Industry News

High court to rule on states’ authority over mortgage lending subsidiaries

National banks say OCC, not states, should set rules

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The Supreme Court this week will hear arguments in a case that could limit the power of states to impose their own stricter standards on the mortgage lending subsidiaries of federally chartered banks. The case, Watters v. Wachovia Bank, began as a dispute between Michigan regulators and Wachovia Bank. Wachovia argued that its state-chartered Wachovia Mortgage subsidiary was subject to regulation only by the federal government, through the Office of the Comptroller of Currency (OCC). The OCC in 2001 ruled that federal law preempts states from regulating state-chartered subsidiaries of national banks. Wachovia has prevailed in District and Circuit Court decisions, and in cases involving other banks courts have stood behind the OCC's interpretation of the National Banking Act. That the Supreme Court has agreed to hear the case has generated speculation that it could take a different approach in defining to what extent federal regulations may trump state and local laws, the Washington P...