Wells Fargo sues California
|February 10, 2003|
Banking giant claims federal regulation trumps state laws on interest payments
Inman News Features
The California Department of Corporations has accused Wells Fargo Bank and its mortgage subsidiary of violating state banking laws. But the banking conglomerate is counter-attacking with the argument that state law is irrelevant.
The bank and its Des Moines, Iowa-based Wells Fargo Home Mortgage subsidiary filed a lawsuit to that effect against the state in U.S. District Court in Sacramento earlier this month. The lawsuit seeks a ruling that federal law supersedes state law governing mortgage interest payments and that the federal Office of the Comptroller of the Currency alone regulates national banks. It also seeks injunctive relief against the California commissioner.
California regulators responded to the lawsuit last week by initiating an administrative action to revoke the bank's state mortgage license.
Wells Fargo Home Mortgage CEO Pete Wissinger said federal regulations allow national banks and their operating subsidiaries to conduct mortgage business in California without a state license.
"The comptroller's office has confirmed to us unequivocally that under its regulations California licenses are not required to conduct our mortgage business in California," Wissinger said in a statement.
California law prohibits charging interest more than one day before the mortgage is recorded even if the borrower received the funds before that day. Federal law permits charging interest on first mortgage loans beginning on the day when the borrower received the funds.
Wissinger said the charging interest as permitted under federal regulations "makes common sense."
"It's fair, and it's the law in every state except California, but most importantly, it's the law of the land," he said.
Wells Fargo Bank and its mortgage operation are part of Wells Fargo & Co., a $349 billion financial services conglomerate headquartered in San Francisco. The mortgage business has 4 million customers in all 50 states, according to Wells Fargo.
Copyright: Inman News Service