HOLA did not apply to preempt state law claims against a mortgage-assignee who was a federally chartered thrift because the originator of the loans was not also federally chartered

In Vang v. Home Loan Funding, Inc., CV F 07-1454 AWI GSA, (E.D. Cal. Feb. 22, 2010) the mortgage-assignee, a federally chartered thrift, moved to dismiss a class claim for fraudulent omission brought under California common law and under California’s Business and Professional Code § 17200 on the ground that both claims were preempted by the Home Owners’ Loan Act of 1933, 12 U.S.C. § 1464 (HOLA). The Plaintiffs argued that HOLA did not apply to preempt the state law claims because the originator of the loans was not a federally chartered institution and did not, therefore, come within the preemptive reach of HOLA. Because the loans were ultimately transferred to the Defendant by means of assignment, they remain subject to the same state law claims and defenses regardless of the fact the loans were assigned to an institution that is subject to federal regulation under HOLA. The court agreed. It started its analysis by stating that under the law of assignments the loans would be subject to the same claims and defenses after assignment to the Defendant, absent countervailing authority. It found no countervailing authority. In fact, the applicable authority sets forth the scope of activities that state law may not regulate. These include Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations [ … ] or other credit-related documents …. § 560.2(b)(9), as well as state laws relating to [p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages are preempted. § 560.2(b)(10). The Plaintiffs were not suing for Defendant’s conduct with respect to any of the listed activities. They were not thus attempting to regulate the conduct of the federally chartered institution. Rather, they sued because Defendant is the holder in due course of loans that were subject to claims and defenses under state law at the time of their origination.

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