Fear and Loathing in Federal Preemptions

Will depositories 'roll up' their mortgage banking subsidiaries into the bank parent because of upcoming regulatory changes? As National Mortgage News and American Banker reported last week, federally insured depositories have a choice to make: they can keep their mortgage subs as such, which would subject them to a patchwork of state consumer-protection laws. Alternatively, they can roll up their subsidiaries, retaining the federal preemption shield but losing the practical benefits of keeping the mortgage business in a stand-alone unit. One attorney told us that the roll up is merely a "legal maneuver" that exists on paper. He added that there is a great fear that if the units are not rolled up it could allow state attorney generals to get their foot in the door to the bank. "Banks are afraid that if the state unit still exists, AGs can use it to get into the bank even if it's not mortgage related," he said…