No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the Currency

In light of the Fraudclosure actions in New Jersey, I though I would dig up and dust off this post from back in July of last year, reposted in full below…

No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the Currency

Posted by Foreclosure Fraud on July 22, 2010 · 

From the letter… Discussion Pursuant to 12 U.S.C. § 371, national banks may “make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to * * * such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order.” The OCC’s real … Read more

From the letter…

Discussion

Pursuant to 12 U.S.C. § 371, national banks may “make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to * * * such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order.” The OCC’s real estate lending regulations provide that, “[e]xcept where made applicable by Federal law, state laws that obstruct, impair, or condition a national bank’s ability to fully exercise its Federally authorized real estate lending powers do not apply to national banks.” 12 C.F.R. § 34.4(a).

Section 34.4(a)(10) states that national banks “may make real estate loans under 12 U.S.C. § 371 without regard to state law limitations concerning * * * [p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages.” 12 C.F.R.§ 34.4(a)(10) (emphasis added). However, in no sense, under the facts presented, can the Banks be viewed as making a real estate loan under 12 U.S.C. § 371 and 12 C.F.R. § 34.4. The Banks did not originate the loans. They did not fund the loans at inception. Nor did they “purchase” the loans as part of any real estate lending program comprehended by the regulation. Here, the Banks act as trustees for the benefit of investors in the trusts. The substance of the transaction is that the investors, not the Banks, are purchasing the loans that have been made by Delta. The investors own the beneficial interest in the loans held by the Banks as trustees. And the effect of any liability for violation of the CFA ultimately falls on the investors. Nowhere do the Banks allege that they themselves, as opposed to the trusts they represent, are exposed to liability for any violation of the CFA. For all these reasons, 12 U.S.C. § 371 and 12 C.F.R. § 34.4(a) simply do not apply to the transactions by which the Banks acquired legal title to the loans in the circumstances at issue here.

With respect to the activities of Wells Fargo and Bank One as trustees, the banks derive their power to act as trustees from 12 U.S.C. § 92a. When state law conflicts with national banks exercising powers granted to them by federal law, the Supremacy Clause of the United States Constitution requires that the state law yield to the paramount authority of federal law, with the result that application of the state law to national banks is preempted. The Supreme Court has explained this principle stating that it interprets “grants of both enumerated and incidental ‘powers’ to national banks as grants of authority not normally limited by, but rather ordinarily pre-empting, contrary state law.” Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 32 (1996).

As the Supreme Court demonstrated in its review of preemption cases in the Barnett case, Supremacy Clause principles animating conflict preemption have been expressed in a wide variety of phrases that do not yield materially different meanings, including “stand as an obstacle to,” “impair the efficiency of,” “significantly interfere,” “interfere,” “infringe,” and “hamper.” See Barnett, 517 U.S. at 33. Thus, if application of the CFA to the loans held by the Banks as trustee were to obstruct, impair, condition, or otherwise interfere with the Banks’ exercise of fiduciary powers granted to them under federal law, the state statute would be preempted.

Based on the facts presented, we do not believe that to be the case. The Banks have not claimed that application of the CFA would impair their ability to act as trustee in these circumstances or that the state law otherwise interferes with the performance of their legal obligations as trustee. Nor could they claim that having to respond to state law defenses to recovery on assets held in trust obstructs or impairs their power to act as trustee absent some indication that the state law infringes their authority, conditions their actions, or imposes a burden in a way prohibited by federal law. In short, the Banks’ authority to act as trustees under federal law does not insulate the assets the Banks hold in trust for the benefit of investors from state law requirements otherwise applicable to those assets.

Matt Weidner had a good take on this document as well…

CAPACITY IS A FORECLOSURE CASE KILLER!- OCC LETTER: TRUSTS NOT EXEMPT FROM STATE LAWS

There is a growing body of evidence that stands for the proposition that the banks and shadowy trust companies sweeping across our nation to take homes are not in fact exempt from state banking and business regulation.  I have posted the Cuomo and Watters Supreme Court cases, but below is a very interesting letter from the Office of Comptroller and Currency which makes an even more compelling presentation of the facts.

Quite simply, we must continue to challenge the shadowy, unidentified anonymous entities that are filing suits and taking homes from Americans…..this letter should become a regular part of your research and pleading.

For more of Matt’s post go here…

And didn’t the banks in Mass just admit  exactly what the letter states?

In a statement, Steve Dale, a U.S. Bancorp spokesman, said: “Our role in this case is solely as trustee concerning a mortgage owned by a securitization trust. This judgment has no financial impact on U.S. Bancorp. The issues addressed by the court revolved around the process of the servicing of the loan on behalf of the securitization trust, which was preformed in this case by the servicer, American Home Mortgage Servicing.”

Vickee J. Adams, a Wells Fargo spokeswoman, said: “The loans at issue in the court’s ruling were not originated, owned, serviced or foreclosed upon by Wells Fargo. As trustee of a securitized pool of loans, Wells Fargo expects the entities who service these loans to abide by all applicable state laws, including those laws that govern foreclosure sales.”

Oh yea, they did…

Be sure to check out the full letter below…

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4closureFraud.org

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No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the Currency

Comments
4 Responses to “No Federal Preemption by a Trustee of a Mortgage Backed Security Trust from Senior Counsel of the Office of the Comptroller of the Currency”
  1. pparke500 says:

    Oh, I want to thank 4foreclosurefraud for posting this letter. I heard a lawyer in Judge Starnes court allude to it so it will be nice to have a copy when I face Judge Starnes. The atty was arguing that the bank was a foreign corp and needed to post a bond. That fell on deaf ears but I’m trying it again in my motion to dismiss.

  2. LVLawman says:

    However, where a national bank did “table funding” for mortgage brokers (mortgage accumulators) there is a colorable claim that the banks, along the line, had a stake in the mortgage.

    Similarly, I am waiting for some bank attorney to argue “preemption” where there are pending “put back” suits involving the specific mortgage. I have no faith that the Honorable members of the local judiciaries can, or wish, to parse this nonsense out and would seek any excuse to advance their rocket dockets without having to think or learn.

    • pparke500 says:

      I disagree somewhat. One, I don’t think banks in foreclosure cases are going to admit they table funded the loan. And two, I think the rocket docket judges are more likely to claim federal exemption without figuring out the letter’s guidance because it does not help them rule in favor of the banks.

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