Court Opinion

ID: 2963894
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:16:58.25433+00
Date Added: 2024-06-11T11:37:22.753131
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USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                                     
                                 ____________________

        No. 94-1479

                            ROBERT AND JENNIFER GRUNBECK,

                               Plaintiffs, Appellants,

                                          v.

                       THE DIME SAVINGS BANK OF NEW YORK, FSB,

                                 Defendant, Appellee.

                                                     
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                    [Hon. Paul J. Barbadoro, U.S. District Judge]
                                             ___________________

                                                     
                                 ____________________

                               Torruella, Chief Judge,
                                          ___________

                           Campbell, Senior Circuit Judge,
                                     ____________________

                               and Cyr, Circuit Judge.
                                        _____________

                                                     
                                 ____________________

             Jewel  N.  Klein, with  whom Holstein,  Mack  & Klein,  George P.
             ________________             ________________________   _________
        Dickson   and  Law  Offices  of  George  Dickson  were  on  brief  for
        _______        _________________________________
        appellants.
             Douglas G.  Verge, with  whom Richard  P.  Hazelton and  Sheehan,
             _________________             _____________________      ________
        Phinney, Bass & Green were on brief for appellee.
        _____________________

                                                     
                                 ____________________

                                   January 23, 1996
                                                     
                                 ____________________

                    CYR,  Circuit Judge.   The  interesting issue  of first
                    CYR,  Circuit Judge
                          _____________

          impression presented in this case is whether section 501(a)(1) of

          the Depository Institutions Deregulation and Monetary Control Act

          of  1980, 12  U.S.C.    1735f-7a(a)(1) (1988)  ("Monetary Control

          Act"), preempts New Hampshire Rev. Stat. Ann.   397-A:14(I) (West

          Supp.  1994) ("Simple Interest Statute" or "SIS").  In a thought-

          ful and comprehensive opinion, the district  court ruled that the

          Simple  Interest Statute,  as applied  to a  residential mortgage

          loan permitting  negative amortization,  is preempted  by section

          501(a)(1).  

                                          I
                                          I

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                    On January  15, 1988, Dime  Real Estate Services  - New

          Hampshire,  Inc.  ("Dime  Real  Estate NH")  made  a  thirty-year

          adjustable rate loan to Timothy Ray and Thomas F. Richards in the

          approximate amount  of $111,000, secured  by a first  mortgage on

          their  residence in Milford, New Hampshire.  Dime Real Estate NH,

          incorporated  in New  York and  licensed to  extend loans  in New

          Hampshire, is a wholly-owned  subsidiary of Dime Savings Bank  of

          New  York,  FSB ("Dime  Savings"), a  federally-chartered savings

          institution  also incorporated in New York.  The Ray and Richards

          note, which  contained a provision  permitting negative amortiza-

          tion, was assigned to Dime Savings the day it was made.

                    The  interest rate was fixed at 7.75% for the first six

          months, adjustable monthly thereafter at a margin of 3% above the

          "monthly median  cost  of  funds" ratio,  as  determined  by  the

                                          2

          Federal  Home Loan  Bank  Board  ("FHLBB"),  and rounded  to  the

          nearest one-eighth  of one percentage  point.  The  interest rate

          was capped, by agreement, at 9.75% for the second six months, and

          13.875% thereafter.  The  note afforded protection from unantici-

          pated variable interest rate increases by permitting the borrower

          to pay either the total principal and interest due for the month,
                 ______

          or a lower "minimum required  payment amount."  In the  event the
          __   _____

          borrower elected  to make  the lower "minimum  required payment,"

          however, the  interest remaining unpaid  for that month  would be

          added onto  the loan principal, resulting  in "negative amortiza-

          tion," and the interest  due the following month would  be calcu-

          lated on the basis of the higher adjusted loan principal.  

                    On October  31, 1990,  Ray and Richards  conveyed their

          Milford  residence,  subject to  the  Dime  Savings mortgage,  to

          appellants Robert and Jennifer Grunbeck, who occupied it as their

          principal residence.  After the Grunbecks  ceased payments on the

          mortgage in 1993,  Dime Savings  instituted foreclosure  proceed-

          ings.   The  Grunbecks responded  with an  Ex Parte  Petition for

          Injunctive Relief  in New Hampshire state  court, claiming, inter
                                                                      _____

          alia,  that  the  negative  amortization  provision  "compounded"
          ____

          interest and, therefore, violated  the Simple Interest  Statute.1
                              
          ____________________

               1The Simple Interest Statute provides:
            
                    Any first mortgage  home loan made  under the
                    provisions  of  this chapter  [Chapter 397-A:
                    Licensing  of  Nondepository  First  Mortgage
                    Bankers and  Brokers  of Title  35 Banks  and
                    Banking;  Loan  Associations; Credit  Unions]
                    shall provide for the computation of interest
                    on a simple interest basis.  

                                          3

          Dime Savings promptly removed the case to federal district court,

          see  28 U.S.C.     1441,  1446; see  also id.     1332 (diversity
          ___                             ___  ____ ___

          jurisdiction),  then  moved to  dismiss  on  the ground,  amongst

          others,2  that  section 501(a)(1)  of  the  Monetary Control  Act

          preempts the Simple Interest Statute.  In due course the district

          court  entered judgment  for Dime  Savings, see Grunbeck  v. Dime
                                                      ___ ________     ____

          Sav. Bank of New York, FSB, 848 F. Supp. 294,  (D.N.H. 1994), and
          __________________________

          the Grunbecks appealed.

                                          II
                                          II

                                      DISCUSSION
                                      DISCUSSION
                                      __________

          A.   Standard of Review
          A.   Standard of Review
               __________________

                    We review  Rule 12(b)(6) dismissals de  novo, crediting
                                                        __  ____

          all well-pleaded  allegations.  Clarke v.  Kentucky Fried Chicken
                                          ______     ______________________

          of Cal., Inc., 57 F.3d 21,  22 n.1 (1st Cir. 1995).   For present
          _____________

          purposes, therefore,  we accept the allegation  that the negative

          amortization provision in the loan agreement "compounds" interest

          and thus  contravenes the Simple Interest  Statute.  Accordingly,

                              
          ____________________

          N.H. Rev. Stat. Ann.   397-A:14(I).  

               2Dime Savings presented  additional defensive claims  below,
          including  that (1)  the SIS  is  preempted by     804(c) of  the
                                                                    
          Alternative  Mortgage Transaction Parity Act of 1982, 12 U.S.C.  
          3803(c) (1988),  (2) the  negative amortization provision  in the
          Dime Savings  note does  not "compound" interest  and, therefore,
          does not violate  the SIS, and 3) for  various reasons, the Grun-
          becks lack "standing" to  challenge the SIS.  The  district court
          bypassed these  claims, and dismissed on the Monetary Control Act
          preemption ground.  Grunbeck v. Dime  Sav. Bank of New York, FSB,
                              ________    ________________________________
          848 F. Supp. 294, 296 n.2 (D.N.H. 1994).  We do not address these
          claims.   In particular, we  bypass the "standing"  claim because
          the undeveloped  record does  not enable its  reliable determina-
          tion.  

                                          4

          we  turn to consider whether  the statute, so  construed, is pre-

          empted by section 501(a)(1).3  

          B.   Monetary Control Act Preemption
          B.   Monetary Control Act Preemption
               _______________________________

                    Congress' power  to preempt state law  derives from the

          Supremacy Clause of the United States Constitution.   E.E.O.C. v.
                                                                ________

          Massachusetts,  987 F.2d  64,  67 (1st  Cir.  1993).   "[I]n  any
          _____________

          preemption analysis,  'the question  of whether federal  law pre-

          empts a state statute  is one of congressional intent.'"   Green-
                                                                     ______

          wood  Trust Co.  v. Massachusetts,  971 F.2d  818, 823  (1st Cir.
          _______________     _____________

          1992), cert. denied, 113 S. Ct. 974 (1993) (quoting French v. Pan
                 _____ ______                                 ______    ___

          Am Express, Inc., 869 F.2d  1, 2 (1st Cir. 1989)).   Although the
          ________________

          preemption  power is  not  liberally exercised  by Congress,  id.
                                                                        ___

          (citing Gregory v. Ashcroft,  111 S. Ct. 2395, 2400 (1991)), if a
                  ________   ________

          federal  statute  includes  an express  preemption  provision the

          court  need only determine its  scope.  Id.  (citing Cipollone v.
                                                  ___          _________

          Liggett Group, Inc., 112 S. Ct. 2608, 2618 (1992)).  
          ___________________

               1.   Rules of Construction
               1.   Rules of Construction
                    _____________________

                    The  scope  of  an  express  preemption   provision  is

          gleaned,  first and  foremost, from the  language of  the federal

          statute,  employing traditional rules  of statutory construction.

                              
          ____________________

               3The  district court construed the SIS as a ban on "compound
          interest," or  "charg[ing] interest on interest."   Grunbeck, 848
                                                              ________
          F. Supp. at 296 n.2, 298-300, 302-03.  The parties do not dispute
          its  construction.   In  addition,  the  State of  New  Hampshire
          asserted in  its amicus memorandum below, that "The New Hampshire
          Banking Department  has construed the [SIS]  as banning regulated
          mortgage companies from using any computational method other than
          simple  interest in  loan  products     including,  specifically,
          assessments  of  interest  on  deferred interest      unless  the
          practice is permitted by overriding federal law."  

                                          5

          CSX Transp., Inc.  v. Easterwood,  113 S. Ct.  1732, 1737  (1993)
          _________________     __________

          ("If the statute contains an express pre-emption clause, the task

          of statutory construction must in the first instance focus on the

          plain wording of  the clause, which necessarily contains the best

          evidence of Congress' pre-emptive intent.").   Of course, if  the

          statutory  language  is  ambiguous,  Burlington N.  R.R.  Co.  v.
                                               ________________________

          Oklahoma Tax Comm'n, 481 U.S.  454, 461 (1987), or would  work an
          ___________________

          unreasonable result, we may consult relevant legislative history,

          Cabral v.  INS, 15 F.3d 193,  194 (1st Cir. 1994),  to confirm an
          ______     ___

          interpretation indicated  by the  plain language.   Strickland v.
                                                              __________

          Commissioner, Maine Dep't. of  Human Servs., 48 F.3d 12,  17 (1st
          ___________________________________________

          Cir.),  cert. denied,  116  S. Ct.  145  (1995), (citing  INS  v.
                                                           
                  ____  ______                                      ___

          Cardoza-Fonseca, 480 U.S. 421, 432-43, 446 (1987)).  
          _______________

                    Where  Congress has  spoken directly  to the  issue, an

          interpretation rendered by the agency responsible for administer-

          ing  the statute is entitled  to no special  deference.  Chevron,
                                                                   ________

          U.S.A.  Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
          ____________    _______________________________________

          837, 842 (1984).  In all events, the courts will reject an agency

          interpretation which conflicts with congressional intent.  Id. at
                                                                     __

          843  n.9.   Finally,  we attribute  "ordinary  meaning" to  plain

          statutory terms,  see Greenwood Trust,  971 F.2d  at 824  (citing
                            ___ _______________

          Morales  v. Trans  World Airlines,  Inc., 112  S. Ct.  2031, 2036
          _______     ____________________________

          (1992)), but  may  reject an  express preemption  claim absent  a

          sufficiently clear license to trespass on state sovereignty.  See
                                                                        ___

          E.E.O.C., 987 F.2d at 68 (citing Gregory, 111 S. Ct. at 2401).  
          ________                         _______

                    The  Monetary Control  Act preemption  provision relied

                                          6

          upon by the district court states in relevant part:

                    The provisions of the constitution or laws of
                                                          ____
                    any  State expressly  limiting  the  rate  or
                               _________  ________  ___  ____  __
                    amount of interest, discount  points, finance
                    ______ __ ________
                    charges,  or  other  charges  which   may  be
                                                  _____   ___  __
                    charged, taken, received,  or reserved  shall
                    _______                                 _____
                    not apply to any loan, mortgage, credit sale,
                    ___ _____ __ ___ ____  ________
                    or advance which is     
                               _____ __
                         (A)  secured by  a  first  lien  on
                              _______ __  _  _____  ____  __
                         residential real property . . .;
                         ___________ ____ ________
                         (B) made after March 31, 1980; and
                         (C) described in section  527(b) of
                         the National Housing Act . . . . 

          12 U.S.C.    1735f-7a(a)(1) (emphasis added).4  Like the district

          court,  see Grunbeck, 848 F.  Supp. at 297-98,  the parties focus
                  ___ ________

          their preemption  analyses primarily on the  phrase "limiting the

          rate or amount of interest." 

                    As  Dime  Savings views  the  matter,  the SIS  plainly

          "limits" the "rate or  amount of interest" received in  the sense

          that  more interest would be paid by the borrower were "compound-
                ____

          ing" not banned under  the SIS; and the SIS  effectively "limits"

          the "amount" of interest the lender can recover in the sense that

          the lender could earn  more interest were it permitted  to charge

          interest at the same "rate" calculated on a compound basis.
                          ____        __________ __ _ ________ _____

                    These arguments  rest on the implicit  premise that the

          "amount"  of interest the lender  may charge is  "limited" by the

          SIS.  On  the contrary, the SIS imposes no  restriction on either

          the  "rate" or  the  "amount" of  interest  the borrower  may  be

          charged,  but merely  requires that any  interest rate  or amount
                                              ___

                              
          ____________________

               4The Grunbecks do not dispute that the Dime Savings mortgage
          loan  meets the three criteria set out in   s (A)-(C).  Grunbeck,
                                                                  ________
          848 F. Supp. at 297 n.4.  

                                          7

          agreed  to  by the  parties be  computed  on a  "simple interest"
                                          ________

          basis.  Thus, nothing in the SIS prevents a lender from contract-

          ing  for whatever  simple  interest rate  will exact  an interest
                             ______

          return  equal  to or  greater than  whatever  rate and  amount of

          interest  would  be recoverable  through  compounding.   The  SIS

          leaves  entirely to  the parties  the rate  and amount  of simple

          interest to be exacted. 

                    The  Dime Savings interpretation  blurs the distinction

          between the terms  "rate" and  "amount" of interest,  as used  in

          section  501(a)(1).   It  assumes  that the  central  question   
                                    _______

          whether  the SIS limits  the "rate" of  interest    is  to be re-
                                                             
                           ______

          solved through  reference  to  the  effect the  SIS  ban  against
                                              ______

          charging interest  on interest  might have  upon the "amount"  of

          interest  the lender may be  able to command  in the marketplace.
                    ___ ______ ___ __  ____ __ _______  __ ___ ___________

          Not only does this assumption implicitly acknowledge that the SIS

          itself imposes no statutory  limit on the simple  interest "rate"
                            _________  _____

          lenders  may charge, but it  alters the fundamental  focus of the

          preemption debate by inquiring whether the SIS might make it more

          difficult for lenders to command    in a better-informed  market-

          place (i.e., wherein a  "simple interest" calculation is mandato-

          ry)    either the rate or amount of interest otherwise obtainable

          by "compounding."5  
                              
          ____________________

               5As  the district  court  observed, "without  being able  to
          charge interest  on interest, many lenders would not allow poten-
          tial  borrowers to  defer accrued  interest."   Grunbeck, 848  F.
                                                          ________
          Supp.  at 299.  In other words,  many lenders might choose not to
                                                              ______
          compensate by increasing the simple interest rate, and  might not
          permit  borrowers to defer interest payments on which no interest
          ______
          could be  charged.  Although unimpeachable,  these considerations

                                          8

                    No  less  importantly,  the  shift  in  analytic  focus

          attending the  Dime Savings'  assumption undermines  the required

          "plain  language"  interpretation,  see  Morales v.  Trans  World
                                              ___  _______     ____________

          Airlines, Inc., 504  U.S. 374, 383-84  (1992), by extirpating    
          ______________

          from the pivotal section 501(a) clause:   "expressly limiting the

          rate or amount of  interest"    the important modifier  "express-

          ly."   Thus, the preemption  inquiry urged by  Dime Savings would

          focus not on whether the "express" language of the SIS "limit[s]"

          the rate  or amount of interest which  the lender may charge, but

          on broad-gauged assessments concerning  the likely impact the SIS
                                                             ______

          ban on  compounding would have  on home-mortgage lenders  and the

          industry at large. 

                    When engaged in  the task of  statutory interpretation,

          "[c]ourts . . . should . . . attempt to give meaning to each word

          and  phrase."  See United  States v. Flores,  968 F.2d 1366, 1371
                         ___ ______________    ______

          (1st Cir. 1992).  Thus, in our view the district court mistakenly

          inquired  whether the SIS ban against charging interest on inter-

          est  could affect the amount of interest lenders might command in
               _____ ______
                              
          ____________________

          are inapposite to the present discussion.
               First,  were a  lender to  opt not  to permit  deferments of
          interest payments, it nonetheless would receive both the rate and
          amount of simple interest  for which it contracted on  all monies
          loaned.   Second, in any  such transaction  it could not  be said
          that  the SIS, either directly  or effectively, limited the legal
                    ___
          rate or amount of interest chargeable by the lender.  To be sure,
          lenders who chose not to offset the SIS ban by raising the simple
          interest rate,  or chose  not  to permit  deferments of  interest
          payments, would realize less total interest income as a result of
          their lending  decision.  But  as the  State noted in  its amicus
          memorandum  below, "[t]o  the  extent that  this requirement  may
          affect the total amount  of interest potentially realizable under
          the Dime [Savings]  loan, such  effect is incidental  to the  re-
          quirement and cannot be viewed as an 'express' usury ceiling."  

                                          9

          the marketplace,  thereby not  only eliding the  term "expressly"

          but overlooking the term "limiting" however defined.6

                    Moreover,  the language  Congress  employed in  section

          501(a)(1)    "expressly  limiting the rate or amount of interest"

             contrasts  sharply with  the preemption language  in companion

          section 521  of the Monetary  Control Act, whereby  Congress pre-

          empted all state legislation "with respect  to interest rates" in
                                        ____ _______  __

          order  to protect  federally insured  State-chartered banks  from

          State  regulation of credit card  transactions.  See  12 U.S.C.  
                                                           ___

          1831d(a) (emphasis added).  See also Greenwood Trust, 971 F.2d at
                                      ___ ____ _______________

          830  n.10  ("[S]ection  501  addresses  different  categories  of

          lenders and  loans and contains  materially different  preemption

          terms than does section  521.").  Thus, it is important to recog-

                              
          ____________________

               6In parsing  the   501(a)(1) text, the district court recog-
          nized that the parties' differing views as to the significance of
          the term  "limiting" accounted for their  widely divergent inter-
          pretations.  The court  observed that "Dime [Savings] essentially
          construes 'limiting' as an adjective meaning 'serving to restrict
          or restrain.' .  . . The Grunbecks and  the State ... essentially
          construe  'limiting' as a verb meaning to impose a 'final, utmost
          or furthest boundary' on  permissible interest rates or amounts."
          Grunbeck, 848 F. Supp. at 298.  
          ________
               In our view, however, the plain statutory language cannot be
          read as  Dime Savings  suggests, without  ignoring the  term "ex-
                                                    ________
          pressly," see Flores, 968 F.2d at  1371, and without disregarding
                    ___ ______                                 ____________
          the  "ordinary meaning"  of  the term  "limiting," see  Greenwood
                                                             ___  _________
          Trust, 971  F.2d at 824.   The SIS itself, as  distinguished from
          _____                                      __  _____________ ____
          market forces, does not "serve to . . . restrain" either the rate
          ______ ______
          or amount of  simple interest  which may be  obtained, since  the
          lender  remains  free  to  compensate by  increasing  the  simple
          interest rate.   Thus, the  SIS does not  "expressly" limit  "the
          rate  or amount of interest."  Nor,  in the alternative, does the
          SIS    as distinguished from market forces    "limit" the rate or
                    _____________ ____ ______ ______
          amount  of interest if "limit" means a "final, utmost or furthest
          boundary"  on the  rate  or amount  of  interest, since  the  SIS
          imposes no ceiling  whatsoever on  either the rate  or amount  of
                     _______
          simple interest that may be exacted. 

                                          10

          nize that the Congress which enacted the Monetary Control Act was

          acutely aware that  its choice of the  distinctive terminology   

          "expressly limiting"     would serve as  the primary interpretive

          tool through which its preemptive intent would be revealed to the

          courts.  See BFP v. Resolution Trust Corp., 114 S. Ct. 1757, 1761
                   ___ ___    ______________________

          (1994)  (Congress is presumed to act with intent and purpose when

          it uses particular language in  one section of a statute  and not

          in another.).7  
                              
          ____________________

               7The  district court  drew encouragement for  its preemption
          ruling from "[p]revious  interpretations of  similar language  in
          similar legislation," with particular  reference to the  National
          Bank Act  of 1864, ch. 106,  13 Stat. 99 (codified  as amended in
          various sections of Title 12, United States Code).  Grunbeck, 848
                                                              ________
          F. Supp.  at 300.  Section  85 of the National  Bank Act provided
          that "a bank may charge 'interest at the rate allowed by the laws
          of the  State, .  . . where  the bank is  located and  no more.'"
          Citizens' Nat'l Bank of Kansas City v. Donnell, 195 U.S. 369, 373
          ___________________________________    _______
          (1904).  Section 86 stated  that "taking, receiving, or  charging
          'a  rate of  interest greater  than is  allowed by  the preceding
          section, when knowingly done, shall be deemed a forfeiture of the
          entire interest which the  note, bill, or other evidence  of debt
          carries with it,  or which has been agreed to  be paid thereon.'"
          Id.  
          ___
               The district court expressed  the view that Donnell supports
                                                           _______
          a broad reading of   501(a)(1), in two respects.

                    First, it offers persuasive support  for con-
                    struing "laws limiting the rate or amount  of
                    interest"  to  include laws  prohibiting com-
                    pound  interest. .  . . Second,  it indicates
                    that such laws  also qualify as state  "usury
                    laws" which  the title  to   501(a)(1)  indi-
                    cates Congress intended to preempt.

          Grunbeck,  848 F.  Supp.  at 301.   We  think the  district court
          ________
          misapprehended  the purport of  Donnell, as  well as  its bearing
                                          _______
          upon the question before us.  
               First,  the National Bank Act is largely inapposite to   501
                                                                        501
          of the Monetary Control Act.  In drafting   501, Congress did not
          borrow language from the National  Bank Act.  On the other  hand,
          Congress did  borrow  language  from  the National  Bank  Act  in
          drafting   521 of the Monetary Control Act.  Greenwood Trust, 971
                     521                               _______________
          F.2d at  827.   "[S]ection 521 was  conceived as an  offspring of

                                          11

               2.   Legislative History  
               2.   Legislative History  
                    ___________________

                    Even  assuming  ambiguity  in  the   phrase  "expressly

          limiting the rate or amount of interest," see  Cabral, 15 F.3d at
                                                    ___  ______

          194, relevant  legislative  history clearly  reflects a  congres-

          sional  intention  to  confine  the scope  of  section  501(a)(1)

          preemption  to state  laws which  impose express ceilings  on the
                                                           ________

          rate or amount of interest which may be charged, as distinguished

          from bans  against charging interest on  interest or compounding.
               ____

          The legislative  aim in  enacting section  501 focused  on "state

          usury ceilings," S.  Rep. No.  368, 96th Cong.,  2d Sess.  18-19,
                ________

          reprinted in 1980 U.S.C.C.A.N. 236, 254-55 (emphasis added), with
          _________ __

          particular emphasis  on state usury laws  which restrict interest

          rates to below-market levels and result in artificial disruptions
                   ____________                      __________ ___________

          in the supply of home-loan mortgage funds.

                    The  Committee finds  that where  state usury
                    laws  require  mortgage  rates  below  market
                    levels of interest,  mortgage funds in  those
                    states  will  not  be readily  available  and
                    those funds will  flow to other states  where
                              
          ____________________

          section 85 of the Bank Act . . . ."  Id. at 830 n.10.   Thus, the
                                               ___
          Monetary  Control  Act  includes  two  separate  and dramatically
          different preemption provisions.  Id.  Consequently, an interpre-
                                            __
          tation of  the progenitor of   521,  i.e., the National Bank Act,
                                         521
          affords  little, if any, insight into the   501 preemption provi-
                                                      501
          sion at issue in the present case.      Second,     Donnell    is
                                                              _______
          inapposite to the  present inquiry not only because  it construed
          an  unrelated statute       85  of the  National Bank  Act    but
          because the SIS does not "expressly limit[] the rate or amount of
                                    _________
          interest"  even assuming that  a ban  against compounding  can be
                                           ___
          considered a limitation on  the rate of interest "allowed  by the
                       __________
          laws of the State . . . ."  Donnell, 195 U.S. at 373.  Indeed, it
                                      _______
          is surpassingly awkward to ascribe  meaning to the term "express-
          ly"  if the  SIS ban  against compounding  is considered  an "ex-
                           ___                                          ___
          press[] limit[ation on] the rate or amount of interest" which may
          _____   ___________         ____ __ ______
          be charged, since no rate or amount of "interest on interest" may
                            __
          be charged under the SIS.

                                          12

                    market yields are available.  This artificial
                    disruption of funds  availability not only is
                    harmful  to  potential  homebuyers in  states
                    with  usury laws, it also frustrates national
                    housing policies and programs. 
                     
          Id.  at 254.  Congress thus  sought to  facilitate first-mortgage
          ___

          home loans at market rates, in order to enable an adequate credit

          supply and strengthen the financial system. 

                         In  addition to  the adverse  effects of
                    usury ceilings on credit  availability, mort-
                    _____ ________
                    gage rate ceilings must be removed if savings
                              ________
                    and  loan institutions . .  . are to begin to
                    pay market  rates of interest on  savings de-
                    posits.   Without  enhancing the  ability  of
                    institutions  to achieve market rates on both
                    sides of their  balance sheets, the stability
                    and  continued viability of  our nation's fi-
                    nancial system would not be assured.   

          Id. at 255 (emphasis added).  
          ___

                    The  district  court   correctly  noted  that  Congress

          intended to preempt state laws imposing usury ceilings, Grunbeck,
                                                        ________  ________

          848 F. Supp.  at 299, but nonetheless concluded that "the [SIS] .

          .  .  would limit  the availability  of mortgage  funds in  a way
                                                                  __  _ ___

          comparable  to a numerical cap on interest rates."  Id. (emphasis
          __________  __                                      ___

          added).  True, demand  for home mortgage credit could  be reduced

          were lenders to decline  to defer interest payments, even  though

          the  SIS does not place a ceiling  on simple interest rates.  But

          though potential  homebuyers might  borrow less (or  not at  all)

          were  lenders to decline to defer interest payments or demand too

          high a  rate or  amount  of simple  interest  for doing  so,  the

          potential  homebuyer's decision  would  be the  result of  market

          forces,  the phenomenon  Congress  set out  to facilitate  in its
                   ___ __________  ________  ___ ___  __ __________  __ ___

          enactment  of section  501(a)(1).   That is  to say, the  SIS ban
          _________  __ _______  _________

                                          13

          against  charging interest  on  interest  would neither  "require
                                                                    _______

          mortgage  rates  below  market  levels of  interest,"  nor  cause
                                                                      _____

          "artificial disruption in funds  availability."  See 1980 U.S.C.-
           __________                                      ___

          C.A.N. at 254 (emphasis added).
                        

                    Moreover, market adjustments in simple  interest rates,

          which New Hampshire home mortgage lenders are free to adopt under

          the SIS, tend  to promote equilibrium  between credit supply  and

          credit demand.  In contrast, lenders  may be forced from a credit
                                                       ______

          marketplace  governed by  interest rate  ceilings where  the only
                                                   ________

          alternative is to make  loans at interest rates below  the levels

          obtainable in competing  loan markets.  Credit  supply is artifi-
                                                                 __ _______

          cially  disrupted in  such a  lending environment  because credit
          ______  _________

          demand  tends to go unmet where borrowers are attracted by below-
          ______

          market interest rates but lenders  are not.  As a result,  credit
                                ___ _______  ___ ___

          demand and credit supply are less likely to attain equilibrium at

          the usury-ceiling  level.  In these  respects at least, a  ban on

          compounding is in no sense comparable to a mortgage interest rate

          ceiling.8   Thus, an  outright ban  against charging  interest on
                              
          ____________________

               8As  a "[p]revious  interpretation  of  similar language  in
          similar legislation," the district court cited to "Fourchon, Inc.
                                                             ______________
          v.  Louisiana Nat'l Leasing Corp., 723 F.2d 376, 381-83 (5th Cir.
              _____________________________
          1984)  (construing phrase 'rate of interest' in [  926(d) of the]
          Preferred Ship Mortgage Act in accordance with previous construc-
          tion of similar phrase in National Bank  Act to preempt state law
          prohibiting charging of interest on interest)."  Grunbeck, 848 F.
                                                           ________
          Supp. at  300.  But  the policies  subserved by    926(d) of  the
          Preferred Ship Mortgage Act are much broader than those  underly-
          ing    501  of the  Monetary Control  Act.   "The  Preferred Ship
          Mortgage Act was  designed to avoid parochial  limitations on the
          ready availability of credit  to the shipping industry  by wholly
                                                                     ______
          and  completely  superseding  state  law and  practice  in  every
          ___  __________  ___________
          respect."   Fourchon,  723 F.2d  at  387 (Shaw,  J.,  dissenting)
                      ________
          (emphasis  added).   "[T]he  policies behind  the Preferred  Ship

                                          14

          interest  does not work the adverse effects on the credit market-

          place  which  concerned  Congress  in  section  501(a)(1),  viz.,

          artificial  disruptions  in credit  availability caused  by State
          __________

          ceilings  on  interest  rates  resulting  in below-market  rates.
          ________                                     ____________

          Accordingly, we believe the relevant legislative history provides

          sturdy support for the view that the important modifier "express-

          ly" may not be read out of section 501(a)(1) and the term "limit-

          ing" is not to be equated with "banning." 

                    Congress  also signaled  its  narrow preemptive  intent

          under section  501(a)(1) by insulating these  mortgage loans from

          state  usury  limitations  only,  and not  from  other  state-law
                 _____  ___________  ____

          limitations encompassed  within the "annual  percentage rate" nor

          other state-law limitations designed to protect borrowers:

                    In exempting mortgage loans from  state usury
                    limitations, the Committee intends  to exempt
                    only those  limitations that are  included in
                    the  annual percentage  rate.   The Committee
                    does  not intend  to  exempt  limitations  on
                    prepayment charges, attorney fees, late char-
                    ges  or similar limitations  designed to pro-
                         __ _______ ___________  ________ __ ____
                    tect borrowers.  
                    ____ _________

          1980  U.S.C.C.A.N. at 255  (emphasis added).   The district court

          concluded,  without  elaboration,   that  "interest  on  interest

          prohibitions . . .  are 'included' in the interest  rate."  Grun-
                                                                      _____

          beck, 848 F. Supp. at  300.  Dime Savings so contends  on appeal,
          ____
                              
          ____________________

          Mortgage  Act support  an  expansive interpretation  of the  term
          'rate of interest'  in section  926(d)."  Fourchon,  723 F.2d  at
                                                    ________
          382.   As discussed above, however, see Section B.2, the policies
                                              ___
          underlying    501  of the  Monetary Control Act do  not support a
          broad interpretation of  the term "rate  or amount of  interest."
          Consequently, the Fourchon  interpretation affords little insight
                            ________
          into the  preemptive  intent underlying     501 of  the  Monetary
          Control Act. 

                                          15

          maintaining that the SIS ban against charging interest on  inter-

          est is included in the "annual interest rate."  We cannot agree. 

                    In the first place,  a ban against compounding interest

          affords significant consumer protections to homebuyers.  Charging

          interest on  deferred interest  under a residential  mortgage not

          only increases  the "unseen" costs  of home ownership  but erodes
                                       _____

          home equity.  Moreover, the relevant legislative history address-

          es "state usury  limitations" only.  The SIS, on  the other hand,
                           ___________

          is no mere  "limitation" but an outright  ban against calculating

          interest on interest.   The ordinary meaning of the  term "limit-

          ing" is  either    as the district court and Dime Savings view it

             "serving to restrict or restrain" or    as the Grunbecks  urge

             to enforce  a "final,  utmost or furthest  boundary."  Id.  at
                                                                    ___

          298.   But the  SIS does not  merely "limit," nor  does it simply
                                                        ___

          "restrain,"  compounding;  it prohibits  it.    Thus, the  "plain
                                        _________

          language"  interpretation advocated  by  Dime  Savings cannot  be

          endorsed  without  disregarding  the  ordinary  meanings  of  the

          distinctive terms "ban" or  "prohibit" and "limit" or "restrain."

          See Greenwood Trust, 971 F.2d at 824. 
                                                
          ___ _______________

               3.   Administrative Regulations and Opinions  
               3.   Administrative Regulations and Opinions  
                    _______________________________________

                    Congress authorized  the FHLBB  and its successor,  the

          Office of Thrift Supervision ("OTS"), "to issue rules and regula-

          tions and to publish interpretations governing the implementation

          of [section 501]."   12 U.S.C.   1735f-7a(f).  Judicial review of

          an agency's  interpretation of the statute  it administers impli-

          cates two  preliminary  inquiries.   Strickland,  48 F.3d  at  16
                                               __________

                                          16

          (citing  Chevron, 467  U.S.  at  842-43).  The first  is  whether
                   _______

          Congress has "directly spoken to  the precise question at issue."

          Id.  (quoting Chevron, 467 U.S. at 842) (internal quotation marks
          ___           _______

          omitted).  If  not, we  inquire "whether the  agency's answer  is

          based  on a permissible construction of the statute."  Id. (quot-
                                                                 ___

          ing Chevron, 467 U.S. at 843) (internal quotation marks omitted).
              _______

          Although we accord deference  to the agency's interpretation, the

          final  word  on  statutory  interpretation  is  for  the  courts.

          Chevron, 467 U.S. at 843 n.9 ("The judiciary is the final author-
          _______

          ity on issues of statutory construction and must reject  adminis-

          trative  constructions which are  contrary to clear congressional

          intent.").   Furthermore,  "[i]f  a court,  employing traditional

          tools of statutory construction,  ascertains that Congress had an

          intention on the precise question at issue, that intention is the

          law and must be given effect."   Id.  Where an agency interpreta-
                                           ___

          tion  is based exclusively on  its reading of  the bare statutory

          language, no special deference  is due.  See Strickland,  48 F.3d
                                                   ___ __________

          at 16.  Furthermore, if "the statute itself, viewed in connection

          with the statutory design and the legislative history, reveals an

          unequivocal  answer  to the  interpretive  question, the  court's

          inquiry ends."  Id. at 17.
                          __

                    a. FHLBB Regulations
                    a. FHLBB Regulations
                       _________________

                    The FHLBB has issued administrative regulations for the

          implementation  of section  501, see  12 C.F.R. Part  590 (1988),
                                           ___

          which  focus upon the effect  of interest ceilings  on the avail-
                                                    ________

          ability of  mortgage  credit.   "The  purpose of  this  permanent

                                          17

          preemption of state interest-rate ceilings applicable to Federal-
                                            ________

          ly-related  residential  mortgage loans  is  to  ensure that  the

          availability of  such  loans  is  not impeded  in  states  having

          restrictive  interest limitations. . .  ."  12  C.F.R.   590.1(b)

          (emphasis  added).  The  FHLBB has reaffirmed  that "[n]othing in

          this  section preempts  limitations in  state laws  on prepayment

          charges,  attorneys'  fees,  late  charges  or  other  provisions

          designed to protect borrowers."  Id.   590.3(c).  
                                           ___

                    A  statute that  imposes an  outright ban  against com-

          pounding does not place a "ceiling" on interest rates or amounts.

          See  supra pps.  12-14.   Moreover, assuming  it may  affect loan
          ___  _____

          demand,  a ban  against  charging interest  on interest  does not

          artificially  disrupt the  availability of home  mortgage credit.
          ____________  _______

          See  supra at pps. 12-15.   Finally, given  the commercial reali-
          ___  _____

          ties,  it is reasonably clear  that the SIS  ban against charging

          interest on  interest not  only affords important  protections to

          homebuyers  but  does so  without  "expressly  limiting" interest

          rates.

                    b. The FHLBB and OTS Opinions  
                    b. The FHLBB and OTS Opinions
                       __________________________

                    In response to an inquiry in 1984 as to whether "Michi-

          gan laws regarding the charging of interest on deferred interest"

          were  preempted by section 501, the FHLBB opined that "state laws

          which would prohibit the charging of [interest on] interest would

          constitute provisions  'limiting the rate or amount of interest .

          . . which  may be charged. .  . .'  It  is our opinion that  such

          charges  are  not  consumer  protection provisions  of  the  type

                                          18

          contemplated by  12 C.F.R.   590.2(c) (1984)  such as limitations

          on prepayment  charges, attorney's fees  and late charges."   Op.

          Off. Gen. Counsel, FHLBB 1097 (November 15, 1984).   In 1991, the

          OTS  followed suit  with an  opinion reaffirming  the  1984 FHLBB

          opinion that a state statute regulating "compounding" is preempt-

          ed by  section 501.   Op. Off. Chief Counsel,  OTS 91/CC-37 (Aug.

          16, 1991).

                    We agree  with the  district court that  these opinions

          are not controlling.   See Grunbeck,  848 F. Supp.  at 298  ("Al-
                                 ___ ________

          though these two  opinions unequivocally support [Dime  Savings']

          reading of   501(a)(1), the regulators have failed to provide any

          analytical support for [their conclusion].  In this circumstance,

          absolute  deference   would  be  nothing  more   than  blind  al-

          legiance.").   The  district  court's  observations  are  plainly

          correct.   Neither regulatory body  tendered a rationale  for its
                                                         _________

          opinion.   The  FHLBB     the first  to address  the question    

          neither described, nor cited, the Michigan provision to which its

          opinion related.9  And neither  agency parsed the section 501(a)-

          (1) preemption clause language.  

                    As deference ultimately "depends on  the persuasiveness

          of  the agency's position," Strickland,  48 F.3d at  18, we agree
                                      __________

          that none is due in this instance.  The interpretation adopted by

                              
          ____________________

               9The OTS indicated that the party requesting its opinion had
          represented  that Michigan has no statute on the subject and that
          the Michigan provision relating  to "interest on interest" origi-
          nated  in uncited caselaw announced around the turn of the centu-
          ry. 

                                          19

          these agencies disregarded entirely the term "expressly"    which

          plainly constrains the scope  of the section 501(a)(1) preemption

          clause    and overlooked the relevant legislative history explic-

          itly declaring a congressional  intention to preempt state usury-

          law ceilings      as distinguished  from bans  on compounding    
              ________

          which  result  in artificial  disruptions  in home-mortgage  loan

          credit by  mandating below-market interest rates.   Finally, even
                               ____________

          assuming the  FHLBB interpretation  were apposite to  the present

          discussion, in the respect that the Michigan provision with which

          it  dealt  imposed a  ban on  compounding,  there is  no explicit

          indication that either agency considered the significant consumer

          protections, see supra  at 15, afforded by state  bans    such as
                       ___ _____

          the SIS    against  charging interest on interest.  For these and

          other  reasons discussed at  length in this  opinion, we conclude

          that  the agency  interpretation  relied on  by  Dime Savings  is

          unpersuasive and entitled to no deference in the present context.

                    c.  The Parity Act
                    c.  The Parity Act
                        ______________

                    The district  court rejected the  State's argument that

          passage  of the  Alternative Mortgage  Transaction Parity  Act of

          1982 ("Parity Act"), 12 U.S.C.     3801 et seq., two years  after
                                                  __ ___

          passage of the  Monetary Control Act, supports a narrow construc-

          tion of the preemptive scope of section 501(a)(1).  Grunbeck, 848
                                                              ________

          F. Supp.  at 301-02.   We  nonetheless  believe that  significant

          insight can be gleaned from the Parity Act.  

                    The Parity Act preempts State bans on certain "alterna-

                                          20

          tive mortgage  transactions,"10 by which is meant  "all manner of

          mortgage  instruments  that do  not  conform  to the  traditional

          fully-amortized,  fixed-interest-rate  mortgage  loan."     First
                                                                      _____

          Gibraltar  Bank, FSB  v. Morales,  19 F.3d  1032, 1037  (5th Cir.
          ____________________     _______

          1994), cert. denied, 115 S. Ct. 204, vacated on other grounds, 42
                 _____ ______                  _______ __ _____ _______

          F.3d 895 (5th Cir. 1995) (per curiam).  Common forms of "alterna-

          tive  mortgage transactions"  include  adjustable  interest  rate

          mortgages, which may permit  negative amortization, and graduated

          payment  mortgages,  which  may temporarily  lower  the  mortgage

          payment  to  less than  the  monthly interest  due,  resulting in

          planned negative amortization whereby  interest is charged on the

          deferred  interest.  Id. (citing  generally to Grant  S. Nelson &
                               ___

          Dale A.  Whitman, Real Estate Transfer,  Finance, and Development
                            _______________________________________________

          1000-13  (4th ed.  1992)).   Other planned  negative amortization
                              
          ____________________

               10The  term  "alternative  mortgage  transaction"   means  a
          residential mortgage loan  
                         (A) in  which the interest  rate or
                         finance charge may  be adjusted  or
                         renegotiated;
                         (B)  involving  a  fixed-rate,  but
                         which  implicitly permits  rate ad-
                         justments by having the debt mature
                         at the  end of an  interval shorter
                         than the term  of the  amortization
                         schedule; or
                         (C) involving any  similar type  of
                         rate, method of determining return,
                         term, repayment, or other variation
                         not  common  to traditional  fixed-
                         rate, fixed-term  transactions, in-
                         cluding without limitation,  trans-
                         actions that involve the sharing of
                         equity or appreciation;
                    described and defined  by applicable  regula-
                    tion. 

          12 U.S.C.   3802(1). 

                                          21

          provisions include  the reverse annuity mortgage  ("RAM") and the

          credit  conversion mortgage,  both  of which  charge interest  on

          deferred interest.  Id.  "An alternative mortgage transaction may
                              ___

          be  made by a housing creditor in accordance with [section 3803],

          notwithstanding any  State constitution, law or  regulation."  12

          U.S.C.   3803(c).   It is a requirement of  section 3803 that for

          "housing creditors [other  than banks  and credit unions]  . .  .

          transactions  [must  be]  made  in  accordance  with  regulations

          governing  alternative mortgage  transactions  as  issued by  the

          [OTS]  . . . ."  Id.   3803(a)(3).  These OTS regulations, see 12
                               
                           ___                                       ___

          C.F.R.    545.33(f)(4)-(11) (1988),  impose, inter alia, substan-
                                                       _____ ____

          tial lender  disclosure requirements relating  to features unique

          to alternative mortgage transactions.  

                    The State argued below that it would be "'illogical and

          contrary  to  public policy'"  for Congress  to  require     as a

          precondition to preemption under the Parity  Act    that negative

          amortization loans conform  with OTS  disclosure regulations  "if

          lenders could  claim preemption  for the same  transactions under

          [the Monetary  Control Act]  without making the  required disclo-

          sures."   Grunbeck, 848 F. Supp.  at 302.  Although,  as the dis-
                    ________

          trict  court  correctly   observed,  "[c]onstruing  the  Monetary

          Control Act to  preempt simple interest  laws does not  eliminate
                                                                  _________

          the incentive for lenders to comply with the Parity Act's disclo-

          sure  requirements,"  id. (emphasis  added),11  it  must also  be
                                __
                              
          ____________________

               11The court explained that "negative amortization provisions
          are  not the  only  characteristics that  qualify  a loan  as  an
          alternative mortgage transaction,"  and, further, that  "[s]imple

                                          22

          noted that  negative amortization provisions whereby  interest is

          assessed  on deferred  interest  are common  features in  various
                                                                    _______

          forms  of  alternative  mortgage  transactions;  e.g.,  graduated
          _____

          payment  mortgages,  RAMs,   and  credit  conversion   mortgages.

          Because  a ban against  charging interest on  interest would pre-

          clude  a central  feature  common to  many  forms of  alternative

          mortgage  transactions,  simple interest  statutes unquestionably

          infringe upon alternative mortgage loans, even though they do not

          impose  an outright ban.  Thus, as the State contends, construing

          the Monetary Control Act  so as to preempt simple  interest laws,

          such  as the  SIS, would  significantly reduce  these alternative
                                                  ______

          mortgage lenders' incentive to comply with the Parity Act disclo-

          sure requirements.  Whether or not illogical, there can be little

          question that this result would conflict with the policy underly-

          ing the Parity Act and, thus, with the intent of Congress.  

                    As the district  court noted, "the  Parity Act and  the

          Monetary  Control  Act  serve  related but  distinctly  different

          functions."     Id.   The Parity  Act represents  a congressional
                          ___

          response to a concern,  amongst others, that State bans  on mort-

          gages  other than  traditional fixed-rate mortgages  would reduce

          the  overall availability  of mortgage  credit,  since fixed-rate

          mortgages  had become relatively more  expensive as the result of

          increased interest-rate volatility. 

                    The Congress hereby finds that    
                              
          ____________________

          interest laws are merely one of several categories of" state laws
          "inconsistent with a qualifying  lender's right to issue alterna-
          tive mortgage loans."  Id.  
                                 ___

                                          23

                         (1)  increasingly volatile  and dy-
                         namic  changes  in  interest  rates
                         have seriously impaired the ability
                         of  housing  creditors  to  provide
                         consumers  with fixed-term,  fixed-
                         rate credit secured by interests in
                         real property, cooperative housing,
                         manufactured homes, and other dwel-
                         lings;
                         (2)  alternative  mortgage transac-
                         tions are essential  to the  provi-
                         sion of an adequate supply of cred-
                         it secured  by residential property
                         necessary  to  meet the  demand ex-
                         pected in the 1980's; . . . .

          12  U.S.C.   3801(a).  These concerns prompted Congress to autho-

          rize State-chartered  housing lenders,  such as Dime  Real Estate
               _____

          NH, to enter into alternative mortgage transactions.  

                    It is the purpose of [the Parity Act]  to ...
                    provide [nonfederally chartered housing cred-
                             ____________
                    itors]  . . . parity with federally chartered
                    institutions by authorizing all housing cred-
                    itors to make, purchase, and enforce alterna-
                    tive  mortgage  transactions so  long  as the
                    transactions are in conformity with the regu-
                    lations issued by the Federal agencies.

          Id. at   3801(b).  See also First Gibraltar Bank, FSB, 19 F.3d at
          ___                ___ ____ _________________________

          1043.   Thus, the purpose of the  Parity Act was to preempt State

          bans  on alternative mortgage  transactions, including adjustable
          ____

          rate mortgages permitting  negative amortization whereby interest

          may be charged on deferred interest payments.12

                    In  the Monetary Control  Act, on the  other hand, Con-

          gress was  responding to  the very  different concern  that State
                              
          ____________________

               12The parties do not  dispute that the Dime Savings  loan is
          an  "alternative  mortgage  transaction,"  though  they  disagree
          whether the loan was made in accordance with OTS regulations.  We
          do not resolve the  Dime Savings' Parity Act preemption  claim as
          applied to the present  loan, however, since it has  not yet been
          considered by the district court. 

                                          24

          interest-rate  ceilings  were  depressing home-mortgage  interest
                         ________

          rates to below-market levels, thereby artificially disrupting the
                   ____________

          availability of funds  for both traditional fixed-rate  mortgages

          and "alternative  mortgage  transactions."   The  latter  concern

          prompted Congress to preempt  only state laws "expressly limiting

          the rate or amount of interest."  Thus, section  501(a)(1) of the

          Monetary Control Act was not aimed at preempting State laws, such

          as the  SIS, which  prohibit "alternative  mortgage transactions"

          permitting negative amortization whereby  interest may be charged

          on deferred interest. 

                                         III
                                         III

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                    We hold that the New Hampshire Simple Interest Statute,

          as applied to the Dime Savings loan, is not preempted  by section

          501(a)(1) of the  Monetary Control Act.   Consequently, we remand

          to permit  the district court  to consider  the remaining  issues

          relating to the  petition to enjoin  foreclosure on the  Grunbeck

          residence. 

                    The judgment  is vacated and  the case is  remanded for
                    The judgment  is vacated and  the case is  remanded for
                    _______________________________________________________

          further  proceedings consistent  with  this opinion.   Costs  are
          further  proceedings consistent  with  this opinion.   Costs  are
          ___________________________________________________    __________

          awarded to appellants.
          awarded to appellants.
          _____________________

                                          25