Licensing Exemption For A Subsidiary Of a National Association 50% Owned By An Unaffiliated Entity - Q1 2000

By the Division of Banks

A bank's subsidiary has a 50% ownership interest in an unaffiliated mortgage company, who owns the other 50%. The issue presented is whether a subsidiary in which a national bank has a 50% ownership interest is exempt from being licensed as a mortgage lender in the Commonwealth when the other 50% interest is owned by an entity unaffiliated with the bank or its holding company.

Said chapter 255E, section 2 contains a specific exemption from mortgage lender licensing for "a national banking association... or any subsidiary or affiliate." In previous opinions of the Division, this exemption has been applied to both wholly owned subsidiaries of a national bank as well as majority-owned subsidiaries of such banks. The issue presented here is whether a 50% ownership interest in a subsidiary would qualify the entity for this licensing exemption.

The language contained in said section 2 would appear to be broad enough to support a licensing exemption. It refers to "any" subsidiary or affiliate of a national banking association without reference to the parent's ownership interest in the entity. In addition, both wholly-owned and less than wholly-owned subsidiaries are examined by the Office of the Comptroller of the Currency ("OCC") during the course of an examination of a national bank. The Division has confirmed these examination procedures with the OCC.

Based on the language of the statute and the supervision of subsidiaries of a national bank by the OCC, it is the position of the Division that a 50% owned subsidiary of a national bank, is exempt from being licensed as a mortgage lender pursuant to said chapter 255E, section 2.