The Honorable Henry Wade 

Criminal District Attorney 

Dallas Government Center 

Dallas, Texas 75202 

Opinion NO. k- a82 

Re: Whether the housing 

authority may finance a 

housing project by means 

of a deed of trust note 

bearing interest in excess 

of as per annum. 

Dear Mr. Wade: 

You ask whether the Housing Authority of the City of 

Dallas, created pursuant to the Housing Authorities Law, 

article 1269k, V.T.C.S., may finance a housing project by 

means of a deed of trust note bearing interest in excess of 

8% per annum. The Housing Authority proposes to finance 

the construction loan and the permanent mortgage loan with 

the assistance of mortgage insurance issued by the Secretary 

of Housing and Urban Development (hereinafter HUD/FHA), 

acting by and through the Federal Housing Commission pursuant 

to section 231 of the National Housing Act (codified at 12 

U.S.C.A. 1715~ [Supp. 19761). The current permissible 

interest rate for HUD/FHA insured mortgage loans under 

section 231 is 9% per annum. The note would be repaid out 

of revenue generated from the project and housing assistance 

payments from HUD/FHA. There would be no bond underwriting 

or sale in this transaction. 

Section 3 of article 1269k defines bond as follows: 

[Ulnless a different meaning clearly 

appears from the context . . . 

(k) 'Bonds' shall mean any bonds, 

notes, interim certificates, debentures, 

or other obligations issued by the 

authority pursuant to this Act. 

p. 3715 
The Honorable Henry Wade - page 2 (H-992) 

Section 15, as amended by Acts 1971, 62nd Leg., ch. 416, 

P. 1555, provides for the sale of bonds: 

Bonds of an authority shall be authorized 

by its resolution and may be issued in one 

or more series and shall bear such date 

or dates, mature at such time or times, 

bear interest at such rate or rates, not 

exceeding eight (9) per centum per annum, 

be in such denomination or denominations, 

be in such form, either coupon or registered, 

carry such conversion or registration privileges, 

have such rank or priority, be executed in 

such manner, be payable in such medium of 

payment, at such place or places, and be 

subject to such terms of redemption (with or 

without premium) as such resolution, its 

trust indenture or mortgage may provide. 

The bonds may be sold at not less than 

par at public sale held after notice 

published once at least five (5) days prior 

to such sale in a newspaper having a general 

circulation in the city or the county and in 

a financial newspaper published in the City of 

New York, New York, provided, however, that 

such bonds may be sold at not less than par to 

the Federal Government at private sale without 

any public advertisement. . . . 

The "bonds" governed by section 15 do not include every 

kind of obligation listed in the section 3 definition. A 

different meaning appears from the context of section 15, 

which refers to par value instruments issued in such numbers 

that a public sale is the usual method of distributing them. 

We believe that section 15, with its 9% interest ceiling 

would be held not to apply to the note proposed in this 

financing scheme. 

Moreover, section 21 gives the housing authority 

additional powers to exercise to the end of securing federal 

assistance: 

p. 3716 
The Honorable Henry Wade - page 3 (H-882) 

In addition to the powers conferred upon 

an authority by other provisions of this 

Act, an authority is empowered to borrow 

money or accept grants or other financial 

assistance from the Federal Government for 

or in aid of any housing project within its 

area of operation, to take over or lease or 

manage any housing project or undertaking 

constructed or owned by the Federal Government, and to these ends, to comply with 

such conditions and enter into such mortgages, 

trust indentures, leases, or agreements as 

may be necessary, convenient or desirable. 

It is the purpose and intent of this Act 

to authorize every authority to do any and 

all things necessary or desirable to secure 

the financial aid or cooperation of the 

Federal Government in the undertaking, 

construction, maintenance, or operation of 

any housing project by such authority. 

This section does not limit the interest that may be paid as 

a condition to securing federal assistance and it expresses 

the intent to authorize compliance with such conditions. This 

expression of intent further supports our conclusion that 

section 15 does not apply to the proposed note, which the 

housing authority wishes to execute as a condition to securing 

federal assistance in the form of HUD/FHA mortgage insurance. 

SUMMARY 

The Housing Authority of the City of Dallas 

may finance a project with a note bearing 

interest in excess of 8% per annum. 

,Very truly yours, 

// 

JOHN L. HILL 

Attorney General of Texas 

p. 3717 
The Honorable Henry Wade - page 4 (H-882) 

APPROVED 

Opinion Committee