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California State Assembly Banking and Finance Committee issues memorandum on Covid-19 banking and finance issues

State Issues National Bank Act Courts Preemption Mortgages Covid-19 California

State Issues

On March 20, the California State Assembly Banking and Finance Committee issued a memorandum noting that state authority over large national banks “is significantly constrained by federal law.” The memorandum provides that, under the National Bank Act and related case law, courts have widely upheld federal preemption over state laws that “interfere with the business of banking.” As such, courts “would likely stop any attempts by the state to force banks to limit rates or fees, demand forbearance or loan modifications, or require banks to make certain loans.” While state officials may urge national banks to give their borrowers relief, “these requests do not carry the force of law.” The memorandum also discusses mortgage rates and home sales, noting that in the event that mortgage rates increase and negatively affect the real estate market, “state legislators have limited tools to address such problems.”

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