Mortgage Bank Subsidiary Preempted From State Regulation

The U.S. Supreme Court has ruled that a national bank subsidiary devoted to mortgage lending is subject to federal regulation, and states therefore are preempted from requiring such subsidiaries to conform to licensing, reporting and other state regulations.

The Court held that Wachovia’s mortgage business, whether conducted by the bank itself or through the bank’s operating subsidiary, is subject to regulation by the federal Office of the Comptroller of the Currency (OCC), and not to "visitorial" regimes of the states in which the subsidiary operates. Justice Ginsburg delivered the majority opinion in Watters v. Wachovia Bank, N.A., 127 S.Ct. 1559 (2007), joined by Justices Kennedy, Souter, Breyer and Alito.