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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 6, 2004 Decided July 13, 2004
No. 03-5204
NATIONAL HOME EQUITY MORTGAGE ASSOCIATION,
APPELLANT
v.
OFFICE OF THRIFT SUPERVISION, ET AL.,
APPELLEES
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.
2
Sarah Reznek was on the brief for amicus curiae State
Attorneys General in support of appellee.
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 Mort-
gage Association seeks an order declaring invalid a final rule
promulgated by the Office of Thrift Supervision pursuant to
the Alternative Mortgage Transaction Parity Act, 12 U.S.C.
§§ 3801 et. seq. The challenged rule designates certain OTS
regulations as applicable and others as inapplicable to nonfed-
erally chartered housing creditors that engage in ‘‘alternative
mortgage transactions.’’ The district court granted summary
judgment in favor of the OTS, 271 F. Supp. 2d 264 (D.D.C.
2003), and the NHEMA appeals. We conclude the OTS did
not exceed its statutory authority in promulgating the rule
and hence we affirm the judgment of the district court.
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 institu-
tions 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
others as inapplicable to nonfederally chartered creditors that
engage in ‘‘alternative mortgage transactions’’ (AMTs). See
67 Fed. Reg. 60,542 (Sept. 26, 2002). An AMT is a mortgage
loan for which the term or interest rate or both are adjustable
rather than fixed. See 12 U.S.C. § 3802(1).
The Congress passed the Parity Act in 1982 in order to
‘‘eliminate the discriminatory impact that [regulations autho-
rizing federally chartered depository institutions to engage in
3
alternative mortgage financing] have upon nonfederally char-
tered housing creditors,’’ and to provide for parity between
the two types of lenders ‘‘by authorizing all housing creditors
to make, purchase, and enforce alternative mortgage transac-
tions so long as the transactions are in conformity with’’
federal regulations. Id. § 3801(b). Section 804(c) of the Act
provides:
An alternative mortgage transaction may be made by a
housing creditor in accordance with this section notwith-
standing any State constitution, law, or regulation.
Id. § 3803(c). The Act also authorized the OTS, the Office of
the Comptroller of the Currency, and the National Credit
Union Administration to
identify, describe, and publish those portions or provi-
sions of their respective regulations that are inappropri-
ate for (and thus inapplicable to), or that need to be
conformed for the use of, nonfederally chartered housing
creditors.
Pub. L. 97–320, § 807(b), reprinted in 12 U.S.C. § 3801 note.
Pursuant to this authority, in 1983 the Federal Home Loan
Bank Board (OTS’s predecessor) promulgated a final rule in
which it identified certain of its regulations, including those
that describe and define AMTs, as applicable to nonfederally
chartered creditors. 48 Fed. Reg. 23,032, 23,053 (May 23,
1983). The Bank Board understood its role as making appli-
cable to state chartered housing creditors only those regula-
tions that were ‘‘an integral part of, and particular to’’ AMTs
entered into by federally chartered housing creditors, and not
those regulations that governed all types of mortgage loans.
Id.
This regulatory scheme remained substantially unchanged
until 1996, when the OTS added to the list of regulations
applicable to nonfederally chartered creditors those govern-
ing 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. 12 C.F.R. § 560.33. The latter
4
permits federal thrifts to impose a fee for prepayments and
specifies how such payments shall be applied to the balance of
the loan. Id. § 560.34. As a result of this change, state
chartered housing creditors could levy prepayment penalties
and late fees without regard to state laws limiting or prohibit-
ing such charges.
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 mar-
ket. In April 2000 the OTS issued an Advance Notice of
Proposed Rulemaking in which it aired that concern. See 65
Fed. Reg. 17,811, 17,813 (Apr. 5, 2000). Although the agency
recognized that subprime lending helps borrowers who would
not otherwise qualify for a mortgage loan, it wanted to
discourage rather than to enable predatory practices. Id. at
17,814/2. To that end, the agency sought public comments
regarding, among other things, the extent to which housing
creditors were ‘‘engaging in predatory or abusive mortgage
lending practices that would be contrary to existing state law
but for the provisions of the Parity Act and OTS’s implemen-
tation thereof.’’ Id. at 17,816/2.
The OTS next issued a Notice of Proposed Rulemaking
that would make the late fee and prepayment penalty regula-
tions 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 67 Fed. Reg.
20,468, 20,471 (Apr. 25, 2002). In contrast, the OTS proposed
to continue applying to state chartered housing creditors its
rules regarding adjustments and disclosures to borrowers
entering into AMTs. Id.
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 67 Fed. Reg. 60,542–55, on the ground that
those regulations are ‘‘not essential or intrinsic’’ to a lender’s
5
ability to engage in AMTs. Id. at 60,544. As a result, state
chartered housing creditors again have to comply with state
laws governing prepayment penalties and late fees, rather
than with the relevant OTS regulations.
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 Admin-
istrative Procedure Act, 5 U.S.C. § 706(2)(A), because there
is insufficient evidence in the record to support either the
agency’s conclusion that the regulations at issue are ‘‘not
essential or intrinsic’’ to a creditor’s ability to engage in
AMTs, or the factual premise of the rule, that state chartered
housing creditors were abusing their authority to charge
prepayment penalties and late fees.
Upon cross-motions 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 enti-
tled 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
6
respecting AMTs or, rather, only those regulations reason-
ably identified by the OTS as not ‘‘inappropriate for (and thus
inapplicable to)’’ state chartered housing creditors. If the
Congress has so spoken, then ‘‘the court, as well as the
agency, must give effect to the unambiguously expressed
intent of Congress.’’ Id. at 842–43. If, however, ‘‘the statute
is silent or ambiguous with respect to the specific issue,’’ then
we must go on to determine ‘‘whether the agency’s answer is
based on a permissible construction of the statute.’’ Id. at
843.
At Chevron step one the NHEMA emphasizes that, pursu-
ant 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
transactions as issued by the [OTS] for federally chartered
savings and loan associations.’’ 12 U.S.C. § 3803(a) (appel-
lant’s emphasis). The NHEMA contends that this provision,
when read in conjunction with § 804(c) (preempting state law
with respect to AMTs made in accordance with § 804), id.
§ 3803(c), unambiguously establishes that nonfederally char-
tered housing creditors shall be able to engage in AMTs upon
all the same terms as federally chartered housing creditors,
and that the Act thus preempts all state laws respecting
AMTs. The NHEMA draws further support for its interpre-
tation from § 802 of the Parity Act, in which the Congress
stated the purpose of the Act is to ‘‘provide [nonfederally
chartered housing creditors] parity with federally chartered
institutions.’’ Id. § 3801(b). ‘‘Thus,’’ we are told, ‘‘the scope
of preemption created by the Parity Act is that necessary to
create parity: not more, not less.’’
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 TTT only to transac-
tions made in accordance with regulations governing alterna-
tive mortgage transactions as issued by the [OTS].’’ The
Congress did not, however, simply make all OTS regulations
applicable to nonfederally chartered housing creditors engag-
ing in AMTs; to the contrary, the legislature specifically
7
directed the agency to ‘‘identify, describe, and publish those
portions of [its] regulations that are inappropriate for (and
thus inapplicable to)’’ such creditors. Pub. L. 97–320,
§ 807(b). The Congress neither defined ‘‘inappropriate’’ nor
provided any further guidance to the OTS. In light of this
consequently broad mandate, the Act need not be construed,
as the NHEMA argues, as an unequivocal direction to make
applicable to state chartered housing creditors all OTS regu-
lations governing federally chartered housing creditors en-
gaging in AMTs, and thus to preempt all state laws and
regulations inconsistent therewith. The agency must decide
which regulations are appropriate and which are inappropri-
ate for nonfederally chartered housing creditors in view of the
purposes of the Parity Act and of such other regulatory
policies as the OTS may lawfully pursue.
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 re-
quired 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 ‘‘inappro-
priate for’’ application to nonfederally chartered creditors.
The statute thus clearly admits of the agency’s interpretation
that the Congress did not mandate parity between federally
and nonfederally chartered creditors with respect to every
8
detail of AMTs, and that the purpose of the Act is served —
and the agency’s responsibility thereunder is discharged — if
the OTS makes applicable to state creditors only those regu-
lations ‘‘essential or intrinsic to the[ir] ability’’ to engage in
AMTs.
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 greater deference when adopted
soon after passage of statute). The OTS reverted to this view
in response to what it reasonably perceived as the unantic-
ipated 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 response 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
9
Procedure Act, 5 U.S.C. § 706(2)(A), because there is no
evidence in the administrative record demonstrating that (1)
late payment and prepayment fees are ‘‘not essential or
intrinsic’’ to state housing creditors’ ability to engage in
AMTs; or that (2) state housing creditors’ abuse of late
payment and prepayment provisions resulted in an increase
in predatory lending. The NHEMA does not, however, raise
this argument on appeal — no doubt because 46 state Attor-
neys General had submitted evidence supporting the findings
of fact upon which the OTS based its decision to make its
prepayment and late fee regulations inapplicable to state
chartered housing creditors, which evidence the Attorneys
General reiterate in their brief as amici curiae in support of
the OTS. In response to the agency’s ANPR, the Attorneys
General reported that, in their experience, the regulatory
change made in 1996 encouraged abusive practices ‘‘primarily
by non-depository lenders and mortgage brokers,’’ that is,
state chartered housing creditors subject to little, if any
federal regulation. Letter from Nat’l Ass’n of Attorneys
General in Response to ANPR, at 1–3. Concerned particular-
ly with prepayment penalties and late fees, the Attorneys
General ‘‘strongly urge[d] the OTS to take appropriate action
to revise its regulations’’ in order ‘‘to protect borrowers from
predatory practices.’’ Id. at 3. In view of the Attorneys
General’s responsibility for enforcing state consumer protec-
tion laws, the OTS could reasonably have given special weight
to their informed judgment about the effect of the agency’s
1996 change of policy. Because the NHEMA does not press
its APA argument on appeal, however, we hold only that the
OTS’s interpretation of the Parity Act is a reasonable one.*
* In the district court the NHEMA also argued the OTS’s
interpretation is not entitled to deference because more than one
agency has authority to administer and hence to interpret the
Parity Act. See 271 F. Supp. 2d at 274. Because that issue is not
presented on appeal, we do not decide it either.
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III. Conclusion
For the foregoing reasons, the judgment of the district
court is
Affirmed.