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The National Banking Act And OCC Regulations Are
The Proper Preemption Analysis
Wells Fargo urges the Court to analyze preemption of Civil Code §
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2923.6 under the Home Owners Loan Act (“HOLA”) and its attendant
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Office of Thrift Supervision (“OTS”) regulations (Def.’s Mot. Dismiss 7).
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This analysis is wrong: Wells Fargo’s only ground for preemption arises
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from the National Banking Act (NBA).
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Preemption of state law by national banks is analyzed under the
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OCC conflict preemption standards set forth in the NBA. See Aguayo v.
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U.S. Bank, N.A., 653 F.3d 912, 921-22 (9th Cir. 2011). In this case,
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plaintiff’s loan was originally held by World Savings Bank, which
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became Wachovia, which eventually merged with Wells Fargo (Def.’s
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Mot. Dismiss 2). Because Wells Fargo currently holds the loan, is
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directly responsible for the foreclosure process, and is a national bank,
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the NBA and OCC regulations apply. The fact that the loan originated
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with World Savings, a federal savings association, does nothing to
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change this analysis.1 The central allegation in this case—Wells Fargo’s
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The court in Gerber v. Wells Fargo Bank, N.A., criticized the cases
relied on by Wells Fargo to support the claim that World Savings and
Wachovia somehow bestow HOLA preemption to Wells Fargo because
the “cases cite either (a) nothing, (b) each other, or (c) generic
statements of law about corporations succeeding to the rights of the
entities they acquire.” 2012 WL 413997, at *4 (D. Ariz. Feb. 9, 2012). As
the court noted, “preemption is not some sort of asset that can be
bargained, sold, or transferred.” Id.; see also Albizo v. Wachovia Mortg.,
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noncompliance with Civil Code § 2923.6—is attributable solely to the
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foreclosure actions of Wells Fargo and has nothing to do with the
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origination activity of World Savings. See Gerber v. Wells Fargo Bank,
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N.A.,, 2012 WL 413997, at *4 (D. Ariz. Feb. 9, 2012).
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Even if Wells Fargo were correct that the preemption analysis
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applicable to federal savings associations is appropriate here, its
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reliance on the HOLA preemption standard is misplaced because
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Congress amended HOLA in 2011 as a part of the Dodd-Frank Wall
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Street Reform and Consumer Protection Act to conform HOLA
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preemption standards to the NBA conflict preemption standard. See 12
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U.S.C. § 1465(a) (2012) (“Any determination by a court . . . regarding
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the relation of State law to [federal savings associations] shall be made
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in accordance with the laws and legal standards applicable to national
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banks regarding the preemption of State law.”).
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B. California Civil Code § 2923.6 Is Not Preempted By The
National Banking Act
For a state law to be preempted under the OCC regulations of the
NBA, the law would have to be listed in the express preemption clause
and be absent from the savings clause. Aguayo, 653 F.3d at 922. Civil
Code § 2923.6 escapes preemption under each rubric: it is not expressly
preempted and it is included in the savings clause.
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2012 WL 1413996, at *15 (E.D. Cal. Apr. 20, 2012) (HOLA is not a
privilege that can “trickle[…] down” to a loan’s successor in interest).
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1. Civil Code § 2923.6 is Not Expressly Preempted by
OCC Regulations Because It Does Not Regulate
Mortgage Servicing, Processing, or Disclosures
Wells Fargo’s argument that Section 2923.6 regulates the
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“servicing” and “processing” of loans relies on an overbroad construction
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of “servicing” and “processing” that is untethered to lending, the focus of
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the OCC regulation. To interpret “servicing” to include foreclosure, as
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Wells Fargo argues, would result in the preemption of every state law
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regarding foreclosure. See Gerber, 2012 WL 413997, at *8 (“‘[S]ervicing’
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does not include ‘foreclosure,’ and state laws regulating foreclosure are
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therefore not preempted by NBA . . . .”). Section 2923.6 requires a
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mortgagee to make a “written determination” that the modification has
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been approved or denied before moving forward with the foreclosure
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process. See Cal. Civ. Code § 2923.6(c)(1).
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Nor does Section 2923.6 require “disclosures” because notices that
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relate to debt collection upon default of an existing loan are not
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disclosures within the meaning of the regulation. See Epps v. JP
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Morgan Chase Bank, N.A., 675 F.3d 315, 325 (4th Cir. 2012). The NBA
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only preempts state laws requiring disclosures at loan origination. OCC
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Interpretive Letter No. 1005, 2004 WL 3465750 (June 10, 2004).
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Significantly, Section 2923.6 requires banks to disclose why a
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modification application has been approved or denied only after the
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borrower has defaulted on their loan, not at loan origination. The
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statute’s pre-foreclosure requirements, then, are not lending disclosures
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preempted by the NBA.
Indeed, except for two courts that incorrectly applied the HOLA
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preemption analysis in the context of the NBA, every court that has
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analyzed whether California foreclosure laws, including Civil Code §
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2923.5, are preempted under the NBA have held that they are not. See
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Cabrera v. Countrywide Home Loans, Inc., 2013 WL 1345083 (N.D. Cal.
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Apr. 2, 2013); Tamburri v. Suntrust Mortg., Inc., 875 F. Supp. 2d 1009
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(N.D. Cal. 2012); Skov v. U.S. Bank Nat’l Ass’n, 207 Cal. App. 4th 690,
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143 Cal. Rptr. 3d 694 (2012). But see Maynard v. Wells Fargo Bank,
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N.A., 2012 WL 4898021 (S.D. Cal. Oct. 15, 2012) (applying HOLA
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analysis to find preemption); Acosta v. Wells Fargo Bank, N.A., 2010
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WL 2077209 (N.D. Cal. May 21, 2010) (same).2
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2. Civil Code § 2923.6 Falls Under OCC Regulation’s
Savings Clause
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Even if Section 2923.6 regulated “servicing,” “processing,” or
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“disclosures,” the regulation’s savings clause would still “save” it from
preemption. Foreclosure is nothing more than a debt collection process
The fact that the Homeowner Bill of Rights provides for additional
post-sale remedies for servicer violations does nothing to change this
analysis. See Lopez v. Washington Mut. Bank F.A., 284 F.3d 990 (9th
Cir. 2002) (finding that the imposition of a damage remedy does nothing
to interfere with the mortgagee’s ability to conduct lending activities
under HOLA).
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on real estate loans. It follows, then, that since Section 2923.6 regulates
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procedures before a notice of default or foreclosure sale, this law
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undoubtedly regulates creditors’ “rights to collect debt” within the
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meaning of the OCC’s savings clause. 12 C.F.R. § 34.4(b)(5) (2011).
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Section 2923.6 is therefore “saved” and not preempted. See Gerber, 2012
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WL 413997, at *5 (“There has never been a federal presence . . .
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sufficient to displace the various types of state statutes governing
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foreclosure procedures.”).
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Another requirement within Section 34.4(b)’s savings clause is
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that the state law not “significantly interfere” with the national banks’
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powers under the NBA. Nothing in Section 2923.6 requires Wells Fargo
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to offer a loan modification or to change its lending or servicing
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practices. It simply requires a mortgagee to delay the foreclosure
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process until they have ruled on a borrower’s modification application.
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CONCLUSION
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Ultimately what Wells Fargo argues is that any substantive
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requirement imposed by state foreclosure law is preempted. But Wells
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Fargo cannot have it both ways: it cannot rely on California’s non-
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judicial foreclosure statute as authorization to sell the home, yet argue
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that the homeowner’s claims under the same regime are preempted. See
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Dan’s City Used Cars, Inc. v. Pelkey, __ S. Ct. __, 2013 WL 1942398, at
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*9 (May 13, 2013) (A towing company “cannot rely on New Hampshire's
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Elizabeth S. Letcher (SBN 172986)
HOUSING AND ECONOMIC RIGHTS
ADVOCATES
P.O. Box 29435
Oakland, CA 94604
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