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~ising as follows: 

*Your attention Is respectfully 

CiiroCted to the provisions of Subsection 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 relatw to invostn#nt of funds of building and loan associations in loans 

insured by the National Housing Administrator, and all Qffective prior 

to July 1, 1030. 

"Sffoctive July 1, 1939, Subsection 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 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 asscciation, 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 office 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 forbids all others. Those portions of Section 38 dealing specifically aith respect 

to the Xational ilousing Act, all require 

such loans to be insured under the provisions of that Act. Such requircrmnts 

are found in Subdivisions 2, 3 and 5 of 

Section 38. 

mutier the povisions of the Xational 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 insurcd 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 3uilbinp L:. Loan Associations Act specifically 

au&&zing invzstmnt in loans insured 
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 carreepoadingly. 

=Even as late as the 46th fiegislature (1939) the N. Li. A. loans as eligible tivestxients, were liberalized to 

the extent of 9% of the appraised valuation 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 Associations 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 Administrator.' 

'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 certain 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 construction nit& respect to 0iigibie invcstsmnts. Thhis 

is a utter exclusively for the Legislature. Ye oannot question its r&3dom. 

Vary trulg yours 

OS-ER