Opinion ID: 666003
Heading Depth: 4
Heading Rank: 2

Heading: The Law Since 1983

Text: 44 In 1983, the FHLBB opted to discontinue its practice of promulgating regulations specifically empowering federal savings associations to act and to permit such associations to exercise all powers granted them by the HOLA, subject only to limitations contained in the regulations. 48 Fed.Reg. 23,032, 23,032 (1983). This revision of the prior regulatory scheme resulted in the deletion of sections providing specific lending authority (such as Sec. 545.6-4), but the FHLBB emphasized that the deletion d[id] not mean that any authority c[ould] no longer be exercised. Id.; see 12 C.F.R. Sec. 545.1 (1984) (A Federal association may exercise all authority granted it by the [HOLA] and its charter and bylaws, whether or not implemented specifically by Bank Board regulation, subject to the limitations and interpretations contained in this Part.). The provision concerning preemption was relocated to 12 C.F.R. Sec. 545.2 (1984), and it provided that the regulations contained in Sec. 545 are preemptive of state law purporting to address the subject of the operations of a Federal association. We note that this approach has been continued by the OTS; the current versions of 12 C.F.R. Secs. 545.1 and 545.2 are essentially identical to their 1984 counterparts. 45 Regulatory limitations on the power of savings associations to make loans on the security of real estate are found in 12 C.F.R. Sec. 545.32 (1993). That section authorizes federal savings associations to originate, invest in, sell, purchase, service, participate, or otherwise deal in ... loans made on the security of residential or nonresidential real estate ... subject to the limitations of this part. 12 C.F.R. Sec. 545.32(a) (1993). Section 545.32 further provides that, 46 [s]ubject to the limitations in Secs. 545.33 and 545.35 of this part, a real estate loan may be fully amortized, partially amortized, non-amortized, or a line-of-credit loan, and the loan contract may provide for the deferral and capitalization of a portion of the interest. 47 12 C.F.R. Sec. 545.32(b)(4) (1993). In determining that federal preemption of Texas homestead law had not occurred, the district court relied largely on Sec. 545.32(c)(2), which provides: 48 (c) Security property. A loan is made on the security of real estate if: 49 (2) The security interest of the Federal savings association may be enforced as a real estate mortgage or its equivalent pursuant to the law of the state in which the property is located[.] 50 12 C.F.R. Sec. 545.32(c)(2) (1993) (emphasis added). 51 The banks also bring to our attention some correspondence between the Department of Housing and Urban Development (HUD) and the FHLBB. In 1988, HUD planned to implement a demonstration program in which it would insure some home equity conversion mortgages, and it sought an advisory opinion from the FHLBB as to whether its regulations had preempted Texas homestead law so as to make such mortgages enforceable in Texas by federal savings associations and state chartered associations. Deputy general counsel for the FHLBB responded with an opinion letter dated August 4, 1989. We quote from that letter at length: 52 Congress by statute has explicitly permitted Federal associations to secure loans with real estate. 12 U.S.C. Sec. 1464(c)(1)(B). It is axiomatic that the authority to secure loans protects lenders in the event of default on such loans by foreclosing on the property constituting the security. State laws which prevent or otherwise restrict Federal associations from engaging in transactions involving such mortgages, are in conflict with Bank Board regulations. 53 The Texas laws in question [i.e., the homestead exemption] clearly prevent Federal associations from exercising the authority granted to them by the HOLA and the Board's regulations. Therefore, this Office concludes that the constitution and statutes of Texas under review are an obstacle to the accomplishment and execution of the purposes and objectives of 12 C.F.R. pt. 545 to the extent that they prevent Federal associations from securing line of credit conversion mortgages with real estate consisting of homesteads, and foreclosing on such mortgages in the event of default. According to de la Cuesta, the HOLA authorizes the Board to enact regulations that preempt substantive state real property laws purporting to govern the mortgage lending operations of Federal associations. The regulatory history of 12 C.F.R. Sec. 545 reveals that the Board exercised this authority to preempt state real property laws, insofar as reverse mortgages are concerned.... 54 .... 55 ... [W]e opine that Federal associations are authorized to offer, and if the need arises, to foreclose upon line of credit conversion mortgages which are secured by Texas homesteads, despite contrary state law. 56 FHLBB General Counsel Opinion Letter, Fed.Banking L.Rep. (CCH) p 82,502, at 61,707-08 (August 4, 1989) (footnotes omitted) (emphases added) [hereinafter FHLBB Letter]. 57 The banks contend, with the full support of the OTS as amicus curiae, that these materials, taken together, demonstrate the intention of the FHLBB/OTS to preempt Texas homestead law insofar as it would prohibit federal savings associations from entering into and enforcing RAMs and line of credit conversion mortgages. 58