Georgia Department of Law, from the office of Michael J. Bowers, Attorney General

Official Opinion 95-24

May 12, 1995

Executive Director
Georgia Housing and Finance Authority


The Georgia Housing and Finance Authority does not have statutory power to provide marketing, fund management and underwriting services to a private, nonprofit lending entity

The Georgia Housing and Finance Authority ("GHFA"), through its Executive Counsel, has requested our advice concerning the above-stated matter.

From the documentation you have provided, a tax-exempt, private, charitable organization, which makes small loans to local nonprofit organizations for the purpose of rehabilitating affordable housing, is seeking assistance in managing its loan fund, to include underwriting services. The organization presently has $750,000 in investment funding from forty investors, primarily individuals and other nonprofit organizations.

The proposal is for GHFA to manage the lending fund for a period of years, and rather than be paid, instead share in the income - both fees and interest earned - in return for providing marketing and underwriting services. The current directors of the private entity, however, would retain their discretion over the making of loans and would seek new and additional sources of funding. For its efforts, GHFA would receive, in return, a share of the income received on the loans by the private entity. The issue, therefore, is whether GHFA may enter into an agreement which provides such services to a private, nonprofit entity, which has private purposes consistent with the purposes of GHFA.

The intent of the General Assembly in creating the Authority was "to create an instrumentality that can facilitate . . . housing and housing finance" and "work directly with and assist financial institutions . . . in creating, offering, delivering, and servicing such additional financing alternatives . . . to businesses and individuals involved in housing or housing finance." O.C.G.A. §§ 50-26-2(d), (e). The Authority has "any and all powers necessary or convenient to its usefulness in carrying out and effectuating the purposes and provisions of [Title 50, Chapter 26, the "Georgia Housing and Finance Authority Act"] which are not in conflict with the Constitution of this state, including, but without limiting the generality of . . ." its specific powers, to include the power to "extend credit, to make loans, to participate in the making of loans, to enter into commitments for the purchase of mortgages or participations, to acquire and contract to acquire mortgages or participations." O.C.G.A. §§ 50-26-8(a), -8(a)(9). The Authority may participate in a "Project" which includes "Housing finance" and means, inter alia, "the purchase or acquisition of mortgages or participations therein." O.C.G.A. §§ 50-26-4(8), (12). With regard to loan servicing and provisions of services to others, the Authority has specific powers to "service mortgages and to make and execute contracts for the servicing of mortgages made or acquired by the authority." O.C.G.A. § 50-26-8(a)(12) (emphasis added).

It is a "well-established general rule" that the authority can

exercise only such powers as are conferred on [it] by law, and a grant of power to such corporations must be strictly construed; and such a corporation can exercise no powers except such as are expressly given or are necessarily implied from express grant of other powers, and if there is a reasonable doubt of the existence of a particular power, the doubt is to be resolved in the negative.

Beazley v. DeKalb County, 210 Ga. 41, 43 (1953); Tippins v. Cobb County Parking Auth., 213 Ga. 685 (1957) (Beazley applied to authority).

In examining the plain language of the statutory powers granted to the Authority, the power to service loans (which includes the managing and underwriting processes of the loan fund) may only be performed or procured with respect to "mortgages made or acquired by the authority." Under the plain language of the Code and the corresponding statutory scheme for GHFA, the General Assembly did not intend that the Authority exercise its powers through a joint income-sharing endeavor with, or contract to provide its underwriting and administrative services to, loans undertaken by a private entity. See O.C.G.A. § 1-3-1(b) (ordinary signification attached to all words); Allison v. Domain, 158 Ga. App. 542 (1981) (statute must be construed with reference to whole system of which it is a part). In light of the instruction in Beazley, supra, without a more specific authorization of power in the Code, the existence of a power to enter into the arrangement contemplated must be resolved in the negative.

In conclusion it is my opinion that the Georgia Housing and Finance Authority does not have the power to enter into an arrangement with a private, nonprofit entity for the Authority to provide management, marketing and underwriting services for the private entity's lending fund.

Prepared by:

Assistant Attorney General