Court Opinion

ID: 9428891
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:25:04.354191+00
Date Added: 2024-06-11T17:23:15.936760
License: Public Domain

Justice Rehnquist,
with whom Justice Stevens joins,
dissenting.
The Court today concludes that in § 5(a) of the Home Owners’ Loan Act of 1933 (HOLA), 12 U. S. C. § 1464(a) (1976 ed., Supp. IV), Congress authorized the Federal Home Loan Bank Board to pre-empt by administrative fiat California’s limitations upon the enforceability of “due-on-sale” clauses in real estate mortgages held by federal savings and loan institutions. The Court reaches this extraordinary result by concluding that due-on-sale clauses relate to a savings and loan’s mortgage lending practices which “are a critical aspect of its ‘operation’ over which the Board unquestionably has jurisdiction.” Ante, at 167. Because I conclude that Congress has not authorized the Board to promulgate a regulation such as 12 CFR §545.8-3(f) (1982), I dissent.
Section 5(a) of the HOLA, 12 U. S. C. § 1464(a) (1976 ed., Supp. IV), unquestionably grants broad authority to the Board to regulate the mortgage lending practices of federal savings and loans. In order to perform this role, the Board may take into account state property and contract law which governs real estate transactions in general and the enforceability and interpretation of mortgage lending instruments in particular. Thus, it would be within the Board’s power to determine that it constitutes an unsafe lending practice for a *173federal savings and loan to conclude a real property mortgage without a fully enforceable due-on-sale clause. It would be within the authority delegated to it by Congress for the Board to conclude that a due-on-sale clause must be included in a mortgage instrument as a means of enabling a federal savings and loan to remove unprofitable loans from its portfolio.
Such a regulation would be entirely consistent with the approach taken by Congress in regulating the savings and loan industry. In § 8 of the Federal Home Loan Bank Act of 1932 (FHLBA), 12 U. S. C. § 1428, the precursor to HOLA, Congress has required the Board to examine state law “relating to the conveying or recording of land titles, or to homestead and other rights, or to the enforcement of the rights of holders of mortgages on lands securing loans.” (Emphasis added.) Section 8 provides further:
“If any such examination shall indicate, in the opinion of the board, that under the laws of any such State . . . there would be inadequate protection to a Federal Home Loan Bank in making or collecting advances under this chapter, the board may withhold or limit the operation of any Federal Home Loan Bank in such State until satisfactory conditions of law . . . shall be established.” 12 U. S. C. § 1428 (emphasis added).
Thus, there is no indication in the FHLBA that the Board may, by promulgating regulations, pre-empt those state laws that are deemed to be economically unsound. Instead, if the Board concludes that California’s limitations upon the enforceability of due-on-sale clauses endangers the soundness of the system established by the HOLA and the FHLBA, then the response contemplated by Congress is for the Board to “withhold or limit the operation” of the system in California.
In declaring the due-on-sale clause enforceable as a matter of federal law, however, the Board has departed from the ap*174proach contemplated by Congress. Although Congress has authorized the Board to regulate the lending activities of federal savings and loan associations, there is no indication in the HOLA itself, or in its legislative history, that Congress has empowered the Board to determine whether and when federal law shall govern the enforceability of particular provisions contained in mortgages concluded by federal savings and loan associations. If anything, §8 of the FHLBA indicates that it was Congress’ understanding in 1932 that the enforceability of provisions in mortgages is a matter of state law. Contract and real property law are traditionally the domain of state law. Aronson v. Quick Point Pencil Co., 440 U. S. 257, 262 (1979); Butner v. United States, 440 U. S. 48, 55 (1979). In the HOLA, Congress did not intend to create a federal common law of mortgages. See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630 (1981).*
The Board’s attempt to enforce due-on-sale clauses as a matter of federal law cannot be upheld as a regulation of mortgage lending practices of federal savings and loan associations. In §545.8-3(f), the Board has gone beyond regulating how, when, and in what manner a federal savings and loan may lend mortgage money. Instead, as the Court recognizes, ante, at 146-147, the Board’s regulation purports to create a rule of law which will govern the rights and obligations of the parties to the mortgage instrument. This regulation does not simply delineate those provisions a federal savings and loan must or must not include in a mortgage instrument. Section 545.8-3(f) purports to guarantee the enforceability of a contractual provision notwithstanding state law to the contrary. In this case, the Board is not regulating the operation of federal savings and loan associa*175tions, but the operation of due-on-sale clauses. Without a congressional authorization more explicit than that relied upon by the Court, I conclude that the Board has entered a domain in which it is not authorized to override state laws.
The limitations the California courts have placed upon the enforceability of due-on-sale clauses do not impair the ability of the Board to regulate the manner in which federal savings and loan associations engage in mortgage lending. California has not interfered with the Board’s determination that it constitutes an unsafe lending practice for a federal savings and loan to enter a loan agreement without a fully enforceable due-on-sale clause. California’s rule regarding due-on-sale clauses is not invalid pursuant to the Supremacy Clause simply because it makes it difficult for lenders to eliminate unprofitable mortgage loans from their portfolios.
Although the Board has concluded that the California courts’ limitations upon the enforceability of due-on-sale clauses is economically unsound, I cannot agree that Congress has enabled the Board to insulate federal savings and loans from California mortgage law merely by promulgating a regulation that declares these clauses to be enforceable. Discharge of its mission to ensure the soundness of federal savings and loans does not authorize the Federal Home Loan Bank Board to intrude into the domain of state property and contract law that Congress has left to the States.

 The Board, however, has argued that federal common law does govern the contractual relationship between federal savings and loan institutions and their mortgagors. See Gulf Federal Sav. & Loan v. Federal Home Loan Bank Bd., 651F. 2d 259, 266 (CA5 1981), cert. pending, No. 81-1744; Brief for Federal Home Loan Bank Board et al. as Amici Curiae 26, n. 21.