OCC Vs. States; Opponents of Federal Preemption Talk

A varied group of leading civil rights and consumer organizations, including ACORN, suggested the Office of the Comptroller of the Currency (OCC) withdraw its proposal to preempt state anti-predatory lending laws to national banks and their subsidiaries, announced the Center for Responsible Lending. The parties involved defended that state laws protect borrowers from abusive lending.

OCC’s proposal “amounts to issuing lenders a license to prey on vulnerable borrowers through national banks and their subsidiaries,” said ACORN’s president Maude Hurd in a separate announcement. ACORN, or the Association of Community Organizations for Reform Now, claims to be the nation’s largest community organization of low- and moderate-income families.

A few months back the OCC, an administrator of national banks, reported basing its decision to draft the proposal on evidence that predatory lending is a problem existing mainly among the subprime market — mortgage bankers or finance companies — not national banks. In addition, OCC reported state anti-predatory laws such as one passed in North Carolina, hindered the credit available to borrowers.

On the contrary, “we have not received a single complaint about a lack of subprime mortgage credit due to our anti-predatory lending law… the OCC is attempting to solve a problem that doesn’t exist,” said North Carolina’s chief regulator of mortgage lenders in CRL’s announcement.

Accordingly, “the OCC seems not even to have asked any tough questions about what Wells Fargo Home Mortgage’s subprime lending looks like, much less taken any action to end their abusive practices,” said Hurd in ACORN’s announcement.

In the order of preempting anti-predatory laws, the OCC reported it issued its own guidelines for national banks to follow when originating mortgages, using brokers and purchasing loans. In these, banks are warned OCC will take action if they engage in abusive practices.

“Its especially hard to imagine how the OCC — an agency most people facing predatory loans have never heard of — believes they do, or can monitor evidence of fraud these borrowers may be experiencing,” added Hurd. “The laws against unfair and deceptive practices they say they will enforce just don’t actually work to prevent predatory lending — if they did the problem would have been solved long ago.”

In a phone interview, an OCC spokesman said the proposal was open to comments, therefore denied to say anything regarding the criticism. Instead, he faxed a speech given last month by the head of OCC, in which criticism of OCC’s efforts was dismissed as “inflated and hollow rhetoric.”

Meanwhile, the American Land Title Association (ALTA), the self-proclaimed voice of the industry that provides title insurance protection for home loans, said in a comment letter that the proposal’s language was ambiguous and needed specification.

ALTA said OCC purports “to preempt state laws ‘concerning’ ‘security property’ or the ‘origination of loans’ where no one at the time the regulation is adopted knows with any precision what those terms really encompass,” according to the comment letter.

ALTA commented the unspecified laws and broad language draw risks because national banks, their lawyers and third parties, such as title insurers, could have problems in determining the validity and enforceability of national bank mortgage loans.