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




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