BPI, SFA Back OCC’s Proposal for “Valid-When-Made” Rule

BPI, SFA Back OCC’s Proposal for “Valid-When-Made” Rule

In a comment letter submitted January 21, BPI and the Structured Finance Association (SFA) offered comments to the OCC on its proposal to amend portions of the regulations implementing the National Bank Act and Home Owners’ Loan Act, rectifying a 2015 appeals court ruling in Madden v. Midland Funding that challenged the longstanding “valid-when-made” doctrine governing interest rates on loans sold to nonbanks.  BPI and the SFA expressed their support for the proposal, which would “reestablish the correct legal interpretation—well understood for over 150 years—that a loan validly originated does not become usurious if the originator subsequently sells, assigns, or securitizes the loan,” and emphasized the importance of the proposal in limiting the threat of disruption to the lending and securitization markets posed by the Madden decision.  The letter encouraged the OCC to finalize the proposed rule as soon as possible to address uncertainty in the market and to harmonize the final rule with the parallel proposal from the FDIC. 

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The views expressed do not necessarily reflect those of the Bank Policy Institute’s member banks, and are not intended to be, and should not be construed as, legal advice of any kind.