Can a Texas state housing agency hold title to foreclosed mortgage properties through a bank trustee, and does it have to pay property taxes on them?

Texas AG Opinion JM-1198: Can the Texas Housing Agency Hold Foreclosed Property Tax-Free?

Plain-English summary

The Texas Housing Agency ran single-family mortgage revenue bond programs where private lenders originated mortgages for qualified home buyers, then sold those mortgages to a bank trustee that held them, and any foreclosed properties, on the agency's behalf using bond proceeds. The agency's Acting Executive Administrator asked the Attorney General whether the agency's own statute let it (or its bank trustee) hold title to foreclosed properties in that way, whether such property was exempt from taxes, and what happened to tax liens that predated a foreclosure.

The Attorney General concluded the Texas Housing Agency Act's grant of power to "acquire, own, rent, lease, hold, or dispose of" real property, including by foreclosure, made clear the agency could hold title to foreclosed properties in its own name. It further concluded that when a bank held title "on behalf of" the agency as its agent, the agency's beneficial ownership was legally the same as if the agency held title directly, so the tax exemption in the Housing Agency Act's section 16 followed the property either way. On the tax-lien question, the opinion explained that under Texas law a tax lien attaches to real property each January 1st and is not automatically wiped out just because a tax-exempt government body later acquires the property, though enforcement of that lien is suspended while the exempt body holds it.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

The Texas Housing Agency and its bond trustee banks: The opinion confirmed the agency could structure its single-family mortgage revenue bond programs so that a trustee bank held foreclosed mortgage properties in the trustee's own name on the agency's behalf, without losing the agency's own tax-exempt status for that property.

Local taxing authorities dealing with agency-foreclosed properties: The opinion explained that while property held by or for the agency was exempt from state and local taxes going forward, a tax lien that attached before the agency's acquisition was not automatically extinguished, only its enforcement was suspended while the exempt owner held the property.

Prior owners and their taxes for the year of foreclosure: The opinion did not resolve whether the agency or trustee could refuse taxes on a property for the portion of the tax year before the foreclosure occurred, since the opinion found it unnecessary to reach the agency's separate question about which funds could be used to pay any taxes that were owed.

Common questions

Could a Texas state housing agency let a bank hold foreclosed mortgage properties in the bank's own name instead of the agency's?
Yes, according to the opinion, so long as the bank was acting as the agency's agent or trustee. The Attorney General concluded that when an agent holds title "on behalf of" a principal, the agent holds the property in trust for the principal's benefit, so the legal relationship of the agency to the property was the same either way.

Did property owned or held for the Texas Housing Agency have to pay property taxes?
No. The opinion concluded the Housing Agency Act's section 16 exempted the agency's property, income, and operations from state and local taxes and assessments, and that this exemption covered property held on the agency's behalf by an agent, not just property titled directly to the agency.

What happened to a tax lien that already existed on a property before the Texas Housing Agency foreclosed on it?
The lien was not automatically erased. The opinion explained that under Texas law a tax lien attaches to property each January 1st and survives a later acquisition by an exempt governmental body, though enforcement of the lien is suspended while that body owns the property, and could potentially be enforced again if the property later passed to a non-exempt owner.

Background and statutory framework

The Texas Housing Agency Act, article 1269l-6 of the Vernon's Texas Civil Statutes, authorized the agency to make mortgage loans for low and moderate income housing and to issue revenue bonds to finance those loans. Section 8(5) of the Act gave the agency power to "acquire, own, rent, lease, hold, or dispose of any real, personal, or mixed property... by purchase, exchange, gift, assignment, transfer, foreclosure, sale, lease, or otherwise," and section 8(6) authorized it to sell, encumber, or release any interest in property it owned. The Attorney General read those provisions as clearly permitting the agency to hold title to foreclosed properties in its own name.

On the trustee question, the opinion relied on general agency-law principles, citing Texas Supreme Court authority defining what it means for one party to hold something "on behalf of" another, and authority holding that a party can be a legal agent even when the parties label the relationship a "trusteeship." Because the bank in the agency's bond programs acted both as trustee for bondholders and as the agency's agent in dealing with mortgage companies, the opinion concluded the bank's title to foreclosed property was held in trust for the agency's benefit, putting the agency in the same legal position as if it held title directly.

Section 16 of the Housing Agency Act separately exempted the agency's property, income, and operations from state and local taxes and assessments, while allowing the agency to make voluntary payments in lieu of taxes when practical. On the tax-lien question, the opinion turned to the general property tax framework in the Tax Code: taxes are the personal obligation of whoever owns the property on January 1st of the tax year, and the resulting lien attaches on that date under the Texas Constitution and the Tax Code. Citing Texas Supreme Court and courts of appeals authority, the opinion explained that a pre-existing tax lien is not extinguished merely because an exempt governmental body later acquires the property, only its enforcement is suspended for as long as the exempt body owns it, and the lien could become enforceable again if the property passed to a non-exempt owner.

Citations

Statutes:

• Texas Housing Agency Act, article 1269l-6, V.T.C.S., §§ 8(5), 8(6), 9, 10, 16
• Tax Code § 32.07 (property taxes as personal obligation of the January 1st owner)
• Tax Code §§ 25.13, 32.07(b)
• Tex. Const. art. VIII, § 15 (tax lien attaches January 1st)
• Tax Code § 32.01 (tax lien)

Cases:

• State v. Eggerman, 16 S.W. 1067 (Tex. 1891)
• Thompson v. Schmitt, 274 S.W. 554 (Tex. 1925)
• Childress County v. State, 92 S.W.2d 1011 (Tex. 1936)
• Maverick County Water Control & Improvement Dist. No. 1 v. State, 456 S.W.2d 204 (Tex. Civ. App.-San Antonio 1970, writ ref'd)
• State v. Bexar-Medina-Atascosa Counties Water Improvement Dist., 310 S.W.2d 641 (Tex. Civ. App.-San Antonio 1958, writ ref'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1198
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1198.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

THE ATTORNEY GENERAL OF TEXAS

Jim Mattox

July 30, 1990

Ms. Tish Gonzalez
Acting Executive Administrator
Texas Housing Agency
P. O. Box 13941
Austin, Texas 78711-3941

Opinion No. JM-1198

Re: Authority of the Texas Housing Agency to take and hold title to foreclosed properties in its own name, and related questions (RQ-1897)

Dear Ms. Gonzalez:

You have requested that we address several questions about the "single family mortgage revenue bond programs" of the Texas Housing Agency. Your first question is:

Does Sec. 8(a)(5) [of the Texas Housing Agency Act, article 1269l-6, V.T.C.S.] permit [the agency] to take and hold title to foreclosed properties in its own name?

The Texas Housing Agency is authorized to make mortgage loans to private entities to help finance low and moderate income housing developments, and to issue revenue bonds to finance mortgage loans. V.T.C.S. art. 1269l-6, §§ 9, 10. You describe the single family mortgage revenue bond programs as follows:

These programs typically have the following structure: After obtaining approval to proceed with the program and to issue bonds to finance the program, the Texas Housing Agency ("THA") locates mortgage companies to originate mortgages to qualified buyers and to service these mortgages after origination. Such mortgage companies are called "Lenders" or "Participants." THA then issues bonds to finance the program. The money paid for the bonds goes to a trust fund which THA sets up, supervised by a bank on behalf of THA (the "Trustee"). As the Lenders originate mortgages, they sell these mortgages to the Trustee, who buys them with the bond proceeds on behalf of THA. It is currently the policy of the Trustee to acquire the Notes and Deeds of Trust which constitute the mortgages in the trust's name on behalf of THA. Further, when a mortgage goes into default and the financed real estate is foreclosed upon, it is presently the policy of the Trustee to acquire the property in the Trustee's name on behalf of THA.

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Ms. Tish Gonzalez - Page 2 (JM-1198)

Section 8(5) of article 1269l-6, V.T.C.S., states that the Texas Housing Agency has the power

to acquire, own, rent, lease, hold, or dispose of any real, personal, or mixed property, or any interest therein, in performing its duties and exercising its powers under this Act, by purchase, exchange, gift, assignment, transfer, foreclosure, sale, lease, or otherwise, including rights or easements and to hold, manage, operate, or improve real, personal, or mixed property.

Section 8(6) of the statute authorizes the agency to "sell, assign, lease, encumber, mortgage, or otherwise dispose of" property "owned by it," and to "release or relinquish any right, title, claim, lien, interest, easement, or demand, however acquired." We think those provisions make clear that the Texas Housing Agency Act may hold title to the properties in question in its own name.

You next ask about the propriety of a bank holding property "on behalf of" the THA. From our examination of the instruments you provided, it appears that the bank acts both as a trustee for the bondholders and as agent for the Texas Housing Agency in its dealings with the mortgage companies. When an agent takes title to property "on behalf of" the principal in the name of the agent, the agent holds the property in trust for the benefit of the principal. See State v. Eggerman, 16 S.W. 1067 (Tex. 1891) (defining "behalf"); see also Thompson v. Schmitt, 274 S.W. 554 (Tex. 1925) (party may be an agent even if called a "trustee"). Thus, we think the legal relationship of the Texas Housing Agency to the property is the same when title to property is taken in the name of the bank acting on behalf of the agency as when the agency takes title in its own name.

1. Your specific question is whether various documents require that the Texas Housing Agency take and hold title to foreclosed property in its own name. We do not interpret such documents in the opinion process.

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Ms. Tish Gonzalez - Page 3 (JM-1198)

Your third question is:

Does Sec. 16 of Article 1269l-6 give the THA the right at its option, not to pay any taxes on real or personal property acquired through foreclosure or sale under a Deed of Trust or otherwise either by THA or by trustees who acquire the properties only on behalf of THA?

Section 16 of the Texas Housing Agency Act provides:

The property of the agency, its income, and operations are exempt from all taxes and assessments imposed by the state and all public agencies on property acquired or used by the agency under the provisions of this Act. The agency may, under its terms, conditions, and rules, make payments to public agencies in lieu of ad valorem taxes on any property which the agency has acquired through foreclosure or sale under a deed of trust. It shall be the policy of the agency to make these payments in lieu of taxes whenever practicable with any money lawfully available for this purpose, subject to the provisions, requirements, and restrictions of any bond resolution.

That provision makes the property of the agency, its income, and its operations exempt from taxes and assessments imposed by state or local taxing authorities. Property held on behalf of the agency by agents for the Texas Housing Agency would be property of the agency within the meaning of the statute.

Next, you ask:

Assuming THA and Trustees acting on behalf of [the agency] may refuse to pay such taxes, may they refuse to pay the taxes even on properties held by the original buyer on January 1st of the given year and/or for some portion of the year in which foreclosure occurred?

Section 32.07 of the Tax Code provides that property taxes are the personal obligation of the person who owns or acquires the property on January 1st of the year for which the tax is imposed. But see Tax Code §§ 25.13, 32.07(b). A lien to secure payment of the taxes attaches to the property on January 1st of the year for which the tax is imposed. Tex. Const. art. VIII, § 15; Tax Code § 32.01. The lien is not extinguished by the subsequent acquisition of the

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Ms. Tish Gonzalez - Page 4 (JM-1198)

property by a governmental body in whose hands it is exempt from taxes, but enforcement of the lien is suspended. Childress County v. State, 92 S.W.2d 1011 (Tex. 1936); Maverick County Water Control & Improvement Dist. No. 1 v. State, 456 S.W.2d 204 (Tex. Civ. App. - San Antonio 1970, writ ref'd); State v. Bexar-Medina-Atascosa Counties Water Improvement Dist., 310 S.W.2d 641 (Tex. Civ. App. - San Antonio 1958, writ ref'd); Attorney General Opinion JM-1085 (1989). If the property is acquired by someone in whose hands it is not exempt, the lien can then be enforced. Childress County v. State, supra.

You also ask whether the agency could use various funds to pay taxes; since the agency is not liable for taxes on property it owns, we need not reach those questions.

SUMMARY

The Texas Housing Agency may hold title to foreclosed properties in its own name or in the name of an agent acting on its behalf. Such property is exempt from state and local taxes. The agency is not liable for taxes that accrued against property before the agency acquired ownership of it, but the property remains subject to a lien for the unpaid taxes.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General

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