NATIONAL HOME EQUITY MORTGAGE ASSOCIATION, APPELLANT v. OFFICE OF THRIFT SUPERVISION, ET AL., APPELLEES
No. 03-5204
Unitеd States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 6, 2004 Decided July 13, 2004
Appeal from the United States District Court for the District of Columbia (No. 02cv02506)
Ronald W. Stevens argued the cause for appellant. With him on the briefs were David R. Overstreet and Christopher R. Nestor.
Thomas J. Segal, Deputy Chief Counsel, Office of Thrift Supervision, argued the cause for appellees. With him on the brief was Elizabeth R. Moore, Special Counsel.
Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time.
Cheryl L. Ziegler, Jonathan P. Hooks, Nina F. Simon, and Michael R. Schuster were on the brief for amici curiae National Community Reinvestment Coalition, et al. in support of appellee.
Before: GINSBURG, Chief Judge, and HENDERSON and RANDOLPH, Circuit Judges.
Opinion for the Court filed by Chief Judge GINSBURG.
GINSBURG, Chief Judge: The National Home Equity Mortgage Association seeks an order declaring invalid a final rule promulgated by the Office of Thrift Supervision pursuant to the Alternative Mortgage Transaction Parity Act,
I. Background
The NHEMA is a trade association of non-prime mortgage lenders, here representing state chartered housing creditors, including both non-depository lenders and depository institutions other than commercial banks and credit unions. The Association petitions for review of a final rule in which the OTS designated certain of its regulations as applicable and othеrs as inapplicable to nonfederally chartered creditors that engage in “alternative mortgage transactions” (AMTs). See
The Congress passed the Parity Act in 1982 in order to “eliminate the discriminatory impact that [regulations authorizing fеderally chartered depository institutions to engage in
An alternative mortgage transaction may be made by a housing creditor in accordance with this section notwithstanding any State constitution, law, or regulation.
identify, describe, and publish those portions or provisions of their respective regulations that are inappropriate for (and thus inapplicable to), or that need to be conformed for the use of, nonfederally chartered housing creditors.
This regulatory scheme remained substantially unchanged until 1996, when the OTS added to the list of regulations applicable to nonfederally chartered creditors those governing late fees and prepayment penalties. The former allows federal thrifts to include a late fee provision in their loan contracts, subject to certain limitations upon the collection and application of such fees.
Within a few years of this change the OTS became aware that the application of its late fee and prepayment penalty regulations to housing creditors might be contributing to predatory lending practices in the subprime mortgage market. In April 2000 the OTS issued an Advance Notice of Proposed Rulemaking in which it aired that concern. See
The OTS next issued a Notice of Proposed Rulemaking that would make the late fee and prepayment penalty regulations inapplicable to state chartered housing creditors. In the NPR, the agency noted the rising incidence of potentially predatory lending practices and preliminarily found the two regulations at issue were not “essential or intrinsic” to a creditor‘s ability to engage in AMTs. See
Pursuant to its authority under § 807(b), the OTS then promulgated a final rule making its prepayment penalty and late fee regulations inapplicable to state chartered housing creditors, see
The NHEMA challenged the final rule in district court, arguing (1) the OTS lacks authority to designate which of its regulations shall apply to state housing creditors because the Parity Act preempts all state laws governing AMTs; and (2) the rule is arbitrary and capricious, in violation of the Administrative Procedure Act,
Upon cross-motiоns for summary judgment, the district court concluded the Parity Act is ambiguous with regard to the scope of state law preempted. 271 F. Supp. 2d at 270-71. The court then concluded the agency‘s interpretation of the extent to which the Act preempts state law is based upon a permissible construction of the statute and is therefore entitled to deference. Id. at 273. Finally, the district court rejected the NHEMA‘s argument that the rule is arbitrary and capricious for want of factual support in the rulemaking record. Id. at 276-78.
II. Analysis
On appeal the NHEMA renews only its argument that the agency‘s rule is based upon an impermissible interpretation of the Parity Act. We review the OTS‘s interpretation of a statute it is charged with administering according to the familiar two-step analysis in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron, we must first determine “whether Congress has directly spoken to the precise question at issue,” id. at 842, here, whether the Parity Act requires that state chartered housing creditors be made subject to all federal regulations
At Chevron step one the NHEMA emphasizes that, pursuant to § 804(a) of the Parity Act, nonfederally chartered housing creditors may engage in AMTs that are “made in accordance with regulations governing alternative mortgage transaсtions as issued by the [OTS] for federally chartered savings and loan associations.”
It is not so clear to us the Parity Act is intended to preempt all state laws applicable to AMTs. The Act also provides that § 804, which authorizes state chartered housing creditors to engage in AMTs, “shall apply ... only to transactions made in accordance with regulations governing alternative mortgage transactions as issued by the [OTS].” The Congress did not, however, simply make all OTS regulations applicable to nonfederally chartered housing creditors engaging in AMTs; to the contrary, the legislature specifically
Because the Parity Act does not unambiguously express an intent to preempt all state laws governing AMTs, we must go on to Chevron step two and consider whether the agency‘s interpretation of the Act is a permissible one. We hold it is.
As the OTS interprets the Parity Act, the agency is required to apply to state chartered housing creditors only those core regulations that “authorize” federally chartered housing creditors to “engage in” AMTs, as opposed to those less central regulations that govern the terms upon which federally chartered creditors may do so; only state laws in conflict with such authorizing provisions are preempted. In the final rule, the OTS defined the applicable regulations as those that are “essential or intrinsic to the ability of state housing creditors to continue to provide alternative mortgage transactions.”
As we have seen, although the Parity Act on its face makes clear the Congress intended to preempt state law to some extent, the Act also clearly vested the OTS with authority to “identify those portions” of its regulations that are “inappropriate for” application to nonfederally chartered creditors. The statute thus clearly admits of the agency‘s interрretation that the Congress did not mandate parity between federally and nonfederally chartered creditors with respect to every
The NHEMA also argues we owe no deference to the OTS‘s interpretation of the Act because it is a departure from previous agency policy. An agency‘s interpretation of a statute is entitled to no less deference, however, simply because it has changed over time. “On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis.” Chevron, 467 U.S. at 863-64. To be sure, an agency must provide a “reasoned analysis” for its change in course, Motor Vehicle Mfrs. Ass‘n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983), but the OTS has clearly done that. As early as the April 2000 ANPR the OTS expressed concern that state housing creditors were engaging in predatory subprime lending — a concern it ultimately determined to be well-founded. Moreover, the agency‘s change in course is simply a return to the view it held consistently from its first implementation of the Parity Act in 1983 until 1996. Cf. Power Reactor Develop. Co. v. Int‘l Union of Electricians, 367 U.S. 396, 408 (1961) (agency interpretation entitled to greаter deference when adopted soon after passage of statute). The OTS reverted to this view in response to what it reasonably perceived as the unanticipated and undesirable fallout from the change it made in 1996. See Florida Cellular Mobile Communications Corp. v. FCC, 28 F.3d 191, 196-97 (D.C. Cir. 1994) (upholding change in regulation as reasoned respоnse to experience).
In sum, because we conclude the agency‘s interpretation of the Parity Act and its rulemaking authority thereunder is a permissible one, we defer to that interpretation pursuant to Chevron step two.
The NHEMA argued in the district court that the OTS rule is arbitrary and capricious, in violation of the Administrative
For the foregoing reasons, the judgment of the district court is
Affirmed.