ~3lacesno linit on the
procnta,ge of the value of tilt3 p-op-wty
to 58 lOanEd.
Honorable P. C. Wanson - ?agc 2
Upon this statczsnt you subtit for a l,opal
opinion the follovin~ question:
*tiy a buil&ing and loan assccia-
tion, orgnniz& md existing m&r the
law of the State of Texas, invest
fun&s of such association in Title 1,
Class 3 loans, as above defined?.
It is the opinion of this departmnt that your
inquiry should be answered in the negative.
Under &ate of Seytefier 27, 1939, your then of-
fice counsel retiered you an opinion, ::o.882, saying:
.In ny opinion such loans are not
eligibla loans umler our Building J5Loan
Statutes. &2i$ciingSiLoan Association8
am quasi public corporations zml ore
lirnitsdin their powers of investment by
the term of the statutes regOating
then. Section 39 of the Euil&i.ng& Loan
Associations Act deals r?iththe 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 ilousingAct, 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 ifullcoverage, but extenrisonly to
19$, for which reason such partially in-
surcd loans do not meet the requirement
of full insurance conteqlated by tha
&uildinr;5 Loan Associations Act.
OIt nil1 be borne in tind that at
of the zmen&3ent of cur 3uilb-
t&z tird.?
inp L:.
Loan Associations Act specifically
au&&zing invzstmnt in loans insured
Xionqrablzd; C. Branson - Page 3
under the Xationsl Housing Act, the
dot provided for full ccverage. The
National ilousingAct has been aDended
in this respect but the Building &
Loan Associations Act, from which our
associations obtain their authority
to invest, has not been amlrled car-
reepoadingly.
=Even as late as the 46th fiegisla-
ture (1939) the N. Li.A. loans as eligi-
ble tivestxients,were liberalized to
the extent of 9% of the appraised valu-
ation of the proparty, but they were
not liberalized so as to dispense with
the full insurance coverage existing
at the time our Uuil&in,r:
& Loan Associa-
tions Plotauthorized such loans in 1935."
Later, an& mder date of January 18, 1940, your
present office counsel r wsxainerl the question ati &vised
you as follows:
'C f *
SSf'feotiveXay 9, 1939, the Tesas
Legislature added Section 38-s, which
provides that until 1943 a building and
loan association may lend not oxaeeding
g($ 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'ederalUousins .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