S&P Announces: OCC Rule Regarding Preemption of State Anti-Predatory Lending Laws Under Review.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 29, 2004

Standard & Poor's Ratings Services announced today that it is in the process of reviewing the final rule issued by the Office of the Comptroller of the Currency (OCC) on Jan. 7, 2004, which amends 12 C.F.R. Parts 7 and 34 (the Rule). The Rule clarifies the scope of the OCC's preemption authority over national banks and their operating subsidiaries (collectively, National Banks) and sets forth the extent to which the operations of National Banks are subject to state laws.

Standard & Poor's has received numerous inquiries as to whether its criteria for the admission of residential mortgage loans into its rated structured finance transactions will continue to apply to loans originated or purchased by National Banks after the Rule's effectiveness on Feb. 12, 2004. Because of these inquiries, Standard & Poor's is taking this opportunity to inform the marketplace that the Rule is currently under review and that, upon completion of the review process, Standard & Poor's will publish its position on the effect, if any, that the Rule will have on Standard & Poor's structured finance rating criteria.

Although the OCC indicated that it believes it has the authority to occupy the field with regard to the real estate lending activities of National Banks, it has declined to exercise this authority. Rather, the Rule sets forth the types of state statutes that are and are not preempted by the Rule. Therefore, Standard & Poor's believes it is necessary to analyze each provision in a state's anti-predatory lending law to determine if it is the type of provision that is preempted as applied to a National Bank.

Moreover, even if Standard & Poor's concludes that certain provisions of a given state's anti-predatory lending law do not apply to a National Bank's origination of residential mortgage loans within a particular state, Standard & Poor's must further determine whether, and to what extent, such federal preemption extends to assignees or purchasers of such loans from National Banks (or National Banks, as purchasers or assignees), as well as to their respective servicers. While the Rule clarifies the OCC's position regarding the applicability of state laws to National Banks themselves, the Rule is silent on the issue of whether assignee liability provisions contained in state laws and regulations (including anti-predatory lending laws) are preempted by federal law; although the OCC separately addressed this issue in connection with the Georgia Fair Lending Act (GFLA) (see "Standard & Poor's Announces Position on OCC's Preemption Order for the GFLA," published on RatingsDirect on Oct. 3, 2003). These issues are vital to Standard & Poor's analysis of such laws and regulations and their impact on its rated structured finance transactions. (For a discussion of Standard & Poor's general approach to evaluating anti-predatory lending statutes, see "Evaluating Predatory Lending Laws: Standard & Poor's Explains its Approach," published on RatingsDirect on April 15, 2003).

Standard & Poor's intends to complete its review in a timely manner. Upon completion, Standard & Poor's will notify the marketplace of its criteria by the issuance of a subsequent release.

Members of the media may contact Adam Tempkin, Media Relations Manager, at (1) 212-438-7530 or [e-mail].

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