Montana Attorney General Opinion 15-313

Opinion No. 313 Building and Loan Associations-In- vestment of Assets-Mortgages- Home Owners' I. .. oan Cor- poration Bonds. HELD: A Building and Loan Asso- citation, upon the approval of the Sup- erintendent of Banks, may invest not to exceed ten per cent of its assets in bonds of the Federal Home Owners' Loan Corporation in satisfaction of a mortgage held by it upon the real prop- erty of one of its member,,_ August 16, 1931l. You request our opinion on the pro- priety of Building and Loan Associa- tions accepting bonds of the Home Own- ers' Loan Corporation in exchange for real estate mortgages held b~' them. at the same time stating that they were showing some hesitancy in the matter because of the belief that the laws of this state do not permit them to invest in such securities and because there is at present no way of knowing what their futUre market value will be. Section 1 of Chapter 11. Laws of 1933. provides, among other things, as fol- lows: "Every building and loan associa- tion is a creature of the law having eertain powers and duties of a natural person and ali such has power: * • .. "(13) To make loans to members on the security of the shares of the asso- da·tion, and also on their notes se- cured by first mortgages on impron'd real estate, including suburban homes. * • • "( 14) To cancel such loans and re- lease the securities on such terms as the Board of Directors may provide. • • • "( 15) To invest the money of the associa tion in: "(a) The bonds and securities of the United States, and the stocks, honds, debentures and other securities and obligations of any Federal Home Loan Bank created under the laws of the United States; "(b) The bonds and warrants of any state and of any county, city or school district of the State of Mon- tana; and "(c) Not to exceed ten (10) per cent of the association assets in such other bonds and securities as may be approved by the Superintendent of Banks." 'l'he law being as just set forth, it seems obvious that the board of direc- tors of the association may, if it sees fit, change the form of the association's investment, so to speak, and take the bonds of the Home Owners' Loan Cor- poration in satisfaction of a mortgage held by it upon the real property of one of its members, in a case where such member has applied for and ob- tained a hond loan from the corpora- tion for such purpose. In acting thus, however, the mandate of paragraph (c), supra. must be obsened, for the association may not do indirectly what it is prohihited from doing directly. 'Ve are not qualified to speak on the prospecth'e market value of the bonds of the Home Owners' Loan Corpora- tion. Doubtless they will fluctuate in yalue from time to time: all bonds have a habit of so doing. Suffice it to say that they shall bear interest at the rate of 4 per cent per annum, guar- anteed by the United States for a peri- od of not to exceed 18 years; that they shall be exempt,both as to principal and interest. from all taxation except sur-taxes, estate, inheritance and gift taxes; that the corporation shall ac- cept them at face value in full or part payment of any debt owing to it, and that the Congress in the Home Owners' Loan Act has devised what appears to he II safe and consen'ath'e method for their payment as they fall due. Note: See Opinion No. 524, this vol- ume. The 10% restriction is not re- moved by Chapter 5, Laws of 1933-34.