OHIO SUPREME COURT HOLDS MORTGAGE SATISFACTION RECORDING REQUIREMENT NOT PREEMPTED AS TO FEDERAL SAVINGS BANK
The Ohio Supreme Court held that an Ohio law requiring that within 90 days from the date of the satisfaction of a residential mortgage the mortgagee must record the satisfaction was not preempted by 12 C.F.R. § 560.2. Pinchot v. Charter One Bank, FSB, 99 Ohio St. 3d 390 (2003).
The court concluded that a satisfaction recording requirement did not fall within the list of preempted state laws in Section 560.2(b). In response to the lender’s arguments, the court found that such a law did not impose requirements on the “origination” or “servicing” of mortgages. Additionally, the court held that the law did not affect the lending operations of a federal savings bank as it regulates the period after the loan is satisfied. The court concluded that the law was not preempted. Although an analysis under Section 560.2(c) was not required given the above holdings, the court stated that the law was a real property statute intended to promote efficiency and certainty in clearing and transferring title and had only an incidental effect on a federal savings bank’s lending practices.
Although a state regulator could not enforce the state law against a federal savings bank, the court found no authority forbidding a private individual from enforcing a state law that permitted a private action.
The case illustrates that federal savings banks cannot ignore all state law requirements, but must engage in an analysis of the state law and existing preemption authority.
Darrell Dreher and Elizabeth Anstaett