Court OKs State Farm Thrift's Noncompliance

State Farm's federally chartered thrift can use the insurance company's independent agents to market residential mortgages and home equity loans without complying with state licensing requirements, according to a U.S. appeals court. However, the circuit judges noted that their decision may be moot once a new federal law goes into effect that sets registration and licensing requirements for all mortgage originators. The 6th Circuit Court of Appeals ruled that operations of State Farm Bank are not subject to an Ohio law that would require the independent agents to be licensed as mortgage brokers. "We reach this conclusion because the Ohio Act's application to State Farm Bank's exclusive agents fits within the categories of state laws that are expressly preempted by OTS regulations," the appeals court said. Banking attorney Steven Kaplan, a partner at K&L Gates, said, "We have to see how this plays out with the new federal [licensing] law. But at the moment, it is a significant victory for federally chartered entities. It allows them flexibility in how and to whom they solicit customers." The NAMB can be found on the Web at http://www.namb.org.