Iionorablo P. 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.

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

*Your attention Is respectfully CiiroCted

to the provisions of Subsection 2 of the lIuildi.ng and Loan Act, Subeeotfon 3 of theBuilding and Loan Act, Section 3Sa anc'3Sb of theBuilding and Loan **Act,** all relatw to invostn#nt of funds of building and loan associations in loans insuredby the National Housing Administrator,and all Qffectiveprior to July 1, 1030.

"Sffoctive July 1, 1939, SubsectionB 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 13st&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 statczsntyou subtit for a l,opal opinion the follovin~ question:

*tiy abuil&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 abovedefined?.

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

Under &ate of Seytefier 27, 1939,your then office counsel retieredyou an opinion, ::o.882, saying:

.In ny opinion such loans are not eligibla loans umler ourBuilding J5Loan Statutes. &2i$ciing SiLoan Association8
am quasi public corporations zml ore lirnitsd

in their powers of investmentby the term of the statutes regOating then. Section 39 of the Euil&i.ng& Loan AssociationsAct deals r?iththe 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 specificallyaith respect to the Xational ilousing Act, all require such loans tobe insured under the provisions of that Act. Such requircrmnts
are found in Subdivisions2, 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 ifullcoverage,but extenrisonly to 19$, for which reason such partially insurcd loans do not meet the requirement of full insurance conteqlated by tha &uildinr;5 Loan AssociationsAct.

OIt nil1 be borne in tind that at t&z tird.?

of the zmen&3ent of cur 3uilbinp L:. Loan AssociationsAct specifically au&&zing invzstmnt in loans insuredXionqrablz d; C. Branson - Page 3

under the XationslHousing Act, the dot provided for full ccverage. The National ilousing

Act has been aDended in this respectbut the Building & Loan AssociationsAct, 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. loansas eligible tivestxients,

were liberalized to the extent of 9% of the appraisedvaluation of the proparty,but theywere not liberalized so as to dispensewith the full insurance coverage existing at the time our Uuil&in,r: & Loan Associations Plotauthorized such loans in 1935."

Later, an& mder date of January 18, 1940,your present office counsel rwsxainerl 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 associationmay lend not oxaeeding g($ on real estate, provid3cl*the loan is insuredby the F&era1 Housing Administrator.'

'For the reasons abovementioned, it is w opinion that associationsare not authorized to invest in Title 1, Class 3 loans. Obviously one cannot be categorical in an opinion of this nature,but we can absolutelybe certain that an association is lidted in that it cannot leml Eore than SO$ of the appraisedvalue on any character of loan, even though insured fullyby 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 constructionnit& respect to

## 0iigibie invcstsmnts. Thhis is a utter exclusivelyfor the Legislature. Ye oannot question its r&3dom.

Vary trulgyours

OS-ER