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06/30/83 Conference of State Bank v. C. Todd Conover

June 30, 1983





Appeal from the United States District Court for the District of Columbia.


Robinson, Chief Judge; Wilkey, Circuit Judge; and MacKinnon, Senior Circuit Judge.


Opinion for the Court PER CURIAM.

Appellant Conference of State Bank Supervisors (the Conference) sought a declaratory judgment that regulations promulgated by the Comptroller of the Currency (the Comptroller) establishing the terms on which national banks may offer or purchase adjustable-rate mortgages (ARMs) are invalid to the extent they purport to preempt inconsistent state laws. The district court granted the Comptroller's motion for summary judgment on the ground that the challenged regulations fall within the scope of powers granted by Congress under two different acts. The Conference appeals and we affirm. I.

The essential feature of an adjustable-rate mortgage is that the interest rate may be adjusted periodically to reflect changes in prevailing rates. The Comptroller's regulations at issue here provide that all national banks may offer or purchase ARMs subject to various conditions relating to the permissible amount of each increase in interest, the frequency of increases, the maximum overall interest increase, and other matters. Adjustable-Rate Mortgages, 46 Fed. Reg. 18,932 (1981) (to be codified at 12 C.F.R. pt. 29) (JA 37-39). *fn1 The Comptroller described the regulations as intended to "encourage national bank participation in the residential mortgage market by facilitating the development of new mortgage instruments . . . ." Id. at 18,934, col. 1 (JA 28).

A number of states, however, have established restrictions on ARMs that conflict with the Comptroller's regulations in various respects. Believing that these state restrictions have the effect of discouraging national banks from offering ARMs, the Comptroller determined that his regulations should override inconsistent state law. Id. at 18,942, col. 2 (JA 36). The regulations provide generally that national banks may offer ARMs without regard to any limitations imposed by state law. In addition, the regulations preempt state laws that prohibit the charging of interest on interest and prepayment fees and that impair the enforceability of due-on-sale clauses. *fn2

The Conference is an association composed of state government officials who are responsible for regulating state banks. It brought a prompt declaratory judgment action challenging the Comptroller's authority to preempt inconsistent state laws. Since it was undisputed that the banking laws conflict with the Comptroller's regulations, the only question upon which issue was joined was "whether these regulations are within the scope of the Comptroller's powers granted by Congress." *fn3 Conference of State Bank Supervisors v. Lord, 532 F. Supp 694, 696 (D.D.C. 1982) (JA 58). The court considered the question on cross-motions for summary judgment and the parties' written oppositions thereto.

The court accepted both alternative bases offered by the Comptroller as conferring the requisite rulemaking authority. First, the Comptroller relied on the rule-making power conferred by 12 U.S.C. § 371 (g), which was enacted as part of the Housing and Community Development Act of 1974, Pub. L. No. 93-383, 88 Stat. 633 (1974). Section 371 (g) provided:

Loans made pursuant to this section shall be subject to such conditions and limitations as the Comptroller of the Currency may prescribe by rule or regulation. *fn4

Viewing the purpose of the Act as the authorization of wider real estate lending powers for national banks, see H.R. Rep. No. 1114, 93d Cong., 2d Sess. 44 (1974), the court reasoned that since ARMs are "real estate" loans within the meaning of 12 U.S.C. § 371(a), and the challenged regulations establish "conditions and limitations" on such loans, the Comptroller was authorized to issue the regulations under section 371(g).

Second, the court held that the Comptroller had an independent statutory basis for issuing the regulations under 12 U.S.C. § 93a, which was enacted as section 708 of the Depository Institutions Deregulation and Monetary Control Act of 1980 , Pub. L. No. 96-221, 94 Stat. 132 (1980). Section 93a provides:

Except to the extent that authority to issue such rules and regulations has been expressly and exclusively granted to another regulatory agency, the Comptroller of the Currency is authorized to prescribe rules and regulations to carry out the responsibilities of the office, except that the authority conferred by this section does not apply to section 36 of this title [ i.e., the McFadden Act, which makes the power of national banks to branch subject to ...

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