Tuesday, July 19, 2011


OCC Interpretive Letter #1016 February 2005. (See Below)
Same issue decided in Cuomo v Clearinghouse by US Supreme Court, June, 2009.

BofA Unit’s Utah Foreclosures Illegal, State Says in Letter
May 25 (Bloomberg) -- A Bank of America Corp. unit conducting home foreclosures in Utah is violating the law, the attorney general said in a letter as individual states advanced their investigations of mortgage servicing.
ReconTrust Co. isn’t meeting requirements for carrying out foreclosures in the state, Utah Attorney General Mark Shurtleff said in a letter to Bank of America Chief Executive Officer Brian Moynihan. The letter, dated May 19, was released today by Shurtleff’s office.
“All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote.
Jumana Bauwens, a spokeswoman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a phone message and an e-mail seeking comment.
The move to crack down on ReconTrust comes as federal officials and attorneys general in all 50 states are scrutinizing how the largest mortgage servicers, including Bank of America, handle home loans and conduct foreclosures. New York Attorney General Eric Schneiderman is investigating banks’ mortgage securitizations, and California Attorney General Kamala Harris has announced a mortgage fraud task force.
Lender Processing Services Inc. was subpoenaed by California and Illinois as part of an investigation of mortgage- servicing practices, according to statements today. Illinois also subpoenaed Nationwide Title Clearing Inc., according to an e-mailed statement from the office of Attorney General Lisa Madigan.
Connecticut Letter
Connecticut Attorney General George Jepsen said Bank of America, the biggest U.S. bank by assets, “is failing to devote adequate resources” to its mortgage-servicing business in the state, according to a May 20 letter released by his office today. Mortgage borrowers seeking help are experiencing “significant difficulties” with the bank, according to the letter. Jepsen is helping to lead settlement negotiations with mortgage servicers as part of the 50-state investigation.
“Despite having had more than two years to ‘right-size’ your staff and establish effective procedures and systems, Bank of America has so far not prevented even the most common consumer complaints,” Jepsen wrote to Moynihan.
Earlier this year, in a homeowner’s lawsuit against ReconTrust, Shurtleff’s office told a federal appeals court that ReconTrust was breaking the law and urged the court to rule that it isn’t qualified to conduct trustee foreclosures in Utah.
Utah Appeal
In the appeals court case, Bank of America argued that ReconTrust has the authority to conduct foreclosures in Utah under the federal National Bank Act. The only laws that can limit the fiduciary activities of the company are the laws of the state where ReconTrust is located, it said. ReconTrust is based in California and its trust operations for Utah foreclosures take place in Texas, according to the court filing.
The Utah attorney general’s office “adamantly disagrees” with the position that as a national bank ReconTrust is exempt from following Utah law, Shurtleff said. ReconTrust must be a member of the state bar or a title insurance company, according to the attorney general.
Shurtleff told Moynihan that his office intends to enforce that law and asked for a response within 30 days.
“ReconTrust’s exercise of fiduciary powers in the state of Utah is a violation not only of state law, but also applicable federal law,” Shurtleff said.
--Editors: Andrew Dunn, Stephen Farr
To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net;

(RE-POST FROM JULY 12, 2010)

Daniel P. Stipano states National Banks Are Subject to State Laws When Foreclosing Mortgage Loans They Did Not Originate


NOTE FROM KELLY:   USUALLY WHEN YOU ARE SERVED WITH A PETITION FOR FORECLOSURE THE PLAINTIFF WILL BE WELLS FARGO BANK, NATIONAL ASSOCIATION.  I've been wanting to write a post on this, so I'll just include a brief note in this re-posting here: 

National Banks usually attempt to claim they are exempt from any state requirements of either registering      with the Secretary of State or securing a license to conduct mortgage business in the state prior to filing a foreclosure action.  However, Daniel P. Stipano, Acting Chief Counsel, Comptroller of the Currency, Administrator of National Banksconfirms in his letter below if the entity foreclosing on a piece of real property in a particular state did not originate the mortgage on the property they are petitioning to foreclose, if the entity is only acting as a servicer, or a trustee, or an  assignee of a mortgage, the entity attempting to foreclose is subject to the laws of the State in which they are foreclosing.

January 14, 2005

Anthony J. Sylvester 

Riker, Danzig, Scherer, Hyland & Perretti, LLP
Headquarters Plaza
One Speedwell Avenue
Morristown, NJ 07962-1981

Madeline L. Houston
Houston & Totaro
56 Broad Street, Suite 1
Bloomfield, N.J. 07003

Subject:           Wells Fargo Bank, Minnesota, N.A. v. Alberta Harris, et al.
                        Docket No. ESX-L-4676-02 
                        Bank One National Association v. Feinstein

                        Docket No. F-11450-00

Dear Mr. Sylvester and Ms. Houston:

This letter is in response to your letter dated December 13, 2004, seeking the views of the Office of the Comptroller of the Currency (“OCC”) concerning preemption of certain state laws in connection with claims and defenses asserted by the parties in the above-named cases.  You requested the OCC’s views at the direction of the Honorable Kenneth S. Levy, J.S.C., presiding judge in this litigation.  For the reasons stated below, based on the facts presented in the materials provided to us, we believe that neither 12 C.F.R. § 34.4 nor the National Bank Act preempts application of the state laws at issue here to loans simply because they were purchased and held by national banks acting as trustees in connection with issuance of the mortgage-backed securities involved in this case. 


According to the materials provided with the December 13th letter addressed to me, Delta Funding made a mortgage loan to Alberta Harris in December 1999 (Wells Fargo Complaint, First Count ¶1), and subsequently assigned the mortgage to Wells Fargo “as Trustee for Delta Funding Home Equity Loan Trust 2000-1” (Wells Fargo Complaint, First Count ¶4).  Delta Funding made a mortgage loan to Dequilla Robinson in November 1999 (Bank One Statement of Material Facts Not in Dispute ¶3), and subsequently assigned the mortgage to Bank One National Association “as Trustee in Trust for the Registered Holders of Delta Funding Home Equity Loan Asset-Backed Certificates Series 1999-3” (Certification of Harold L. Kofman, Esq. ¶¶1, 3).  There is no indication that either Wells Fargo or Bank One made the original mortgage loans to Alberta Harris or Dequilla Robinson, nor does any party assert that Wells Fargo or Bank One has any other interest in these transactions except as trustees for investors in the mortgage-backed securities. 

As trustee acting on behalf of the investors in Home Equity Loan Trust 2000-1, Wells Fargo filed suit against Ms. Harris alleging that she had defaulted on the loan made by Delta and sought to foreclose on the real estate she had pledged as collateral for that loan (Wells Fargo Complaint, First Count ¶¶1-14).  As trustee acting on behalf of the investors in Delta Asset-Backed Certificates Series 1999-3, Bank One filed suit against Jack Feinstein, as Administrator Ad Prosequendum for the estate of Ms. Robinson, seeking to foreclose on the real estate she had pledged as collateral for the loan made by Delta (Memorandum of Law in Support of Plaintiff Bank One National Association’s Motion for Summary Judgment at 3-4).  Ms. Harris and Mr. Feinstein (“Defendants”), through counsel, opposed the foreclosure actions.  They alleged in counterclaims against the Banks (and third-party claims against Delta and others) defenses based upon alleged violations of the New Jersey Consumer Fraud Act (“CFA”), N.J.S.A. 56.8-2, which, among other things, proscribes unconscionable practices in real estate transactions.  N.J.S.A. 56.8-2.  See Defendant’s Brief in Opposition to Plaintiff Wells Fargo’s Motion for Partial Summary Judgment at 3; Defendant’s Brief in Opposition to Plaintiff Bank One’s Motion for Summary Judgment at 4.  Asserting that federal law authorizing national banks to make and purchase real estate loans preempted the Defendants’ state law defenses under the CFA, Wells Fargo and Bank One, as trustees acting on behalf of the investors, sought partial summary judgment on the cross-claims. 


Pursuant to 12 U.S.C. § 371, national banks may “make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to * * * such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order.”  The OCC’s real estate lending regulations provide that, “[e]xcept where made applicable by Federal law, state laws that obstruct, impair, or condition a national bank’s ability to fully exercise its Federally authorized real estate lending powers do not apply to national banks.”  12 C.F.R. § 34.4(a). 

The Banks assert that application of the CFA is preempted because it would interfere with their power as national banks to purchase loans as authorized under 12 U.S.C. § 371, and that holding them liable for violations of the CFA as loan purchasers would be contrary to 12 C.F.R. § 34.4(a), which preempts state laws that interfere with national bank real estate lending authority.  

Section 34.4(a)(10) states that national banks “may make real estate loans under 12 U.S.C. § 371 without regard to state law limitations concerning * * * [p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages.”  12 C.F.R.§ 34.4(a)(10) (emphasis added).  However, in no sense, under the facts presented, can the Banks be viewed as making a real estate loan under 12 U.S.C. § 371 and 12 C.F.R. § 34.4.  The Banks did not originate the loans.  They did not fund the loans at inception.  Nor did they “purchase” the loans as part of any real estate lending program comprehended by the regulation.  Here, the Banks act as trustees for the benefit of investors in the trusts.  The substance of the transaction is that the investors, not the Banks, are purchasing the loans that have been made by Delta.  The investors own the beneficial interest in the loans held by the Banks as trustees.  And the effect of any liability for violation of the CFA ultimately falls on the investors.  Nowhere do the Banks allege that they themselves, as opposed to the trusts they represent, are exposed to liability for any violation of the CFA.  For all these reasons, 12 U.S.C. § 371 and 12 C.F.R. § 34.4(a) simply do not apply to the transactions by which the Banks acquired legal title to the loans in the circumstances at issue here. 

With respect to the activities of Wells Fargo and Bank One as trustees, the banks derive their power to act as trustees from 12 U.S.C. § 92a.  When state law conflicts with national banks exercising powers granted to them by federal law, the Supremacy Clause of the United States Constitution requires that the state law yield to the paramount authority of federal law, with the result that application of the state law to national banks is preempted.  The Supreme Court has explained this principle stating that it interprets “grants of both enumerated and incidental ‘powers’ to national banks as grants of authority not normally limited by, but rather ordinarily pre-empting, contrary state law.”  Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 32 (1996). 

As the Supreme Court demonstrated in its review of preemption cases in the Barnett case, Supremacy Clause principles animating conflict preemption have been expressed in a wide variety of phrases that do not yield materially different meanings, including “stand as an obstacle to,” “impair the efficiency of,” “significantly interfere,” “interfere,” “infringe,” and “hamper.” See Barnett, 517 U.S. at 33.  Thus, if application of the CFA to the loans held by the Banks as trustee were to obstruct, impair, condition, or otherwise interfere with the Banks’ exercise of fiduciary powers granted to them under federal law, the state statute would be preempted.  

Based on the facts presented, we do not believe that to be the case.  The Banks have not claimed that application of the CFA would impair their ability to act as trustee in these circumstances or that the state law otherwise interferes with the performance of their legal obligations as trustee.  Nor could they claim that having to respond to state law defenses to recovery on assets held in trust obstructs or impairs their power to act as trustee absent some indication that the state law infringes their authority, conditions their actions, or imposes a burden in a way prohibited by federal law.  In short, the Banks’ authority to act as trustees under federal law does not insulate the assets the Banks hold in trust for the benefit of investors from state law requirements otherwise applicable to those assets. 

We trust that the foregoing is responsive to your request.


/s/ Daniel P. Stipano

Daniel P. Stipano
Acting Chief Counsel

Cc:       Hon. Kenneth S. Levy, J.S.C.
            212 Washington Street
            The Wilentz Justice Complex
            General Equity, 8th Floor
            Newark, New Jersey 07102


rod said...
this letter is actually known as OCC Interpretive Letter #1016 February 2005.

It took me 6 years to discover it. Same issue decided in Cuomo v Clearinghouse by US Supreme Court, June, 2009.

We all need to stress these points of law, until the courts hear us and listen and obey their own laws
Kelly L. Hansen said...

I just have to tell you how good you comment made me feel. Now I know I'm not a complete and total idiot. I knew that letter was of great importance. These damn banks keep saying they don't have to conform to state laws, yet they foreclose against mortgages in States where they aren't licenced or registered on mortgage loans they don't originate, and usually aren't even registered on at the Register of Deeds Office...and then they attempt to invoke the state's statutes in their lawsuits if it helps them to do so!
karen said...
Kelly Hansen is an angel! Larry, Mike, Sunny, don't give up!!!Write an e-mail to Cara Heiden's office; contact the OCC. Contact the attorney she referredarry to. We are stronger as a group than we are individually! We have had our house sold too, to Wells of course, but they are putting us in a holding pattern until they investigate our case. Larry, we have been praying for you since we read your blog. God bless us all. Please,please, keep fighting!!! You can pack up if you want to, but don't move out until you have done EVERYTHING you can do. Then you can say you fought the good fight. These are our homes for Pete's sake!!!!!
Anonymous said...
Could someone please explain what the OCC Letter means and it's relevance? I am not able to understand the legal jargon. Thank you very kindly in advance for your support.
Cat West said...
The OCC is the Office of the Comptroller of Currency

They are the branch of our treasury department that is supposed to be watching these banks to make sure they follow the law. Clearly, they aren't doing enough for the homeowners who have become victims of the crimes we hear about on this blog.
Kelly L. Hansen said...

I'm not a lawyer, this is just my "slant" however when I read this I found
it to be of HUGE importance if you have been foreclosed against in a State Court, by an entity that is not registered in your state to do business, if:

that entity did not originate your mortgage loan.

In the case referenced by Rod, the U.S. Supreme Court ruled that National Banks are subject to state laws when they are litigating in state courts.

Daniel P. Stipano's letter goes a step further stating when these entities are foreclosing against loans they did not originate, once again, they are subject to the state's laws in which they are foreclosing.

What is significant about the Supreme Court decision and Daniel P. Stipano's letter is that they both clarify the law regarding National Banks being subject to state laws when foreclosing. (Because your case is subject to dismissal if the entity foreclosing against you has not followed state laws before filing its foreclosure action. Anyone who has been foreclosed against, your foreclosure is subject to a motion to vacate due to loss of subject matter jurisdiction over the case.)

National Banks continue to claim they are "exempt" from state laws: they don't have to be registered in the state to do business; they don't have to be licensed in the state as a mortgage loan servicer, etc. However, if they intend to file foreclosures and use a state court to litigate, they better conform to the state's laws prior to filing or face losing their case. CHECK IF YOUR FORECLOSING ENTITY IS REGISTERED WITH YOUR SECRETARY OF STATE AND IF THEY ARE LICENSED WITH THE BANKING COMMISSIONER AS IS REQUIRED BY STATE LAW.

If not, file a motion to dismiss on those grounds. AFTER YOU TALK TO YOUR LAWYER!!!!!!
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