Watters v. Wachovia Bank, N. A.
Headline: Decision affirms that national banks' mortgage operations, even when conducted through OCC‑licensed operating subsidiaries, are governed by federal supervision and not state licensing or inspection requirements, limiting state oversight.
Holding: The Court held that a national bank’s mortgage business, whether run by the bank or an OCC‑licensed operating subsidiary, is subject to OCC supervision and not to state licensing, reporting, or visitorial regimes.
- Prevents states from licensing or inspecting national banks’ OCC‑licensed operating subsidiaries.
- Shifts supervisory authority over bank mortgage lending to the OCC, limiting state audits.
- Preserves state corporate law but restricts duplicative state oversight of mortgage operations.
Summary
Background
Michigan’s insurance and financial services commissioner told Wachovia Mortgage Corporation it could no longer do mortgage lending in Michigan after the company became a wholly owned operating subsidiary of Wachovia Bank, a national bank. Michigan law exempts banks themselves from state mortgage rules but requires nonbank subsidiaries to register, pay fees, and submit to state inspections. Wachovia Bank and Wachovia Mortgage sued, arguing federal law and OCC rules preempt Michigan’s registration and inspection requirements.
Reasoning
The Court asked whether a national bank’s mortgage business remains governed by the federal regulator (the Office of the Comptroller of the Currency, OCC) when the work is done by an OCC‑licensed operating subsidiary. The Court said yes. It explained that the National Bank Act authorizes national banks to make real estate loans and grants the OCC exclusive authority to examine and supervise national bank lending. Operating subsidiaries were created and licensed to do only what their parent banks may do, and duplicative state licensing and inspections would significantly interfere with federally authorized banking activity. The Court also rejected the commissioner’s Tenth Amendment argument.
Real world impact
The ruling means OCC supervision, not state registration and routine inspections, governs mortgage lending done by national banks or their OCC‑licensed operating subsidiaries. States still control incorporation issues and ordinary state laws that do not impair federally authorized banking activity, but they cannot impose separate visitorial regimes on those federally supervised mortgage operations.
Dissents or concurrances
A dissent argued Congress never authorized broad preemption of state laws for bank subsidiaries and warned that letting an agency preempt state consumer‑protection laws unbalances federal‑state power.
Opinions in this case:
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