Honorable John Vance       Opinion   NO.   JM-1033
District Attorney
Dallas County              Re:      Whether Federal  National
                                              . .*     (Fannie
Government  Center           Mortgage Association
                                           _ --
Dallas, Texas 75202        Mae) Guaranteed    Mortgage   Pass-
                           Through Certificates      may    be
                           pledged as security for county
                           deposits    (RQ-1611)

Dear Mr. Vance:

     At the request of the Dallas County Auditor, you have
asked whether  Federal National Mortgage Association    Gua-
ranteed Mortgage Pass-Through Certificates may be pledged by
the depository for Dallas County as security for the deposit
of county funds placed with the depository.   You have fur-
nished excerpts from the prospectus concerning the certifi-
cates.

     The Federal National Mortgage Association is popularly
known as "Fannie Mae," and it has incorporated that sobri-
quet into its prospectus.    In prominent, large type the
prospectus declares:

        THE OBLIGATIONS OF THE FEDERAL NATIONAL MORT-
        GAGE ASSOCIATION UNDER ITS GUARANTY ARE OBLI-
        GATIONS SOLELY OF THE CORPORATION AND ARE NOT
        BACKED BY THE FULL FAITH AND CREDIT OF THE
        UNITED STATES. : THE CERTIFICATES ARE EXEMPT
        FROM THE REGISTRATION REQUIREMENTS OF THE SE-
        CURITIES ACT OF 1933 AND ARE 'EXEMPTED SECU-
        RITIES' WITHIN THE MEANING OF THE SECURITIES
        EXCHANGE ACT OF 1934.

It further states:

           The   Guarantee.d  Mortgage   Pass-Through
        Certificates ('Certificates') are issued and
        guaranteed by the Federal National Mortgage
        Association   (the 'Corporation' or 'Fannie
        Mae'), a corporation  organized
                                   .    and existing
        under the laws of the United States, under
        the authority contained in Section 304(d) of



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       the Federal National Mortgage Association
       Charter Act (12 U.S.C. 1716 et seg.).

          Each certificate offered hereby and by the
       Supplement related hereto will represent   an
       undivided interest in a pool of mortgage
       loans   (a 'Pool') to    be formed by     the
       Corporation.   Each Pool will consist      of
       residential mortgage loans ('Mortgage Loans')
       either previously owned by the Corporation or
       purchased  by it .in connection with      the
       formation of the Pool.

           .   .   .   .

          Interests in each Pool will be evidenced
       by a separate issue of Certificates.

           .   .   .   .

          The Corporation will have certain       con-
       tractual  servicing    responsibilities    with
       respect to each Pool. In addition, the Cor-
       poration will be obligated to distribute
       scheduled monthly   installments of principal
       and interest   (adjusted to reflect the Cor-
       poration's servicing and guaranty      fee) to
       Certificateholders, whether or not received.

     Statutes governing depositories for county funds are
found in chapter 116 of the Local Government Code. Statutes
regarding  the security   for county funds held by      the
depository are contained in subchapter C thereof.   Section
116.051, which speaks to qualifications as a depository,
reads:

          Within 15        days after the date a bank    is
       selected as         a county depository,   the bank
       must qualify        as the depository by providing
       security for        the funds to be deposited by the
       county with         the bank. The depository     may
       secure these         funds, at the ,option of the
       commissioners        court, by:

          (1) personal bond: surety bond; bonds,
       notes, and other securities: first mortgages
       on real property;     real property;   or  a
       combination of these methods, as provided by
       this subchapter; or




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           (2)  investment securities or interests in
        them as provided by Chapter 726, Acts of the
        67th Legislature, Regular Session, 1981   (Ar-
        ticle 252933-1, Vernon's Texas Civil Stat-
        utes) .

     The section 116.051 reference to "bonds, notes, and
other securities" in subsection (1) is exceedingly    broad,
but, as the "Revisor's Note" accompanying the code section
explains, the list in subdivision (1) is based on the source
law to sections 116.052-116.056.    Section 116.054 narrows
the breadth of the section 116.051 provision.  It reads:

           (a) A county depository may pledge with
        the commissioners court as security under
        this subchapter:

               (1) a bond, note, security of indebt-
           edness, or other evidence of indebtedness
           of the United States if the evidence    of
           indebtedness  is SUDDOrted bv the full
           faith and credit of the United States or
           is auaranteed as to DrinciDal and interest
           bv the United States:

              (2)  a bond of this state or of a
           county, municipality,  independent school
           district, or common school district:

              (3) a bond issued under       the   federal
           farm loan acts:

              (4)   a road district bond;

              (5) a bond, pledge, or other security
           issued by the board of regents of The
           University of Texas System;

              (6) bank acceptances of banks having a
           capital stock of at least $500,000;

               (7) a note    or   bond    secured      by
           mortgages insured and-debenturesissued      by
           the Federal Housing Administration;

              (8) shares or share accounts of a
           savings and loan association     organized
           under the laws of this state or of a
           federal savings    and loan   .association
           domiciled in this state if the payment of
           the share or share accounts is insured by



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           the Federal Savings    and   Loan     Insurance
           Corporation; or

              (9) a bond issued by           a   municipal
           corporation in this state.

           (b) Securities    provided   under         this
        section must have a total market value       equal
        to the amount      of the depository         bond.
        (Emphasis added.)1

The certificates at issue here satisfy none of the section
116.054, subsection    (1), requirements,   and u;Fs;emthey
qualify as "investment   securities or interests
provided by   [article 2529b-1, V.T.C.S.],"    as stated :G
subsection (2) of section 116.051, they do not fall within
the statutory categories of acceptable security for county
deposits.

     In its entirety, article 2529b-1, V.T.C.S.,,reads:

           Section 1. The following terms, used    in
        this Act, have the meanings set forth below:

           (a) 'Government securities' means direct
        obligations of the United States of America,
        obligations   which in the opinion of the
        attorney general of the United States are
        general obligations of the United States and
        backed by its full faith and credit, obliga-
        tions guaranteed   by the United States of
        America,   evidence of indebtedness   of  or



     1. The Local Government Code was enacted by Acts 1987,
70th Legislature chapter   149, at 707 as a non-substantive
recodification of existing laws.     Sections 311.031(c) and
(d) of the Government   Code provide that when a statute  is
amended by the same legislature that repeals the statute  in
the process of enacting a code, the amendment is preserved
and given effect and if the statute, as amended, conflicts
with the code, the statute prevails.     Section 116.051 was
partially   derived  from former article 2547, which 2;~;
amended by Acts 1987, 70th Legislature chapter 846, at
without reference to the repeal of the statute by enactment
of the code. The amendment, which authorizes the pledge   of
certain certificates of deposit by banks to secure county
deposits, does not conflict with the code or affect the
answer to your question, when given effect.




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.

    Honorable John Vance - Page 5   (JM-1033)




           particination    certificates   cruaranteed   bv
           Federal Intermediate    Credit Banks, Federal
           Land' Banks, Banks for Cooperatives,    Federal
           Farm Credit System, Federal Home Loan Banks,
           includinq letters of credit issued by the
           district Federal Home Loan Banks, general
           obligation notes of the Federal Home Loan
           Bank System, and general obligation bonds of
           the Federal Home Loan Bank System, Federal
           National    Mortaaae    Association,    Federal
           Financing Bank Participation Certificates     in
           the Federal Asset Financing Trust, New Hous-
           ing Authority Bonds and Project Notes fully
           secured by contracts with the United      States
           of'America provided such terms shall not in-
           clude any obligation with a declining prin-
           cipal balance.

               (b) 'Investment securities' means      (i)
            aovernment securities or (ii) any general  or
            special obligation issued by a public agency
            (approved by the attorney general of Texas)
            payable from taxes, revenues, either or both.

               (cl 'Public agency' means any        board,
            authority,   agency, department,   commission,
            political subdivision, municipal corporation,
            district, public corporation, body politic,
            or instrumentality   of the State of Texas,
            including without    limitation any    county,
            home-rule   charter city, general-law    city,
            town,   or    village,   any   state-supported
            educational institution of higher    learning,
            any school, junior college, hospital, water,
            sewye,    waste disposal, pollution,     road,
            navigation,   levee, drainage, conservation,
            reclamation, or other district or authority,
            and any other type of political or govern-
            mental entity of the-state of Texas.

                Sec.     2.
                         Investment securities   or   any
            OWIISrShiD or beneficial   interest   therein
            shall be eliaible and lawful security for all
            deposits of -public funds of the State of
            Texas and any public agency to the extent of
            the market value thereof.

               Sec. 3. The provisions of this Act shall
            be-.cumulative of all other existing laws, but
            shall be full and complete authority       for
            investment securities to be eligible        to



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        secure public funds without reference to     any
        other law.   (Emphasis added.)

     The syntax of section       l(a) of article    2529b-1,
V.T.C.S., is complex and might be analyzed     in different
ways, but we have concluded that it should be read as though
the phrase   "including letters of. credit   issued by the
district Federal Home Loan Banks, general obligation   notes
of the Federal Home Loan Bank System, and general obligation
bonds of the Federal Home Loan Bank System" were set off by
parentheses.    This phrase applies only to securities    of
Federal Home Loan Banks, but it is so long that it inter-
rupts the list of entities whose evidence of indebtedness in
participation certificates are government securities.  As so
punctuated, the provision reads:

           (a) \Government securities' means direct
        obligations of the United States of America,
        obligations   which   in the opinion of the
        attorney general of the United States are
        general obligations of the United States and
        backed by its full faith and credit, obliga-
        tions guaranteed    by the United States of
        America,   evidence of indebtedness      of    or
        particination   certificates    ciuaranteed    bv
        Federal Intermediate    Credit Banks. Federal
        Land Banks. Banks for Coooeratives,      Federal
        Farm Credit Svstem, Federal Home Loan Banks
        (including letters of credit issued by the
        district Federal Home Loan Banks, general
        obligation notes of the Federal Home Loan
        Bank System, and general obligation bonds of
        the Federal Home Loan Bank System),      Federal
        National Mortaaae Association,      Federal Fi-
        nancing Bank Participation     Certificates    in
        the Federal Asset Financing Trust, New .Hous-
        ing Authority Bonds and Project Notes       fully
        secured by contracts with the United      States
        of America.provided such terms shall not in-
        clude any obligation with a declining       prin-
        cipal balance.    (Emphasis added.)

     This reading of subsection l(a) of the statute, causes
certificates  "guaranteed by the    . . . Federal Natizcn:l
Mortgage Association"   to be "government  securities"
thus, "investment     securities" under   subsection   l(b):
Section  2 of statute declares that any ownership         or
beneficial interest in investment securities is eligible and
lawful security   for all deposits of public funds of any
public agency to the extent of the market value thereof.




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Counties are "public agencies" within the        meaning of   the
act. V.T.C.S. art. 2529b-1, 5 l(c).

     Cur conclusion that the certificates at issue may be
pledged as security for the deposit'of Dallas County   funds
is based upon our understanding of the legislative   intent.
Punctuation does not control or affect the matter.     Gov't
Code 0 312.012(b).  It is the duty of courts, and of this
office, to give statutes a reasonable,    fair construction
with a view to accomplishing    such intent. See 53 Tex.
Jur.2d Statutes § 126, at 187. The legislative intent here
is clearly to protect public      funds by requiring    that
deposits of them be secured by safe evidences of obligation.

     Influencing our conclusion that the legislature regard-
ed certificates guaranteed  by "Fannie Mae" as safe is the
circumstance that, under federal law, such certificates

        'shall be lawful investments and may be ac-
        cepted as security for all fiduciary, trust,
        and public funds, the investment or deposit
        of which shall be under the authority    and
        control of the United States or an officer
        thereof.'

12 U.S.C. 5 1723(c).

      Consequently, we advise that Federal National Mortgage
Association Guaranteed Mortgage    Pass-Through  Certificates
may be pledged by the depository for Dallas County as secur-
ity for the deposit of county funds placed with the deposi-
tory.


                       SUMMARY

           Federal National    Mortgage   Association
        Guaranteed Mortaaae Pass-Throuah Certificates
        may be pledged by- the deposit&y  for Dallas
        County as security for the deposit of county
        funds placed with the depository.

                                       very   ruly
                                   n           .


                                       JIM     MATTOX
                                       Attorney General of Texas

MARY KELLER
First Assistant Attorney General



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LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney.General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Bruce Y~oungblood
Assistant Attorney General




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