Wachovia 5, Watters 3

The Supreme Court today ruled on a case related to state power over the mortgage lending subsidiaries of federally chartered banks. The bank won.

Michigan regulators contended that the bank's subsidiary could not operate in the state without registering in the state and submitting to state supervision, though Wachovia sued, charging that the National Banking Act and Office of the Comptroller of Currency's regulations preempt state lending laws. The U.S. District Court and Sixth Circuit Court of Appeals held that Wachovia's mortgage business is subject to federal oversight.

The Supreme Court agreed. According to the decision today in Watters vs. Wachovia Bank, state regulators "cannot interfere with the 'business of banking' by subjecting national banks or their OCC-licensed operating subsidiaries to multiple audits and surveillance under rival oversight regimes."

The American Bankers Association likes the decision. The National Association of Realtors, meanwhile, had opposed the OCC preemption regulation, charging that "Realtors involved in real estate lending related activities, such as appraisal, home inspection, mortgage and title services are at a disadvantage with national banks and their operating subsidiaries, which do not have to abide by and bear the costs of state licensing and compliance regulations."

NAR has also fought the entry of national banks into the business of real estate brokerage, while some major real estate brokerage companies have lending divisions or affiliations with lenders.

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