Section 5(a) of the Home Owners' Loan Act of 1933 (HOLA)
empowers the Federal Home Loan Bank Board (Board), under such
regulations as it may prescribe, to provide for the organization,
operation, and regulation of federal savings and loan associations.
Pursuant to this authorization, the Board issued a regulation
providing that a federal savings and loan association "continues to
have the power to include . . . in its loan instrument" a
"due-on-sale" clause,
i.e., a provision that permits the
association to declare the entire balance of the loan immediately
due and payable if the property securing the loan is sold or
otherwise transferred without the association's prior written
consent. A preamble to the regulation stated that the due-on-sale
practices of federal savings and loan associations shall be
governed "exclusively by Federal law," and that the association
"shall not be bound by or subject to any conflicting State law
which imposes different . . . due-on-sale requirements." Appellees
each purchased California real property from one who had borrowed
money from appellant Fidelity Federal Savings and Loan Association
(Fidelity). The borrowers had given Fidelity deeds of trust on the
property; each deed contained a due-on-sale clause. Fidelity, not
having received prior notice of the purchases, proceeded to enforce
the due-on-sale clauses to accelerate payment of the loans, and
when they were not paid, instituted nonjudicial foreclosure
proceedings. Each appellee then filed suit against Fidelity in
California Superior Court, asserting that Fidelity's exercise of
the due-on-sale clauses violated the principles announced in
Wellenkamp v. Bank of America, 21 Cal. 3d
943, 582 P.2d 970, which limited a lender's right to exercise
such a clause to cases where the lender can demonstrate that the
transfer of the property has impaired its security. The Superior
Court consolidated the actions and granted Fidelity's motion for
summary judgment on the ground that the Federal Government had
totally occupied the regulation of federal savings and loan
associations. The California Court of Appeal reversed, holding that
Wellenkamp was controlling, and that federal law had not
expressly or impliedly preempted state due-on-sale law.
Held: The Board's due-on-sale regulation preempts
conflicting state limitations on the due-on-sale practices of
federal savings and loan associations,
Page 458 U. S. 142
and thus bars application of the
Wellenkamp rule to
such associations. Pp.
458 U. S.
152-170.
(a) The general principles governing preemption of state law
that conflicts with federal law are not inapplicable here simply
because real property is a matter of special concern to the States.
And federal regulations have no less preemptive effect than federal
statutes. Where Congress has empowered an administrator to
promulgate regulations, regulations intended to preempt state law
have that effect unless the administrator exceeded his statutory
authority or acted arbitrarily. Pp.
458 U. S.
152-154.
(b) The language of the Board's regulation, and especially the
preamble thereto, clearly show the Board's intent to preempt the
Wellenkamp doctrine. The conflict between that doctrine
and the regulation does not evaporate because the regulation simply
permits, but does not compel, federal savings and loan associations
to include a due-on-sale clause in their contracts and to enforce
that clause when the security property is transferred. While
compliance with both the regulation and the
Wellenkamp
rule may not be a physical impossibility, that rule forbids a
federal savings and loan association to enforce a due-on-sale
clause at its option, and deprives the association of the
flexibility given it by the Board. The rule therefore creates an
obstacle to the accomplishment of the regulation's purpose. Pp.
458 U. S.
154-159.
(c) The Board acted within its statutory authority in issuing
the preemptive due-on-sale regulation. Both the language and
legislative history of the HOLA indicate that the Board was
authorized to regulate the lending practices of federal savings and
loan associations. Congress delegated power to the Board expressly
for the purpose of creating and regulating these associations so as
to ensure that they would remain financially sound and able to
supply financing for home construction and purchase. Consistent
with that purpose, the Board reasonably exercised its authority in
promulgating the due-on-sale regulation. Pp.
458 U. S.
159-170.
121 Cal. App.
3d 328,
175 Cal. Rptr.
467, reversed.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, MARSHALL, and O'CONNOR, JJ.,
joined. O'CONNOR, J., filed a concurring opinion,
post, p.
458 U. S. 171.
REHNQUIST, J., filed a dissenting opinion, in which STEVENS, J.,
joined,
post, p.
458 U.S.
172. POWELL, J., took no part in the consideration or
decision of the case.
Page 458 U. S. 144
JUSTICE BLACKMUN delivered the opinion of the Court.
At issue in this case is the preemptive effect of a regulation,
issued by the Federal Home Loan Bank Board (Board), permitting
federal savings and loan associations to use "due-on-sale" clauses
in their mortgage contracts. Appellees dispute both the Board's
intent and its statutory authority to displace restrictions imposed
by the California Supreme Court on the exercise of these
clauses.
I
A
The Board, an independent federal regulatory agency, was formed
in 1932, and thereafter was vested with plenary authority to
administer the Home Owners' Loan Act of 1933 (HOLA), 48 Stat. 128,
as amended, 12 U.S.C. § 1461
et seq. (1976 ed. and Supp.
IV). [
Footnote 1] Section 5(a)
of the HOLA, 12 U.S.C. § 1464(a) (1976 ed., Supp. IV), empowers the
Board,
Page 458 U. S. 145
"under such rules and regulations as it may prescribe, to
provide for the organization, incorporation, examination,
operation, and regulation of associations to be known as 'Federal
Savings and Loan Associations.'"
Pursuant to this authorization, the Board has promulgated
regulations governing "the powers and operations of every Federal
savings and loan association from its cradle to its corporate
grave."
People v. Coast Federal Sav. & Loan
Assn., 98 F. Supp.
311, 316 (SD Cal.1951).
In 1976, the Board became concerned about the increasing
controversy as to the authority of a federal savings and loan
association to exercise a "due-on-sale" clause -- a contractual
provision that permits the lender to declare the entire balance of
a loan immediately due and payable if the property securing the
loan is sold or otherwise transferred. [
Footnote 2] Specifically,
Page 458 U. S. 146
the Board felt that restrictions on a savings and loan's ability
to accelerate a loan upon transfer of the security would have a
number of adverse effects: (1) that
"the financial security and stability of Federal associations
would be endangered if . . . the security property is transferred
to a person whose ability to repay the loan and properly maintain
the property is inadequate;"
(2) that
"elimination of the due on sale clause will cause a substantial
reduction of the cash flow and net income of Federal associations,
and that to offset such losses it is likely that the associations
will be forced to charge higher interest rates and loan charges on
home loans generally;"
and (3) that
"elimination of the due on sale clause will restrict and impair
the ability of Federal associations to sell their home loans in the
secondary mortgage market, by making such loans unsalable or
causing them to be sold at reduced prices, thereby reducing the
flow of new funds for residential loans, which otherwise would be
available."
41 Fed.Reg. 6283, 6285 (1976). The Board concluded that
"elimination of the due on sale clause will benefit only a
limited number of home sellers, but generally will cause economic
hardship to the majority of home buyers and potential home
buyers."
Ibid.
Accordingly, the Board issued a regulation in 1976 governing
due-on-sale clauses. The regulation, now 12 CFR § 545.8-3(f)
(1982), [
Footnote 3] provides
in relevant part:
"[A federal savings and loan] association continues to have the
power to include, as a matter of contract between it and the
borrower, a provision in its loan instrument
Page 458 U. S. 147
whereby the association may, at its option, declare immediately
due and payable sums secured by the association's security
instrument if all or any part of the real property securing the
loan is sold or transferred by the borrower without the
association's prior written consent. Except as [otherwise] provided
in . . . this section . . . exercise by the association of such
option (hereafter called a due-on-sale clause) shall be exclusively
governed by the terms of the loan contract, and all rights and
remedies of the association and borrower shall be fixed and
governed by that contract."
In the preamble accompanying final publication of the
due-on-sale regulation, the Board explained its intent that the
due-on-sale practices of federal savings and loans be governed
"exclusively by Federal law." 41 Fed.Reg. 18286, 18287 (1976). The
Board emphasized that "[f]ederal associations shall not be bound by
or subject to any conflicting State law which imposes different . .
. due-on-sale requirements."
Ibid. [
Footnote 4]
B
Appellant Fidelity Federal Savings and Loan Association
(Fidelity) is a private mutual savings and loan association
chartered by the Board pursuant to § 5(a) of the HOLA. Fidelity's
principal place of business is in Glendale, Cal. Appellees,
Page 458 U. S. 148
de la Cuesta, Moore, and Whitcombe, each made a purchase of
California real property from one who had borrowed money from
Fidelity. As security for the loan, the borrower had given Fidelity
a deed of trust on the property. Each deed of trust contained a
due-on-sale clause. Two of the deeds also included a provision,
identified as � 15, which stated that the deed "shall be governed
by the law of the jurisdiction in which the Property is located."
App. 51, 86. [
Footnote 5]
Fidelity was not notified prior to each appellee's purchase of
property; when it did learn of the transfer, it gave notice of its
intent to enforce the due-on-sale clause. Fidelity expressed a
willingness to consent to the transfer, however, if the appellee
agreed to increase the interest rate on the loan secured by the
property to the then-prevailing market rate. Each appellee refused
to accept this condition; Fidelity then exercised its option to
accelerate the loan. When the loan was not paid, Fidelity
instituted a nonjudicial foreclosure proceeding.
In response, each appellee filed suit in the Superior Court of
California for Orange County. Each asserted that, under the
principles announced by the California Supreme Court in
Wellenkamp v. Bank of America, 21 Cal. 3d
943, 582 P.2d
Page 458 U. S. 149
970 (1978), Fidelity's exercise of the due-on-sale clause
violated California's prohibition of unreasonable restraints on
alienation, Cal.Civ.Code Ann. § 711 (West 1982),
"unless the lender can demonstrate that enforcement is
reasonably necessary to protect against impairment to its security
or the risk of default."
21 Cal. 3d at 953, 582 P.2d at 977. Each complaint sought (1) a
judicial declaration that the due-on-sale clause was not
enforceable unless Fidelity first showed that the transfer had
harmed its security interest, (2) an injunction against any
foreclosure procedures based on the clause, and (3) compensatory
and punitive damages. App. 5, 49, 84. [
Footnote 6]
The Superior Court consolidated the three actions and granted
appellants' motion for summary judgment. The court explained that
"the federal government has totally occupied the subject of
regulation of Federal Savings and Loans," and held, therefore, that
the decision in
Wellenkamp "cannot be extended to
[federal] savings and loans." App. to Juris.Statement 29a.
The Court of Appeal for the Fourth Appellate District, however,
reversed that judgment. In an opinion that adopted substantial
portions of a parallel ruling by the Court of Appeal for the First
Appellate District, it concluded that the California Supreme
Court's opinion in
Wellenkamp was controlling.
121 Cal. App.
3d 328, 331,
175 Cal. Rptr.
467, 468 (1981), quoting
Panko v. Pan American Federal Sav.
& Loan Assn., 119 Cal. App.
3d 916,
174 Cal. Rptr.
240 (1981),
cert. pending, No. 81-922. The court found
that Congress had neither expressed an intent to preempt state
due-on-sale law nor fully occupied the field of federal savings and
loan regulation; for example, the court pointed out, federal
associations traditionally have been governed by state real
property
Page 458 U. S. 150
and mortgage law with respect to title, conveyancing, recording,
priority of liens, and foreclosure proceedings.
The Court of Appeal likewise rejected appellants' contention
that the Board's 1976 regulation expressly had preempted the
Wellenkamp doctrine. Although the court recognized that
the preamble accompanying 12 CFR § 545.3(f) (1982) manifested the
Board's intent that its due-on-sale regulation supersede
conflicting state law, it refused to "equate the Board's expression
of intent with the requisite
congressional intent." 121
Cal. App. 3d at 339, 175 Cal. Rptr. at 474 (emphasis in original).
[
Footnote 7]
Finally, the Court of Appeal found no evidence that federal law
impliedly had preempted state law, reasoning that California's
due-on-sale law was not incompatible with federal law. The
Wellenkamp doctrine, the court observed, "is a substantive
rule of California property and mortgage law," and not a form of
"regulation" over federal savings and loans. 121 Cal. App. 3d at
341, 175 Cal. Rptr. at 474. Moreover, the court noted, the Board's
regulation
"merely authorizes, and does not compel, savings and loan
associations to include a due-on-sale clause in their loan
contracts and to exercise their rights thereunder."
Ibid., 175 Cal. Rptr. at 475. The Court of Appeal
likewise discovered no conflict between the
Wellenkamp
doctrine and the purposes of the HOLA, because both were designed
to assist financially distressed homeowners.
The court derived "further support," 121 Cal. App. 3d at 342,
175 Cal. Rptr. at 475, for its decision from � 15, which was
included in two of the deeds of trust and which provided that the
deeds would be "governed by the law of the jurisdiction
Page 458 U. S. 151
in which the Property is located."
See n 5,
supra. That language, the court
ruled, evinced an unmistakable intent that state law should govern
the interpretation, validity, and enforcement of the deeds.
[
Footnote 8]
The California Supreme Court denied appellants' petition for
review. App. to Juris.Statement 28a.
Because the majority of courts to consider the question have
concluded, in contrast to the decision of the Court of Appeal, that
the Board's regulations, including § 545.8-3(f), do preempt state
regulation of federal savings and loans, [
Footnote 9] we noted probable jurisdiction. 455 U.S.
917 (1982).
Page 458 U. S. 152
II
The preemption doctrine, which has its roots in the Supremacy
Clause, U.S.Const., Art. VI, cl. 2, requires us to examine
congressional intent. Preemption may be either
Page 458 U. S. 153
express or implied, and "is compelled whether Congress' command
is explicitly stated in the statute's language or implicitly
contained in its structure and purpose."
Jones v. Rath Packing
Co., 430 U. S. 519,
430 U. S. 525
(1977). Absent explicit preemptive language, Congress' intent to
supersede state law altogether may be inferred ,because
"[t]he scheme of federal regulation may be so pervasive as to
make reasonable the inference that Congress left no room for the
States to supplement it,"
because
"the Act of Congress may touch a field in which the federal
interest is so dominant that the federal system will be assumed to
preclude enforcement of state laws on the same subject,"
or because "the object sought to be obtained by the federal law
and the character of obligations imposed by it may reveal the same
purpose."
Rice v. Santa Fe Elevator Corp., 331 U.
S. 218,
331 U. S. 230
(1947).
Even where Congress has not completely displaced state
regulation in a specific area, state law is nullified to the extent
that it actually conflicts with federal law. Such a conflict arises
when "compliance with both federal and state regulations is a
physical impossibility,"
Florida Lime & Avocado Growers,
Inc. v. Paul, 373 U. S. 132,
373 U. S.
142-143 (1963), or when state law "stands as an obstacle
to the accomplishment and execution of the full purposes and
objectives of Congress,"
Hines v. Davidowitz, 312 U. S.
52,
312 U. S. 67
(1941).
See also Jones v. Rath Packing Co., 430 U.S. at
430 U. S. 526;
Bethlehem Steel Co. v. New York Labor Relations Bd.,
330 U. S. 767,
330 U. S. 773
(1947). These principles are not inapplicable here simply because
real property law is a matter of special concern to the States:
"The relative importance to the State of its own law is not
material when there is a conflict with a valid federal law, for the
Framers of our Constitution provided that the federal law must
prevail."
Free v. Bland, 369 U. S. 663,
369 U. S. 666
(1962);
see also Ridgway v. Ridgway, 454 U. S.
46,
454 U. S. 54-55
(1981).
Federal regulations have no less preemptive effect than federal
statutes. Where Congress has directed an administrator to exercise
his discretion, his judgments are subject to
Page 458 U. S. 154
judicial review only to determine whether he has exceeded his
statutory authority or acted arbitrarily.
United States v.
Shimer, 367 U. S. 374,
367 U. S.
381-382 (1961). When the administrator promulgates
regulations intended to preempt state law, the court's inquiry is
similarly limited:
"If [h]is choice represents a reasonable accommodation of
conflicting policies that were committed to the agency's care by
the statute, we should not disturb it unless it appears from the
statute or its legislative history that the accommodation is not
one that Congress would have sanctioned."
Id. at
367 U. S. 383.
See also Blum v. Bacon, 457 U. S. 132,
457 U. S.
145-146 (1982);
Ridgway v. Ridgway, 454 U.S. at
454 U. S. 57
(regulations must not be "unreasonable, unauthorized, or
inconsistent with" the underlying statute);
Free v. Bland,
369 U.S. at
369 U. S.
668.
A preemptive regulation's force does not depend on express
congressional authorization to displace state law; moreover,
whether the administrator failed to exercise an option to
promulgate regulations which did not disturb state law is not
dispositive.
See United States v. Shimer, 367 U.S. at
367 U. S.
381-383. Thus, the Court of Appeal's narrow focus on
Congress' intent to supersede state law was misdirected. Rather,
the questions upon which resolution of this case rests are whether
the Board meant to preempt California's due-on-sale law, and, if
so, whether that action is within the scope of the Board's
delegated authority.
III
As even the Court of Appeal recognized, the Board's intent to
preempt the
Wellenkamp doctrine is unambiguous. The
due-on-sale regulation plainly provides that a federal savings and
loan "continues to have the power" to include a due-on-sale clause
in a loan instrument and to enforce that clause "at its option." 12
CFR § 545.8-3(f) (1982). The California courts, in contrast, have
limited a federal association's right
Page 458 U. S. 155
to exercise a due-on-sale provision to those cases where the
lender can demonstrate that the transfer has impaired its
security.
The conflict does not evaporate because the Board's regulation
simply permits, but does not compel, federal savings and loans to
include due-on-sale clauses in their contracts and to enforce those
provisions when the security property is transferred. The Board
consciously has chosen not to mandate use of due-on-sale clauses
"because [it] desires to afford associations the flexibility to
accommodate special situations and circumstances." 12 CFR §
556.9(f)(1) (1982). [
Footnote
10] Although compliance with both § 545.8-3(f) and the
Wellenkamp rule may not be "a physical impossibility,"
Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S.
at
373 U. S.
142-143, the California courts have forbidden a federal
savings and loan to enforce a due-on-sale clause solely "at its
option," and have deprived the lender of the "flexibility" given it
by the Board.
Moreover, the Board recently has "reiterat[ed] its longstanding
policy" of authorizing federal savings and loan associations to
enforce due-on-sale clauses "subject only to express limitations
imposed by the Board." 46 Fed.Reg. 39123, 39124 (1981). The only
restrictions specified in the Board's regulation are contained in
12 CFR § 545.8-3(g) (1982). [
Footnote 11] That provision, unlike the
Wellenkamp doctrine,
Page 458 U. S. 156
does not confine a federal association's right to accelerate a
loan to cases where the lender's security is impaired. In addition,
Wellenkamp explicitly bars a federal savings and loan from
exercising a due-on-sale clause to adjust a long-term mortgage's
interest rate towards current market rates -- a due-on-sale
practice the Board has approved and views as critical to "the
financial stability of the association."
See Schott
Advisory Opinion at 27.
By further limiting the availability of an option the Board
considers essential to the economic soundness of the thrift
industry, the State has created "an obstacle to the accomplishment
and execution of the full purposes and objectives" of the
due-on-sale regulation.
Hines v. Davidowitz, 312 U.S. at
312 U. S. 67.
Cf. Franklin Nat. Bank v. New York, 347 U.
S. 373,
347 U. S. 378
(1954) (finding a "clear conflict" between federal law, which
authorized national banks to receive savings deposits but did not
specifically permit -- much less require -- advertising by such
banks, and New York law, which forbade them to use the word
"savings" in their advertising or business).
Contending that the
Wellenkamp doctrine is not
inconsistent with the due-on-sale regulation, however, appellees
point to the regulation's second sentence, which provides in
pertinent part:
"[E]xercise by the association of such option (hereafter called
a due-on-sale clause) shall be exclusively governed by the terms of
the loan contract, and all rights and remedies
Page 458 U. S. 157
of the association and borrower shall be fixed and governed by
that contract."
12 CFR § 545.8-3(f) (1982). Appellees interpret this language as
incorporating state contract law -- and therefore any state law
restricting the exercise of a due-on-sale clause. We note, however,
that the incorporation of state law does not signify the
inapplicability of federal law, for "a fundamental principle in our
system of complex national polity" mandates that "the Constitution,
laws, and treaties of the United States are as much a part of the
law of every State as its own local laws and Constitution."
Hauenstein v. Lynham, 100 U. S. 483,
100 U. S. 490
(1880).
See also Testa v. Katt, 330 U.
S. 386,
330 U. S.
390-392 (1947). [
Footnote 12] Moreover, in our view, the second sentence
of § 545.3(f) simply makes clear that the regulation does not
empower federal savings and loans to accelerate a loan upon
transfer of the security property unless the parties to the
particular loan instrument, as a matter of contract, have given the
lender that right. Similarly, if the parties to a given contract
agree somehow to limit the association's right to exercise a
due-on-sale provision,
Page 458 U. S. 158
the second sentence of § 545.8(f) precludes the lender from
relying on the first sentence as authorizing more expansive use of
the clause.
Any ambiguity in § 545.8(f)'s language is dispelled by the
preamble accompanying and explaining the regulation. The preamble
unequivocally expresses the Board's determination to displace state
law:
"Finally, it was and is the Board's intent to have . . .
due-on-sale practices of Federal associations governed
exclusively by Federal law. Therefore, . . . exercise of
due-on-sale clauses by Federal associations shall be governed and
controlled
solely by [§ 545.8] and the Board's new
Statement of Policy.
Federal associations shall not be bound by
or subject to any conflicting State law which imposes different . .
. due-on-sale requirements, nor shall Federal associations
attempt to . . . avoid the limitations on the exercise of
due-on-sale clauses delineated in [§ 545.8(g)] on the ground that
such . . . avoidance of limitations is permissible under State
law."
41 Fed.Reg. 18286, 18287 (1976) (emphasis added). [
Footnote 13]
In addition, the Board recently has "confirm[ed]" that the
due-on-sale practices of federal savings and loans
"shall be governed exclusively by the Board's regulations in
preemption of and without regard to any limitations imposed by
state law on either their inclusion or exercise."
12 CFR
Page 458 U. S. 159
§ 556.9(f)(2) (1982). Thus, we conclude that the Board's
due-on-sale regulation was meant to preempt conflicting state
limitations on the due-on-sale practices of federal savings and
loans, and that the California Supreme Court's decision in
Wellenkamp creates such a conflict. [
Footnote 14]
IV
The question remains whether the Board acted within its
statutory authority in issuing the preemptive due-on-sale
regulation. The language and history of the HOLA convince us that
Congress delegated to the Board ample authority to regulate the
lending practices of federal savings and loans so as to further the
Act's purposes, and that § 545.8-3(f) is consistent with those
purposes.
A
The HOLA, a product of the Great Depression of the 1930's, was
intended "to provide emergency relief with respect to home mortgage
indebtedness" at a time when as many as half of all home loans in
the country were in default. H.R.Conf.Rep. No. 210, 73d Cong., 1st
Sess., 1 (1933).
See 77 Cong.Rec. 2499 (1933) (remarks of
Rep. Hancock);
id. at 2570 (remarks of Rep. Reilly); Home
Owners' Loan Act: Hearings on S. 1317 before a Subcommittee of the
Senate Committee on Banking and Currency, 73d Cong., 1st Sess., 9
(1933) (Senate Hearings) (statement of Horace Russell, one of the
drafters of the bill and General Counsel, Federal Home Loan Bank
Board, Atlanta, Ga.). Local institutions that had previously
supplied funds to finance homes had ceased doing business or had
discontinued such long-term loans, so that more than half the
counties in the country, containing almost one-fifth of the
Page 458 U. S. 160
total population, were without home-financing institutions.
See id. at 7, 19;
see also H.R.Rep. No. 55, 73d
Cong., 1st Sess., 2 (1933); S.Rep. No. 91, 73d Cong., 1st Sess., 2
(1933); Home Owners' Loan Act: Hearings on H.R. 4980 before the
House Committee on Banking and Currency, 73d Cong., 1st Sess.,
16-17 (1933) (House Hearings) (statement of William F. Stevenson,
Chairman, Federal Home Loan Bank Board); Comment, 11 Pac.L.J. 1085,
1103 (1980) (by 1933, 1,700 state-chartered savings and loans had
failed, causing losses of some $200 million, about one-third the
value of savings in these associations).
In order to ameliorate these conditions, Congress enacted the
HOLA, "a radical and comprehensive response to the inadequacies of
the existing state systems."
Conference of Federal Sav. &
Loan Assns. v. Stein, 604 F.2d 1256, 1257 (CA9 1979),
summarily aff'd, 445 U.S. 921 (1980). The Act provided for
the creation of a system of federal savings and loan associations,
which would be regulated by the Board so as to ensure their
vitality as "permanent associations to promote the thrift of the
people in a cooperative manner, to finance their homes and the
homes of their neighbors." S.Rep. No. 91, 73d Cong., 1st Sess., 2
(1933);
see also H.R.Rep. No. 55, 73d Cong., 1st Sess., 2
(1933); 77 Cong.Rec. 4974 (1933) (remarks of Sen. Bulkley).
Thus, in § 5(a) of the Act, Congress gave the Board plenary
authority to issue regulations governing federal savings and
loans:
"In order to provide local mutual thrift institutions in which
people may invest their funds and in order to provide for the
financing of homes, the Board is authorized, under such rules and
regulations as it may prescribe, to provide for the organization,
incorporation, examination,
operation, and
regulation of associations to be known as 'Federal Savings
and Loan Associations,' or 'Federal mutual savings banks' . . and
to issue charters therefor,
Page 458 U. S. 161
giving primary consideration to the best practices of local
mutual thrift and home-financing institutions in the United
States."
12 U.S.C. § 1464(a)(1) (1976 ed., Supp. IV) (emphasis
added).
The broad language of § 5(a) expresses no limits on the Board's
authority to regulate the lending practices of federal savings and
loans. As one court put it, "[i]t would have been difficult for
Congress to give the Bank Board a broader mandate."
Glendale
Federal Sav. & Loan Assn. v. Fox, 459 F.
Supp. 903, 910 (CD Cal.1978),
final summary judgment
granted, 481 F.
Supp. 616 (1979),
order reversing and remanding, 663
F.2d 1078 (CA9 1981),
cert. pending, No. 81-1192. And
Congress' explicit delegation of jurisdiction over the "operation"
of these institutions must empower the Board to issue regulations
governing mortgage loan instruments, for mortgages are a central
part of any savings and loan's "operation."
See Schott
Advisory Opinion at 21; House Hearings 16 (Apr. 20, 1933)
(statement of William F. Stevenson, Chairman, Federal Home Loan
Bank Board) ("We are loaning [savings associations] seven million
dollars a week, and they are lending it pretty largely on homes of
the type contemplated in the Act"); Tr. of Oral Arg. 4
(approximately 78% of savings and loan associations' assets are
invested in mortgage loan contracts).
Moreover, Congress directed that, in regulating federal savings
and loans, the Board consider "the best practices of local mutual
thrift and home-financing institutions in the United States," which
were at that time all state-chartered. § 5(a) of the HOLA, 12
U.S.C. § 1464(a). By so stating, Congress plainly envisioned that
federal savings and loans would be governed by what the Board --
not any particular State -- deemed to be the "best practices."
See also First Federal Sav. & Loan Assn. v. Massachusetts
Tax Comm'n, 437 U. S. 255,
437 U. S. 258,
n. 3 (1978) (observing that the HOLA "protects federal associations
from being forced into the state
Page 458 U. S. 162
regulatory mold"). Thus, the statutory language suggests that
Congress expressly contemplated, and approved, the Board's
promulgation of regulations superseding state law. Appellees,
however, point to the various sections of the HOLA explicitly
preempting [
Footnote 15] and
incorporating [
Footnote 16]
state law, and contend that the Board has no additional authority
to adopt regulations displacing state law. Although Congress made
decisions about the applicability of certain aspects of state law
to federal savings and loans, these provisions do not imply that
Congress intended no further preemption of state law. Rather,
Congress invested the Board with broad authority to regulate
federal savings and loans so as to effect the statute's purposes,
and plainly indicated that the Board need not feel bound by
existing state law. § 5(a) of the HOLA, 12 U.S.C. § 1464(a) (1976
ed., Supp. IV). We cannot read this broad delegation of power as
confining the Board's authority to preempt state law to those areas
"specifically described by the Act's other provisions."
United
Page 458 U. S. 163
States v. Southwestern Cable Co., 392 U.
S. 157,
392 U. S. 172
(1968);
see also Phelps Dodge Corp. v. NLRB, 313 U.
S. 177,
313 U. S.
193-194 (1941).
Furthermore, if federal savings and loans were expected to
conform to state law except where explicitly preempted in the Act
itself, the provisions incorporating specific aspects of state law
were needlessly repetitive. We decline to construe the Act so as to
render these provisions nugatory, "thereby offending the
well-settled rule that all parts of a statute, if possible, are to
be given effect."
American Textile Mfrs. Institute, Inc. v.
Donovan, 452 U. S. 490,
452 U. S. 513
(1981).
See also Jarecki v. G. D. Searle & Co.,
367 U. S. 303,
367 U. S.
307-308 (1961);
cf. Franklin Nat. Bank v. New
York, 347 U.S. at
347 U. S. 378
("We find no indication that Congress intended to make this phase
of national banking [
i.e., advertising] subject to local
restrictions, as it has done by express language in several other
instances"). [
Footnote
17]
B
Because of the exigencies of the times, the HOLA was enacted
hurriedly and its legislative history, concededly, is somewhat
sparse. [
Footnote 18] But
that history does confirm our reading
Page 458 U. S. 164
of the statutory language and the Board's plenary authority to
regulate the operations of federal savings and loans. Attempting to
provide for the "relief of the man who is about to lose his home,"
Congress set out the general framework, and left many of the
details to the Board. House Hearings 13 (Apr. 20, 1933) (statement
of William F. Stevenson, Chairman, Federal Home Loan Bank Board).
Thus, references to the Board's broad discretion to regulate the
newly created federal savings and loans appear throughout the
legislative history. Nowhere is there a suggestion of any intent
somehow to limit the Board's authority.
Chairman Stevenson's testimony during the HOLA hearings suggests
that the Act contemplated that federal law would govern the terms
of the loan instruments used by federal savings and loans.
Discussing § 5(c) of the HOLA, as amended, 12 U.S.C. § 1464(c),
Representative Hancock noted:
"You are departing from uniformity with respect to loan
associations throughout the United States when you say that the
thrift associations cannot loan on a piece of real estate in excess
of $20,000."
House Hearings 14 (Apr. 21, 1933). The Chairman replied:
"That may be true. We are departing in a good many ways. We have
a good many [thrift associations] that are in dire straits because
they have loaned on property way up yonder in value, and they have
their money tied up in hotels, apartment houses and things of that
kind, which puts them in a desperate situation."
Ibid.
Similarly, in response to concern expressed during the Senate
hearings that the Act did not prohibit borrowers from obtaining
financing and then renting the property, Chairman Stevenson
observed: "That would be a matter of regulation. That could be
covered by regulation under the bill." Senate
Page 458 U. S. 165
Hearings 14. Asked whether the Board would have authority to
promulgate such a regulation, Stevenson replied:
"If the Federal Home Loan Bank Board should choose to make that
kind of a regulation, it could put that in. A great many of these
local private institutions would put that kind of a clause in their
loans."
Ibid. See also House Hearings 5 (Apr. 20,
1933) (statement of Chairman Stevenson) (referring to "the
regulations as to the use of the property after the loan is once
obtained");
id. at 9 (Apr. 21, 1933) (statement of Mr.
Stevenson) ("[I]t is in the discretion of the Board when it will
grant [a 3-year] extension [of loan payments]");
id. at
18-19 (colloquy between Mr. Stevenson and Rep. Reilly) (noting that
the Board has discretion in determining whether to charter a
federal association).
The subsequent debates confirm that Congress accepted Chairman
Stevenson's offer and furnished the Board with broad power to
regulate the federal savings and loans. Thus, Representative Luce,
ranking minority member of the House Committee on Banking and
Currency, observed that the federal savings and loan
associations
"will be formed in accordance with the best building and loan
practice, and I feel sure we may rely upon [Chairman Stevenson] and
his Board to carry out that promise."
77 Cong.Rec. 2480 (1933). "It is contemplated by the bill before
us to put the machinery in the hands of the Home Loan Bank Board,"
and "[w]e give the board great power to administer the act,"
Representative Luce continued.
Id. at 2480, 2481.
See
also id. at 2481 ("We leave such things [as limitations on
conversion of federal home loan banks to federal savings and loans]
to the judgment of the board");
id. at 2501 ("The prudent
course is to leave this to the judgment of the board, by imposing a
maximum [rate of interest] in the bill -- 4 percent upon what we
borrow, 5 percent upon what we lend -- and trust this Board . . .
to get lower rates for borrowing or make
Page 458 U. S. 166
lower rates for lending as the opportunity may come");
id. at 4987 (colloquy between Sens. Hebert and Bulkley)
(observing that the Board has discretion in determining when
savings and loans should be chartered in areas with existing local
thrift institutions).
Thus, the HOLA did not simply incorporate existing local loan
practices. Rather, Congress delegated to the Board broad authority
to establish and regulate "a uniform system of [savings and loan]
institutions where there are not any now," and to "establish them
with the force of the government behind them, with a national
charter." House Hearings 15 (Apr. 21, 1933) (statement of Chairman
Stevenson);
id. at 17 (Apr. 20, 1933). [
Footnote 19] And the Board has
exercised
Page 458 U. S. 167
that discretion, regulating comprehensively the operations of
these associations, including their lending practices and,
specifically, the terms of loan instruments. [
Footnote 20]
C
As we noted above, a savings and loan's mortgage lending
practices are a critical aspect of its "operation," over which the
Board unquestionably has jurisdiction. Although the Board's power
to promulgate regulations exempting federal savings and loans from
the requirements of state law may not be boundless, in this case we
need not explore the outer limits of the Board's discretion. We
have no difficulty concluding that the due-on-sale regulation is
within the scope of the Board's authority under the HOLA, and
consistent with the Act's principal purposes.
Page 458 U. S. 168
Congress delegated power to the Board expressly for the purpose
of creating and regulating federal savings and loans so as to
ensure that they would remain financially sound institutions able
to supply financing for home construction and purchase. Thus, in
testifying during the House hearings on the HOLA, the Board's
Chairman observed:
"The new corporations that we propose to set up, we want them
set up on a sound basis as they will be of very material assistance
in home financing for all time, if properly managed."
House Hearings 12 (Apr. 21, 1933). And the relevant House and
Senate Reports referred to the federal associations as "permanent"
institutions. S.Rep. No. 91, 73d Cong., 1st Sess., 2 (1933);
H.R.Rep. No. 55, 73d Cong., 1st Sess., 2 (1933).
The due-on-sale regulation was promulgated with these purposes
in mind. The Board has determined that due-on-sale clauses are
"a valuable and often an indispensable source of protection for
the financial soundness of Federal associations and for their
continued ability to fund new home loan commitments."
12 CFR § 556.9(f)(1) (1982). Specifically, the Board has
concluded that the due-on-sale clause is "an important part of the
mortgage contract," and that its elimination
"will have an adverse [e]ffect on the earning power and
financial stability of Federal associations, will impair the
ability of Federal associations to sell their loans in the
secondary markets, will reduce the amount of home-financing funds
available to potential home buyers, and generally will cause a rise
in home loan interest rates."
Schott Advisory Opinion at 2, 17-18.
The Board's analysis proceeds as follows: it observes that the
federal associations' practice of borrowing short and lending long
-- obtaining funds on a short-term basis and investing them in
long-term real estate loans, which typically have a 25- to 30-year
term -- combined with rising interest rates, has increased the cost
of funds to these institutions and reduced their income. Exercising
due-on-sale clauses enables savings and loans to alleviate this
problem by replacing long-term,
Page 458 U. S. 169
low-yield loans with loans at the prevailing interest rates, and
thereby to avoid increasing interest rates across the board.
See id. at 21-22. Moreover, the Board has determined that
restrictions like the
Wellenkamp doctrine lengthen the
expected maturity date of a lender's mortgages, thus reducing their
marketability in the secondary mortgage market. As a result, the
Board fears,
"the financial stability of Federal associations in California
will be eroded, and the flow of home loan funds into California
will be reduced."
Schott Advisory Opinion, at 34. [
Footnote 21]
Admittedly, the wisdom of the Board's policy decision is not
uncontroverted. [
Footnote
22] But neither is it arbitrary or capricious. As judges, it is
neither our function, nor within our
Page 458 U. S. 170
expertise, to evaluate the economic soundness of the Board's
approach. In promulgating the due-on-sale regulation, the Board
reasonably exercised the authority, given it by Congress, so as to
ensure the financial stability of "local mutual thrift institutions
in which people . . . invest their funds and . . . [which] provide
for the financing of homes." § 5(a) of the HOLA, 12 U.S.C. §
1464(a) (1976 ed., Supp. IV). [
Footnote 23] By so doing, the Board intended to preempt
conflicting state restrictions on due-on-sale practices like the
California Supreme Court's
Wellenkamp doctrine.
Our inquiry ends there. Accordingly, we hold that the Board's
due-on-sale regulation bars application of the
Wellenkamp
rule to federal savings and loan associations. [
Footnote 24] The judgment of the Court of
Appeal is reversed.
It is so ordered.
Page 458 U. S. 171
JUSTICE POWELL took no part in the consideration or decision of
this case.
[
Footnote 1]
The Board came into being under § 17 of the earlier Federal Home
Loan Bank Act, 47 Stat. 736, as amended, 12 U.S.C. § 1437, the
statute which created the federal home loan bank system. The three
members of the Board are appointed by the President, with the
advice and consent of the Senate, for 4-year terms.
See
note following 12 U.S.C. § 1437. In addition to providing for the
establishment of federal savings and loan associations, the HOLA,
by its § 3, 48 Stat. 129, repealed § 4(d) of the Federal Home Loan
Bank Act, 47 Stat. 727, which had authorized federal home loan
banks to make loans directly to homeowners. The HOLA, by its § 4,
48 Stat. 129, instructed the Board to create the Home Owners' Loan
Corporation; this agency was to exchange its bonds for mortgages
held by financial institutions, including state-chartered savings
and loans, and to provide funds to needy homeowners for accrued
taxes, maintenance, and repairs.
[
Footnote 2]
The due-on-sale clause used in many loan instruments is � 17 of
the uniform mortgage instrument developed by the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association.
Paragraph 17 appears in two of the deeds of trust at issue in this
case and reads:
"17. Transfer of the Property; Assumption. If all or any part of
the Property or an interest therein is sold or transferred by
Borrower without Lender's prior written consent, excluding (a) the
creation of a lien or encumbrance subordinate to this Deed of
Trust, (b) the creation of a purchase money security interest for
household appliances, (c) a transfer by devise, descent or by
operation of law upon the death of a joint tenant or (d) the grant
of any leasehold interest of three years or less not containing an
option to purchase, Lender may, at
Lender's option, declare all
the sums secured by this Deed of Trust to be immediately due and
payable. Lender shall have waived such option to accelerate
if, prior to the sale or transfer, Lender and the person to whom
the Property is to be sold or transferred reach agreement in
writing that the credit of such person is satisfactory to Lender
and that the interest payable on the sums secured by this Deed of
Trust shall be at such rate as Lender shall request. If Lender has
waived the option to accelerate provided in this paragraph 17 and
if Borrower's successor in interest has executed a written
assumption agreement accepted in writing by Lender, Lender shall
release Borrower from all obligations under this Deed of Trust and
the Note."
"If Lender exercises such option to accelerate, Lender shall
mail Borrower notice of acceleration in accordance with paragraph
14 hereof. Such notice shall provide a period of not less than 30
days from the date the notice is mailed within which Borrower may
pay the sums declared due. If Borrower fails to pay such sums prior
to the expiration of such period, Lender may, without further
notice or demand on Borrower, invoke any remedies permitted by
paragraph 18 hereof."
App. 50-51, 85-86 (emphasis added).
[
Footnote 3]
The due-on-sale regulation was codified initially in 12 CFR §
545.6-11(f) (1980).
See 44 Fed.Reg. 39108, 39149
(1979).
[
Footnote 4]
Even before adopting the due-on-sale regulation, the Board had
interpreted 12 CFR § 545.8-3(a) (1982) -- a regulation promulgated
in 1948 that requires all loan instruments to "provide for full
protection to the Federal association" -- as authorizing federal
savings and loans to exercise due-on-sale provisions, despite any
state law to the contrary, because such clauses help ensure "full
protection" to the lender.
See the Board's Advisory
Opinion, Resolution No. 75-647, in
Schott v. Mission Federal
Sav. & Loan Assn. (Schott Advisory Opinion), No.
Civ-75-366, pp. 115 (CD Cal.July 30, 1975), reprinted as Exhibit A
to Defendants' Memorandum of Points and Authorities in Opposition
to Plaintiffs' Motion for Preliminary Injunction.
[
Footnote 5]
Paragraph 15 is also part of the uniform mortgage instrument
developed by the Federal Home Loan Mortgage Corporation and the
Federal National Mortgage Association.
See n 2,
supra. The paragraph reads in
full:
"15. Uniform Deed of Trust; Governing Law; Severability. This
form of deed of trust combines uniform covenants for national use
and nonuniform covenants with limited variations by jurisdiction to
constitute a uniform security instrument covering real property.
This Deed of Trust shall be governed by the law of the jurisdiction
in which the Property is located. In the event that any provision
or clause of this Deed of Trust or the Note conflicts with
applicable law, such conflicts shall not affect other provisions of
this Deed of Trust or the Note which can be given effect without
the conflicting provision, and to this end the provisions of the
Deed of Trust and the Note are declared to be severable."
App. 51-52, 86-87.
[
Footnote 6]
Each complaint also included a slander count, alleging that
Fidelity had maliciously published false charges that the appellee
was in default under the deed of trust.
Id. at 9, 54,
89.
[
Footnote 7]
In addition, the Court of Appeal noted that two of the three
deeds of trust at issue were executed prior to the effective date
of § 545.8-3(f). Therefore, the court reasoned, the Board's
due-on-sale regulation was not applicable to those loan
instruments, and could not preempt state law with respect to those
deeds.
See 121 Cal. App. 3d at 344, 345, 175 Cal. Rptr. at
476-477.
[
Footnote 8]
The Court of Appeal refused to ascribe any weight to the absence
of � 15 in the third deed of trust at issue here. The court
described its earlier discussion of � 15 as
"not based so much on an agreement between the parties for the
application of state law as on the conclusion that the general use
of a provision containing such language by federal savings and loan
associations with the approval of the Board persuasively evidences
a recognition by the Board and federal savings and loan
associations that state law would govern the interpretation,
validity and enforcement of security instruments."
Id. at 346, 175 Cal. Rptr. at 477. Nor did the court
find significant the fact that this deed covered commercial rather
than residential property.
[
Footnote 9]
A number of Federal District Courts have concluded that the
Board's due-on-sale regulation preempts state law.
See, e.g.,
Price v. Florida Federal Sav. & Loan Assn., 524 F.
Supp. 175, 178 (MD Fla.1981) (§ 545.8-3(f) is preemptive of any
state regulation);
First Federal Sav. & Loan Assn. v.
Peterson, 516 F.
Supp. 732, 740 (ND Fla.1981) (§ 545.8-3(f) preempts Florida
due-on-sale restrictions similar to those imposed by California);
Dantus v. First Federal Sav. & Loan Assn., 602 F.
Supp. 658,
661
(Colo.1980) (analogous ruling with respect to Colorado law);
Bailey v. First Federal Sav. & Loan
Assn., 467 F.
Supp. 1139, 1141 (CD Ill.1979) (§ 545.8-3(f) forecloses any
state regulation of due-on-sale practices of federal savings and
loans),
appeal dism'd, 636 F.2d 1221 (CA7 1980);
Glendale Federal Sav. & Loan Assn. v.
Fox, 459 F.
Supp. 903, 907 (CD Cal.1978) (same),
final summary judgment
granted, 481 F.
Supp. 616 (1979),
order reversing and remanding, 663
F.2d 1078 (CA9 1981),
cert. pending, No. 81-1192. One
court appears to have agreed with the California Court of Appeal.
See Holiday Acres No. v. Midwest Federal Sav. & Loan
Assn., 308 N.W.2d
471 (Minn.1981) (§ 545.8-3(f) does not preempt state regulation
of due-on-sale clauses).
In addition, at least three Federal Courts of Appeals, several
District Courts, and one State Supreme Court have ruled that
various other Board regulations supersede state law.
See, e.g.,
Conference of Federal Sav. & Loan Assns. v. Stein, 604
F.2d 1256, 1260 (CA9 1979) ("In our judgment, the regulatory
control of the Bank Board over federal savings and loan
associations is so pervasive as to leave no room for state
regulatory control"),
summarily aff'd, 445 U.S. 921
(1980);
First Federal Sav. & Loan Assn. v. Greenwald,
591 F.2d 417, 425-426 (CA1 1979) (Board regulation specifying the
conditions under which federal savings and loans must pay interest
on escrow accounts preempts state law imposing greater interest
requirements);
Kupiec v. Republic Federal Sav. & Loan
Assn., 512 F.2d 147, 150-152 (CA7 1975) (Board regulation
supersedes any common law right to inspect savings and loan's
membership list);
Meyers v. Beverly Hills Federal Sav. &
Loan Assn., 499 F.2d 1145, 1147 (CA9 1974) (Board regulation
preempts the field of prepayments of real estate loans to federal
associations);
Rettig v. Arlington Heights Federal Sav. &
Loan Assn., 405 F.
Supp. 819 (ND Ill.1975) (Board regulations and policy
statements preempt the field of fiduciary duties of federal savings
and loan officers);
Lyons Sav. & Loan Assn. v. Federal Home
Loan Bank Bd., 377 F. Supp.
11 (ND Ill.1974) (Board regulation displaces state law
regarding branching of federal savings and loans);
People v.
Coast Federal Sav. & Loan Assn., 98 F. Supp.
311, 318 (SD Cal.1951) (federal regulation of savings and loans
preempts the field);
Kaski v. First Federal Sav. & Loan
Assn., 72 Wis.2d 132, 141-142,
240 N.W.2d
367, 373 (1976) (federal law supersedes state regulation of
federal savings and loans' lending practices).
But see Derenco,
Inc. v. Benjamin Franklin Federal Sav. & Loan Assn., 281
Ore. 533,
577 P.2d
477 (Board regulation authorizing federal savings and loans to
maintain reserve accounts for tax and insurance payments does not
occupy the field of reserve accounts or preempt state law requiring
payment of interest on such accounts),
cert. denied, 439
U.S. 1051 (1978).
Cf. Gulf Federal Sav. & Loan Assn. v.
Federal Home Loan Bank Bd., 651 F.2d 259, 266 (CA5 1981)
(Board has authority only over internal management of federal
savings and loans, and not over disputed loan agreement
provisions),
cert. pending, No. 81-1744.
[
Footnote 10]
As a practical matter, however, few mortgage instruments are
written without due-on-sale clauses. The Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association, which
purchase the bulk of mortgages sold in the secondary mortgage
market, both require, in the mortgages they buy, either a
due-on-sale clause or a provision enabling the lender to demand
payment of the loan in seven years. The marketability of a mortgage
in the secondary market is critical to a savings and loan, for it
thereby can sell mortgages to obtain funds to make additional home
loans.
See Schott Advisory Opinion, at 28-34; Kinzler,
Due-on-Sale Clauses: The Economic and Legal Issues, 43
U.Pitt.L.Rev. 441, 452-453 (1982); Comment, 9 Fla.State L.Rev. 645,
646, 650 (1981).
[
Footnote 11]
Title 12 CFR § 545.8-3(g) (1982), which applies to loans made
after July 31, 1976, and secured by a home occupied or to be
occupied by the borrower, prohibits the exercise of a due-on-sale
clause in the same four circumstances listed in 1117 of the uniform
mortgage instrument,
see n 2,
supra: when a lien subordinate to the
lender's security instrument is created; when a purchase money
security interest for household appliances is created; when a
transfer occurs by devise, descent, or operation of law on the
death of a joint tenant; or when a leasehold interest of not more
than three years is granted with no option to purchase. Section
545.83(g) also bars the association from imposing a prepayment
penalty when a loan is accelerated by means of a due-on-sale
clause, and provides that, under specified circumstances, the
lender waives its option to exercise a due-on-sale provision.
[
Footnote 12]
This principle likewise leads us to reject appellees' contention
that, with respect to the two deeds of trust containing � 15,
see n 5,
supra, appellants did in fact agree to be bound by local
law. Paragraph 15 provides that the deed is to be governed by the
"law of the jurisdiction" in which the property is located; but the
"law of the jurisdiction" includes federal as well as state
law.
Moreover, like � 17 -- the due-on-sale clause in the uniform
mortgage instrument,
see n 2,
supra -- � 15 typically must be included in
any mortgage the Federal Home Loan Mortgage Corporation or the
Federal National Mortgage Association purchases in the secondary
mortgage market.
See n 10,
supra. Paragraph 15 was added to the
uniform mortgage instrument not to elevate state law over federal
law, but to provide a uniform choice-of-law provision to be used
when interstate disputes arose regarding the interpretation of a
mortgage.
See App. to Brief for Federal Home Loan Bank
Board and Federal Home Loan Mortgage Corporation as
Amici
Curiae 2a (letter from Henry L. Judy, General Counsel, Federal
Home Loan Mortgage Corporation);
see also S.Rep. No.
91-761, p. 25 (1970) (letter from Arthur F. Burns, Chairman of the
Board of Governors, Federal Reserve System).
[
Footnote 13]
Citing
Chrysler Corp. v. Brown, 441 U.
S. 281,
441 U. S.
315-316 (1979), appellees characterize the preamble as
an interpretative regulation that does not have the binding force
of law, and therefore cannot preempt state law. But
Chrysler
Corp. is not on point, because we conclude that § 545.8-3(f)
itself supersedes contrary state due-on-sale law; we look to the
preamble only for the administrative construction of the
regulation, to which "deference is . . . clearly in order."
Udall v. Tallman, 380 U. S. 1,
380 U. S. 16
(1965). We need not consider, therefore, the preemptive effect of
the preamble standing alone.
[
Footnote 14]
Because we find an actual conflict between federal and state
law, we need not decide whether the HOLA or the Board's regulations
occupy the field of due-on-sale law or the entire field of federal
savings and loan regulation.
[
Footnote 15]
See § 5(a) of the HOLA, 12 U.S.C. § 1464(a) (1976 ed.,
Supp. IV) (exempting federal mutual savings banks formerly
organized under state law from "any numerical limitations of State
law on the establishment of branch offices and other facilities");
and § 5(h) of the Act, § 1464(h) (preempting state taxes on federal
savings and loans greater than those imposed on "other similar
local mutual or cooperative thrift and home financing
institutions").
Cf. § 13 of the Federal Home Loan Bank
Act, 12 U.S.C. § 1433 (exempting Federal Home Loan Bank bonds from
taxation).
[
Footnote 16]
See § 5(a) of the HOLA, 12 U.S.C. § 1464(a) (1976 ed.,
Supp. IV) (providing that any federal mutual savings bank which was
formerly a state-chartered institution is subject to state laws
pertaining to discrimination in lending based on neighborhood or
geographic area, and to requirements imposed under the Consumer
Credit Protection Act, 15 U.S.C. § 1601
et seq.); §
5(b)(3) of the Act, § 1464(b)(3) (1976 ed., Supp. IV) (authorizing
federal savings and loans to borrow funds from a state mortgage
finance agency "to the same extent as" state law permits
state-chartered savings and loans to do so); and § 5(c)(4)(A) of
the Act, § 1464(c)(4)(A) (1976 ed., Supp. IV) (permitting federal
associations to invest in, or lend to, any business development
credit corporation incorporated in the State "to the same extent
as" state-chartered savings and loans are authorized to do so).
[
Footnote 17]
Likewise, we find nothing in § 8 of the Federal Home Loan Bank
Act of 1932, 12 U.S.C. § 1428, relied on by the dissent,
see
post at
458 U. S. 173,
that suggests any limit on the Board's authority to issue
regulations preempting state law. That provision, which is not even
part of the HOLA, speaks only to the Board's authority to examine
state laws governing the operation of federal home loan banks, not
federal savings and loans, for the purpose of ensuring "[a]dequate
protection to a Federal Home Loan Bank in making or collecting
advances under th[at] chapter. . . ." 12 U.S.C. § 1428. It does not
purport to constrict the Board's power to regulate the operations
of federal savings and loans, and does not negate the explicit
language and history of the HOLA.
[
Footnote 18]
On April 13, 1933, President F. D. Roosevelt wrote Congress,
asking for
"legislation to protect small home owners from foreclosure and
to relieve them of a portion of the burden of excessive interest
and principal payments incurred during the period of higher values
and higher earning power."
H.R. Doc. No.19, 73d Cong., 1st Sess., 1 (1933). Hearings were
held by the House Committee on Banking and Currency on April 20 and
21, 1933, and by the Senate Committee on Banking and Currency on
April 20 and 22. The bill was approved by the House on April 28,
see 77 Cong.Rec. 2585, and passed the Senate on June 5,
see id. at 4995. The President signed the bill into law on
June 9, 1933,
see id. at 6198, less than two months after
he had first requested the legislation.
[
Footnote 19]
The postenactment history of the HOLA corroborates the Board's
broad authority to regulate the lending practices of federal
savings and loans. As part of the Financial Institutions Regulatory
and Interest Rate Control Act of 1978, Pub.L. 95-630, 92 Stat.
3641, Congress amended § 5(a) of the HOLA to permit state mutual
savings banks to obtain federal charters. During debate in the
House, Representative Hanley introduced an amendment providing that
those mutual savings banks opting to convert to federally chartered
institutions would continue to be subject to state law pertaining
to lending discrimination and to regulations imposed under the
Consumer Credit Protection Act, 82 Stat. 146, as amended, 15 U.S.C.
§ 1601
et seq., if the Board determined that state law
imposed more stringent requirements than federal law.
See
124 Cong.Rec. 33847 (1978).
Representative Hanley explained:
"In no way, of course, would the use of State law requirements
for Federal mutual savings banks be interpreted to erode the Bank
Board's longstanding plenary authority over Federal savings and
loan associations; Federal law alone would continue to govern these
institutions in such areas as branching, anti-discrimination, and
lending authority."
Id. at 33848. Representative St. Germain, chairman of
the Subcommittee on Financial Institutions Supervision, Regulation,
and Insurance of the House Committee on Banking, Finance, and Urban
Affairs and chief sponsor of the bill, agreed:
"This restriction applies only to converted mutual savings
banks, and Congress in no way intends to interfere with the
longstanding, all-inclusive power of the Bank Board over the
activities of Federal savings and loan associations, including
branching authority."
Id. at 33849. The amendment was agreed to.
Ibid.
Similar views were expressed during the Senate debate on the
bill. Senator Brooke observed that
"we do not intend to interfere with the Bank Board's plenary
authority over Federal savings and loan associations, and, in this
area, Federal law alone would continue to govern."
Id. at 36148.
Then, during debate in the House on the Depository Institutions
Deregulation and Monetary Control Act of 1980, Pub.L. 96-221, 94
Stat. 132, one Congressman expressed concern that permitting
federal savings and loans to make residential real estate loans to
the same extent national banking associations were authorized to do
so might be interpreted as making "federal savings and loans . . .
subject to State requirements." 126 Cong.Rec. 6981 (1980) (remarks
of Rep. Patterson). Representative St. Germain responded that the
Act would expand the federal associations' investment powers
"[o]nly if the Federal Home Loan Bank Board permits. Under the
Home Owners' Act, the Bank Board has complete authority to
determine by regulation the lending practices of Federal
associations."
Ibid.
Although these postenactment events cannot be accorded the
weight of contemporary history, they do provide further
confirmation of Congress' intent to delegate to the Board broad
discretion in regulating the lending practices of federal savings
and loans.
See NLRB v. Bell Aerospace Co., 416 U.
S. 267,
416 U. S. 275
(1974);
Red Lion Broadcasting Co. v. FCC, 395 U.
S. 367,
395 U. S.
380-381 (1969).
[
Footnote 20]
The Board's extensive regulations govern, for example, fair
credit requirements, the types and amount of loans, collateral
required repayment schedules, initial loan charges, assignment of
rents, escrow accounts and interest paid on those accounts, late
charges, servicing of loans, and loan payments and prepayments.
See 12 CFR §§ 545.6, 545.8 (1982).
[
Footnote 21]
The Board's Due-on-Sale Task Force estimates that the California
Supreme Court's restrictions on the exercise of due-on-sale clauses
accounted for 40% of the total losses suffered in 1981 by
state-chartered associations in the State -- some $200 million.
See Federal Home Loan Bank Board, Due-on-Sale Task Force
Report 2, 15 (1982). The Task Force projects that imposition of
such restrictions nationwide would create, within two years, annual
losses of $600 to $800 million for federal savings and loans, and
$1 to $1.3 billion for all federal and state associations.
See
id. at 2, 18, 25.
[
Footnote 22]
Those subscribing to the opposite view contend that the
unrestricted exercise of due-on-sale clauses may preclude the
assumption of mortgages at lower interest rates, thus preventing
the sale of homes and transferring the burden of an inflationary
market from the lender to the homeowner and prospective homeowner.
See, e.g., Patton v. First Federal Sav. & Loan Assn.,
118 Ariz. 473,
578 P.2d 152
(1978);
Wellenkamp v. Bank of America, 21 Cal. 3d
943, 582 P.2d 970 (1978);
Nichols v. Ann Arbor Federal Sav.
& Loan Assn., 73 Mich.App. 163, 250 N.W.2d 804 (1977).
A number of courts, however, have agreed with the Board's
approach.
See, e.g., Williams v. First Federal Sav. & Loan
Assn., 651 F.2d 910 (CA4 1981);
Tierce v. APS
Co., 382 So. 2d
485 (Ala.1979);
Malouff v. Midland Federal Sav. & Loan
Assn., 181 Colo. 294,
509 P.2d 1240
(1973);
Martin v. Peoples Mutual Sav. & Loan
Assn., 319 N.W.2d 220
(Iowa 1982);
Occidental Savings & Loan Assn. v. Venco
Partnership, 206 Neb. 469,
293 N.W.2d
843 (1980);
Crockett v. First Federal Sav. & Loan
Assn., 289 N.C. 620,
224 S.E.2d
580 (1976);
Gunther v. White, 489
S.W.2d 529 (Tenn.1973).
[
Footnote 23]
We therefore reject appellees' contention that the Board's power
to regulate federal savings and loans extends only to the
associations' internal management, and not to any external matters,
such as their relationship with borrowers. Although one federal and
one state court have drawn this distinction,
see Gulf Federal
Sav. & Loan Assn. v. Federal Home Loan Bank Bd., 651 F.2d
at 266;
Holiday Acres No. v. Midwest Federal Sav. & Loan
Assn., 308 N.W.2d at 478, we find no support in the language
of the HOLA or its legislative history for such a restriction on
the Board's authority.
Moreover, whatever validity the distinction has in theory, it
makes little sense here. As the Wisconsin Supreme Court
recognized,
"[t]he regulation of loan practices directly affects the
internal management and operations of federal associations, and
therefore requires uniform federal control."
Kaski v. First Federal Sav. & Loan Assn., 72 Wis.2d
at 142, 240 N.W.2d at 373. In fact, as discussed in the text, the
Board's due-on-sale policy is based on the view that due-on-sale
clauses are essential to the financial soundness of federal savings
and loans; preservation of the associations' very existence is
obviously related to their internal management, and is one of the
functions delegated to the Board by Congress.
[
Footnote 24]
Pointing out that two of the deeds of trust were executed prior
to the 1976 effective date of § 545.8-3(f), appellees argue that
the due-on-sale regulation may not be applied so as to destroy
vested rights. Therefore, appellees reason, California law does not
conflict with federal law with respect to those two deeds.
Appellants respond that § 545.8-3(f) did not interfere with
appellees' rights because it merely codified preexisting law.
See n 4,
supra.
When the two deeds of trust were executed in 1971 and 1972,
California law permitted the unrestricted exercise of due-on-sale
clauses upon outright transfer of the security property, as
occurred here. The Board's due-on-sale regulation was then issued
in 1976, reinforcing Fidelity's right to enforce the due-on-sale
provisions. Not until
Wellenkamp was decided in 1978 was a
lender's right under California law to accelerate a loan in
response to an outright transfer limited to cases where the
security was impaired. The California Supreme Court's prior cases,
which forbade the automatic enforcement of due-on-sale provisions
when the borrower further encumbered the property securing the
loan,
La Sala v. American Sav. & Loan
Assn., 5 Cal. 3d 864,
489 P.2d 1113 (1971), and when the borrower entered into an
installment land contract covering all or part of the security
property,
Tucker v. Lasen Savings & Loan
Assn., 12 Cal. 3d
629, 526 P.2d 1169 (1974), permitted the unrestricted exercise
of due-on-sale clauses in cases of outright transfers of the
security.
See 5 Cal. 3d at 880, 489 P.2d at 1123; 12 Cal.
3d at 637-638, 526 P.2d at 1174-1175.
Because we find the
Wellenkamp doctrine preempted by a
previously promulgated federal regulation, and therefore
inapplicable to federal savings and loans, appellees are deprived
of no vested rights if Fidelity is permitted to enforce the
due-on-sale clauses in the two pre-1976 deeds: the savings and loan
had the right to accelerate the loans, pursuant to California law,
when the deeds were executed, and that power was never diminished
by state law. We have no occasion, therefore, to consider whether §
545.8-3(f) may be applied so as to give a savings and loan broader
authority to enforce a due-on-sale clause than it had when the deed
of trust was executed, or to address appellants' contention that §
545.8-3(f) effected no change in the law.
JUSTICE O'CONNOR, concurring.
I join in the Court's opinion, but write separately to emphasize
that the authority of the Federal Home Loan Bank Board to preempt
state laws is not limitless.
* Although
Congress delegated broad power to the Board to ensure that
federally chartered savings and loan institutions "would remain
Page 458 U. S. 172
financially sound,"
ante at
458 U. S. 168,
it is clear that HOLA does not permit the Board to preempt the
application of all state and local laws to such institutions.
Nothing in the language of § 5(a) of HOLA, which empowers the Board
to "provide for the organization, incorporation, examination,
operation, and regulation" of federally chartered savings and
loans, remotely suggests that Congress intended to permit the Board
to displace local laws, such as tax statutes and zoning ordinances,
not directly related to savings and loan practices. Accordingly, in
my view, nothing in the Court's opinion should be read to the
contrary.
* At one point in today's opinion, the Court states that "we
need not decide whether the HOLA or the Board's regulations occupy
. . . the entire field of federal savings and loan regulation."
Ante at
458 U. S. 159,
n. 14.
JUSTICE REHNQUIST, with whom JUSTICE STEVENS joins,
dissenting.
The Court today concludes that, in § 5(a) of the Home Owners'
Loan Act of 1933 (HOLA), 12 U.S.C. § 1464(a) (1976 ed., Supp. IV),
Congress authorized the Federal Home Loan Bank Board to preempt by
administrative fiat California's limitations upon the
enforceability of "due-on-sale" clauses in real estate mortgages
held by federal savings and loan institutions. The Court reaches
this extraordinary result by concluding that due-on-sale clauses
relate to a savings and loan's mortgage lending practices, which
"are a critical aspect of its
operation' over which the Board
unquestionably has jurisdiction." Ante at 458 U. S. 167.
Because I conclude that Congress has not authorized the Board to
promulgate a regulation such as 12 CFR § 545.8-3(f) (1982), I
dissent.
Section 5(a) of the HOLA, 12 U.S.C. § 1464(a) (1976 ed., Supp.
IV), unquestionably grants broad authority to the Board to regulate
the mortgage lending practices of federal savings and loans. In
order to perform this role, the Board may take into account state
property and contract law which governs real estate transactions in
general, and the enforceability and interpretation of mortgage
lending instruments in particular. Thus, it would be within the
Board's power to determine that it constitutes an unsafe lending
practice for a
Page 458 U. S. 173
federal savings and loan to conclude a real property mortgage
without a fully enforceable due-on-sale clause. It would be within
the authority delegated to it by Congress for the Board to conclude
that a due-on-sale clause must be included in a mortgage instrument
as a means of enabling a federal savings and loan to remove
unprofitable loans from its portfolio.
Such a regulation would be entirely consistent with the approach
taken by Congress in regulating the savings and loan industry. In §
8 of the Federal Home Loan Bank Act of 1932 (FHLBA), 12 U.S.C. §
1428, the precursor to HOLA, Congress has required the Board to
examine state law
"relating to the conveying or recording of land titles, or to
homestead and other rights, or to
the enforcement of the rights
of holders of mortgages on lands securing loans."
(Emphasis added.) Section 8 provides further:
"If any such examination shall indicate, in the opinion of the
board, that under the laws of any such State . . . there would be
inadequate protection to a Federal Home Loan Bank in making or
collecting advances under this chapter, the
board may withhold
or limit the operation of any Federal Home Loan Bank in such
State until satisfactory conditions of law . . . shall be
established."
12 U.S.C. § 1428 (emphasis added). Thus, there is no indication
in the FHLBA that the Board may, by promulgating regulations,
preempt those state laws that are deemed to be economically
unsound. Instead, if the Board concludes that California's
limitations upon the enforceability of due-on-sale clauses
endangers the soundness of the system established by the HOLA and
the FHLBA, then the response contemplated by Congress is for the
Board to "withhold or limit the operation" of the system in
California.
In declaring the due-on-sale clause enforceable as a matter of
federal law, however, the Board has departed from the approach
Page 458 U. S. 174
contemplated by Congress. Although Congress has authorized the
Board to regulate the lending activities of federal savings and
loan associations, there is no indication in the HOLA itself, or in
its legislative history, that Congress has empowered the Board to
determine whether and when federal law shall govern the
enforceability of particular provisions contained in mortgages
concluded by federal savings and loan associations. If anything, §
8 of the FHLBA indicates that it was Congress' understanding in
1932 that the enforceability of provisions in mortgages is a matter
of state law. Contract and real property law are traditionally the
domain of state law.
Aronson v. Quick Point Pencil Co.,
440 U. S. 257,
440 U. S. 262
(1979);
Butner v. United States, 440 U. S.
48,
440 U. S. 55
(1979). In the HOLA, Congress did not intend to create a federal
common law of mortgages.
See Texas Industries, Inc. v. Radcliff
Materials, Inc., 451 U. S. 630
(1981).* The Board's attempt to enforce due-on-sale clauses as a
matter of federal law cannot be upheld as a regulation of mortgage
lending practices of federal savings and loan associations. In §
545.8-3(f), the Board has gone beyond regulating how, when, and in
what manner a federal savings and loan may lend mortgage money.
Instead, as the Court recognizes,
ante at
458 U. S.
146-147, the Board's regulation purports to create a
rule of law which will govern the rights and obligations of the
parties to the mortgage instrument. This regulation does not simply
delineate those provisions a federal savings and loan must or must
not include in a mortgage instrument. Section 545.8-3(f) purports
to guarantee the enforceability of a contractual provision
notwithstanding state law to the contrary. In this case, the Board
is not regulating the operation of federal savings and loan
associations,
Page 458 U. S. 175
but the operation of due-on-sale clauses. Without a
congressional authorization more explicit than that relied upon by
the Court, I conclude that the Board has entered a domain in which
it is not authorized to override state laws.
The limitations the California courts have placed upon the
enforceability of due-on-sale clauses do not impair the ability of
the Board to regulate the manner in which federal savings and loan
associations engage in mortgage lending. California has not
interfered with the Board's determination that it constitutes an
unsafe lending practice for a federal savings and loan to enter a
loan agreement without a fully enforceable due-on-sale clause.
California's rule regarding due-on-sale clauses is not invalid
pursuant to the Supremacy Clause simply because it makes it
difficult for lenders to eliminate unprofitable mortgage loans from
their portfolios.
Although the Board has concluded that the California courts'
limitations upon the enforceability of due-on-sale clauses is
economically unsound, I cannot agree that Congress has enabled the
Board to insulate federal savings and loans from California
mortgage law merely by promulgating a regulation that declares
these clauses to be enforceable. Discharge of its mission to ensure
the soundness of federal savings and loans does not authorize the
Federal Home Loan Bank Board to intrude into the domain of state
property and contract law that Congress has left to the States.
* The Board, however, has argued that federal common law does
govern the contractual relationship between federal savings and
loan institutions and their mortgagors.
See Gulf Federal Sav.
& Loan v. Federal Home Loan Bank Bd., 651 F.2d 259, 266
(CA5 1981),
cert. pending, No. 81-1744; Brief for Federal
Home Loan Bank Board
et al. as
Amici Curiae 26,
n. 21.