MBA, Trade Groups Fight Housing Bill Preemption Amendment

MBA (5/7/2008 ) Sorohan, Mike
As the House begins debate over a housing “rescue” bill, the Mortgage Bankers Association and several other industry trade groups sent a letter to House members urging them to oppose an amendment that would override certain federal regulations regarding the foreclosure process—an amendment that the groups said would be “very damaging to safe and sound banking operations.”
The amendment to the American Housing Rescue and Foreclosure Prevention Act of 2008, which the House is expected to vote on this week, would give state laws governing the foreclosure process preemption over federal laws. MBA and the trade groups said the amendment, expected to be offered on the House floor by Reps. Brad Miller, D-N.C., and Steven LaTourette, R-Ohio, would “create new risks to banks’ safety and soundness.”

“The Miller/LaTourette amendment attempts to solve an issue which is not in fact a problem,” the letter said. “Federal regulators have never sought to regulate the foreclosure process and neither the National Bank Act nor the Home Owners’ Loan Act supersedes state or local laws governing the foreclosure process.

“Yet, the Miller/LaTourette amendment, in an apparent attempt to protect state laws governing the foreclosure process from federal preemption, threatens to overturn decades of established law governing banking operations and would create new risks to banks’ safety and soundness.”

The letter points out that the amendment would roll back a recent Supreme Court decision in Watters v. Wachovia NA and other decisions. In Watters v. Wachovia, the Supreme Court upheld the right of the federal banking system to preempt attempts by states to regulate the actions of federally chartered financial systems.

The amendment, the letter said, “goes far beyond protecting state and local laws governing the foreclosure process. It would disrupt long-standing, well-recognized standards of prudent lending, and prevent federal and state bank regulators from administering provisions of federal law to assure sound lending and collateral management practices.”

In short, the letter said, the amendment “takes an overly broad approach in attempting to solve a problem which has not heretofore been apparent with respect to existing law. The Miller/LaTourette ‘solution’ to this non-issue would be very damaging to safe and sound banking operations. We strongly urge you to oppose the amendment.

Joining MBA in the letter were the American Bankers Association; the American Financial Services Association; the Consumer Bankers Association; the Consumer Mortgage Coalition; the Housing Policy Council of The Financial Services Roundtable; and the Securities Industry and Financial Markets Association