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Banking Law Keyed to Barr, 3rd Ed.
Securities Industry Association v. Clarke
Citation:
885 F.2d 1034 (1989)Facts
Security Pacific National Bank (SPN Bank) created a pool consisting of conventional, fixed-rate residential mortgage loans that it had originated in the ordinary course of its lending activities. SPN Bank transferred these mortgage loans to a trust and, in exchange, received mortgage pass-through certificates representing fractional undivided interests in the pool. SPN Bank then sold these certificates to investors through underwriters. After the sale, SPN Bank continued to service the mortgage loans, collecting payments from mortgagors and passing through principal and interest (minus a servicing fee) to certificate holders on a pro rata basis.
The Securities Industry Association (SIA) challenged this practice, arguing that SPN Bank’s issuance and sale of mortgage pass-through certificates constituted “underwriting securities,” which is prohibited for national banks under the Glass-Steagall Act. The Comptroller of the Currency rejected SIA’s challenge, finding that SPN Bank’s activities represented a permissible sale of bank assets and did not violate the Glass-Steagall Act. The Comptroller concluded that the use of the pass-through certificate mechanism was either an express power or an incidental power of national banks, as it was a convenient and useful means of selling mortgage loans, which banks are expressly authorized to sell under banking laws.
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