ORDER AND OPINION
Before the court is Defendant's motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1) for want of subject
matter jurisdiction, and Defendant's motion to dismiss pursuant
to Rule 12(b)(6) for failure to state a claim or, in the
alternative for summary judgment pursuant to Rule 56. For the
following reasons, Defendant's 12(b)(1) motion is denied,
Defendant's motion for summary judgment pursuant to Rule 56 is
On May 17, 2001, Defendant, the Office of Banks and Real
Estate an Illinois State Agency, amended its regulations ("new
OBRE regulations"), which now impose stricter terms on lenders
regarding the origination of high risk home loans, in an attempt
to limit predatory lending. Ill.Admin.Code tit. 38, §
1050.155(a). Plaintiff, the Illinois Association of Mortgage
Brokers, claims the new OBRE regulations run contrary to a
previously enacted federal statute, specifically the Alternative
Mortgage Transaction Parity Act of 1982, Pub.L. No. 97-320, 96
Stat. 1469 (1982) ("AMTPA"). Plaintiff claims that AMTPA
preempts the new OBRE regulations making the new OBRE
regulations invalid. Plaintiff seeks to obtain a preliminary
injunction of the new OBRE regulations, enjoining their
enforcement. Defendant claims that even if Plaintiffs assertions
have merit, Plaintiff is not the appropriate party to bring
suit. The question of whether Plaintiff has standing to invoke
federal subject matter jurisdiction in this case is the only
disputed fact. All other claims are based on interpretation of
the new OBRE regulations and federal statutes. Defendant claims
that the new OBRE regulations are not pre-empted by AMTPA, but
are consistent with the Home Ownership and Equity Protection Act
of 1994, Pub.L. No. 103-325, 108 Stat. 2160 (1994) ("HOEPA").
The court addresses each point in turn.
The first issue the court addresses is standing. Defendant
Plaintiff does not have proper standing to satisfy subject
matter jurisdiction, and moves to dismiss the case accordingly
under Rule 12(b)(1). For the purposes of a 12(b)(1) motion, the
court accepts all well-pleaded allegations in the complaint as
true and draws all reasonable inferences in favor of the
plaintiff. Martin v. Shalala, 63 F.3d 497, 501 (7th Cir.
1995); Rueth v. United States Environmental Protection Agency,
13 F.3d 227, 227 (7th Cir. 1993). The court, when determining
the validity of a motion to dismiss, may properly look beyond
the jurisdictional allegations of the complaint and view all the
evidence that has been submitted to determine if subject matter
jurisdiction exists. Ezekiel v. Michel, 66 F.3d 894, 897 (7th
Cir. 1995). When the party moving for dismissal under 12(b)(1)
challenges the factual basis for jurisdiction, the non-moving
party has the obligation to submit evidence demonstrating
subject matter jurisdiction. Kontos v. United States Dept. of
Labor, 826 F.2d 573, 576 (7th Cir. 1987).
Plaintiff, an association, must clear two hurdles in order to
show that it has proper standing to invoke federal subject
matter jurisdiction. First, Plaintiff must show that there is a
case or controversy within the meaning of Article III. Krislov
v. Rednour, 226 F.3d 851, 856 (7th Cir. 2000). Second,
Plaintiff must show that it has associational standing to bring
this claim for relief. Plotkin v. Ryan, 239 F.3d 882, 884 (7th
Cir. 2001) Without standing, the court has no subject matter
jurisdiction over the matter as prescribed by Article III of the
Constitution. Standing is a question of federal law, and it
falls to the party asserting jurisdiction to establish the right
to judicial review. See Lujan v. Defenders of Wildlife,
504 U.S. 555, 561-62, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); 691, 7
L.Ed.2d 663 (1962); Indemnified Capital Investments, S.A. v.
R.J. O'Brien & Assoc., Inc., 12 F.3d 1406, 1408-09 (7th Cir.
Plaintiff, through affidavit, has successfully demonstrated
that not only is there proper standing to invoke federal subject
matter jurisdiction, but also that this particular association
is the proper association to assert those claims.
1. Article III Standing
To establish Article III standing Plaintiff must demonstrate:
(1) imminent or actual "injury in fact," that is, an "invasion
of a legally protected interest" that is concrete and
particularized rather than conjectural or hypothetical,
Defenders of Wildlife, 504 U.S. at 560-61, 112 S.Ct. 2130; (2)
a causal connection between its injury and the challenged
conduct that is fairly traceable to Defendant rather than to the
"independent action of some third party not before the court,"
Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 4142,
96 S.Ct. 1917, 48 L.Ed.2d 450 (1976); and (3) the likelihood
that its injury will be redressed by a favorable court decision,
see, e.g., id. at 42-46, 96 S.Ct. 1917; Allen v. Wright,
468 U.S. 737, 753 n. 19, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984).
First, Plaintiff can show an imminent injury in fact. The new
OBRE regulations will adversely affect the way that Plaintiffs
members, mortgage brokers, conduct their lending practices and
procedures. If the new OBRE regulations are determined to be
valid, a new set of triggers will be imposed regarding the terms
and conditions mortgage brokers must use in making high risk
home loans, limiting the amount of revenue they would earn on
the loans. Second, there appears to be no question that the
injury complained of is traceable to Defendant. Defendant is
responsible for promulgating the new OBRE regulations. Finally,
Plaintiff can show
that the injury will be redressed be the court's decision on
this matter. The court's determination as to whether the new
OBRE regulation is pre-empted by AMTPA or consistent with HOEPA
will redress the situation.
2. Associational Standing
To establish associational standing Plaintiff must demonstrate
that: (1) its members would otherwise have standing to sue in
their own right, Friends of the Earth Inc. v. Laidlaw
Environmental Services, 528 U.S. 167, 180-81, 120 S.Ct. 693,
145 L.Ed.2d 610 (2000) (citing Hunt v. Washington State Apple
Advertising Comm'n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53
L.Ed.2d 383 (1977)); (2) the interests at stake are germane to
the organization's purpose, id.; and (3) neither the claim
asserted nor the relief requested requires the participation of
individual members in the lawsuit. Id.
Plaintiffs affidavit demonstrates that it has associational
standing. (See Pl.'s Resp.Br., App. A.) Plaintiffs president,
Al Wood, is the Vice-President of Carlton Mortgage and is a
mortgage lender that makes home equity loans on residential real
property, as do a majority of the other members of the Plaintiff
association. (Id.) Al Wood makes "high risk loans" on
alternative home mortgages, within the meaning of the new OBRE
regulations. (Id.) Thus, Al Wood as an individual has standing
to sue Defendant, just like the majority of the association.
See generally, Friends of the Earth Inc., 528 U.S. 167, 120
S.Ct. 693, 145 L.Ed.2d 610 (2000). Additionally, the interests
at stake in the suit are germain to the association. Plaintiff
is attempting to nullify a new state regulation that affects the
way in which mortgage brokers can conduct business. The new OBRE
regulations restrict the types of mortgages that the mortgage
broker can make. Finally, no individual member is needed to
participate in the lawsuit. The only real issue in this case is
the interpretation of the new OBRE regulations as compared with
federal statutes. The claim for relief is not factually based
but analytically based upon statutory interpretation. The matter
may be fully addressed through the adequate representation of
counsel. Therefore, Plaintiff has standing to bring this suit.
Defendant's 12(b)(1) motion to dismiss is denied.
B. Converting a Rule 12(b)(6) motion to Summary Judgment
Defendant also moves to dismiss the complaint for failure to
state a claim pursuant to Fed.R.Civ.P. 12(b)(6) or in the
alternative for summary judgment in accordance with Fed.R.Civ.P.
56. When reviewing a motion to dismiss under Rule 12(b)(6), the
court merely looks at the sufficiency of the complaint, Autry
v. Northwest Prem. Servs. Inc., 144 F.3d 1037, 1039 (7th Cir.
1998), it does not decide whether the plaintiff has a winning
claim. Herdrich v. Pegram, M.D., 154 F.3d 362, 369 (7th Cir.
1998); see also McCormick v. City of Chicago, 230 F.3d 319,
323-26 (7th Cir. 2000) (analyzing Leatherman v. Tarrant
County, 507 U.S. 163, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993)
and reversing the Rule 12(b)(6) dismissal of claims based on §§
1981 & 1983); Bennett v. Schmidt, 153 F.3d 516, 518 (7th Cir.
1998) ("Complaints need not plead law or match facts to every
element of a legal theory. . . .") Furthermore, Rule 12(b)
"[i]f on a motion asserting the defense number (6) to
dismiss for failure of the pleadings to state a claim
upon which relief can be granted, matters outside the
pleading are presented to and not excluded by the
court, the motion shall be treated as one for summary
judgment and disposed of as provided in
Rule 56, and all parties shall be given reasonable
opportunity to present all material made pertinent to
such a motion by Rule 56."
When a defendant files a motion to dismiss and presents
matters outside the complaint, the court may either disregard
the extraneous submissions or convert the motion to one for
summary judgment. Jacobs v. City of Chicago, 215 F.3d 758, 766
(7th Cir. 2000). If the court chooses to convert a 12(b)(6)
motion to one for summary judgment, the non-moving party must
have the opportunity to respond accordingly. Massey v. Helman,
259 F.3d 641, 646 n. 8 (7th Cir. 2001); Alioto v. Marshall
Field's & Co., 77 F.3d 934, 936 (7th Cir. 1996) (holding that a
nonmovant party must show that he can created a genuine issue of
material fact if given the opportunity to respond, in order for
conversion of a 12(b)(6) to be found in error.) In this case,
however, parties agree that there are no factual disputes and
present the court with a pure question of law. Moreover, the
parties have presented their arguments in a manner more akin to
summary judgment than a Rule 12(b)(6) motion. With no factual
dispute, and the parties approaching the issue as summary
judgment, the court treats the motion as a summary judgment
motion and not as a motion to dismiss.
Summary judgment is permissible when "there is no genuine
issue as to any material fact and . . . the moving party is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
That is the posture of this case. There are no factual disputes.
The issue is one of pre-emption, which is amendable to summary
C. Interpreting Federal Statutes and OBRE Regulations
The crux of this case is based mn the statutory interpretation
of two federal statutes and their relationship to a state
regulation. When interpreting statutes one must look at the new
versus the old, the specific versus the general. Wisconsin
Winnebago Bus. Comm. v. Koberstein, 762 F.2d 613, 618 (7th Cir.
1985). If the statutes can be read together and both given their
full meaning then that is the best approach, but if the statutes
conflict the inconsistencies must be looked at and determined.
United States v. Palumbo Bros., 145 F.3d 850, 866 (7th Cir.
1998) (quoting Morton v. Mancari, 417 U.S. 535, 551, 94 S.Ct.
2474, 41 L.Ed.2d 290 (1974)). "In situations when a general
statute and a specific statute appear to be in conflict, courts
have relied upon the general rule that `a more specific statute
covering a particular subject is controlling over a provision
covering the same subject in more general terms. . . .'" Barber
v. Alpha One Mortgage Corp., 266 B.R. 309, 321 (Bankr. E.D.Pa.
2001) (quoting In re Sullivan, 254 B.R. 661, 666 (Bankr.N.J.
2000)). "Where there is no clear intention otherwise, a specific
statute will not be controlled or nullified by a general one,
regardless of the priority of enactment." Id. "The rationale
for this canon is that a general provision should not be applied
when doing so would undermine limitations created by a more
specific provision." Coady v. Vaughn, 251 F.3d 480, 484 (3d
Cir. 2001); see also Selected Risks Insurance Co. v.
Kobelinski, 421 F. Supp. 431, 434 (E.D.Pa. 1976) (holding that
"it is a maxim of statutory construction that the specific
governs the general.").
Plaintiff contends that AMTPA preempts the new OBRE
regulations. Defendant contends that the new OBRE regulations
are not pre-empted by AMTPA but are in fact consistent with
HOEPA, a federal statute which is more recent and specific than
AMTPA. The first issue the
court addresses is which federal statute should be applied to
the new OBRE regulations and why.
1. Interpreting AMTPA
AMTPA, enacted in 1982, provides funds to homeowners by
allowing them easy access to "alternative home loans."
Alternative home loans are loans drawn against a person's home
for purposes other than the initial purchase of the home.
12 U.S.C.A. § 3802(a)(1). AMTPA "represents a congressional
response to a concern, amongst others, that state bans on
mortgages other than traditional fixed rate mortgages would
reduce the overall availability of mortgage credit, since
fixed-rate mortgages had become relatively more expensive as the
result of increased interest rate volatility." Grunbeck v. Dime
Sav. Bank, FSB, 74 F.3d 331, 343 (1st Cir. 1996). The act was a
direct result from the high interest rates being charged on
mortgages in the 1980's. 12 U.S.C.A. § 3801(a)(2).
The statute was an attempt to help jumpstart a stalled economy
by providing easy and unified access to money and lending
institutions. Its stated purpose is to "eliminate the
discriminatory impact that [state] regulations have upon
non-federally chartered housing creditors and provide them with
parity with federally chartered institutions by authorizing all
housing creditors to make . . . alternative mortgage
transactions so long as the transactions are in conformity with
the regulations issued by the federal government." 12 U.S.C.A. §
3801(b); National Home Equity Mortgage Assoc. v. Face,
239 F.3d 633, 637 (4th Cir. 2001). Yet, the statute fails to go into
any detail as to how is will accomplish its goals. AMTPA merely
sets forth principles on the ability to acquire alternative home
loans but it does not discuss the terms for acquiring the loan.
2. Interpreting HOEPA
HOEPA, enacted in 1994, is an amendment to the Truth in
Lending Act ("TILA"). 15 U.S.C.A. 1601, et. al., HOEPA is a
response to the substantive abuses brought by providing
alternative home loans. HOEPA and its regulations establish a
cost threshold, which, once exceeded, triggers a set of
restrictions on lending practices to high risk loans.
15 U.S.C.A. § 1602(aa)(1). The restrictions are activated when
certain parameters are met, specifically when:
"the annual percentage rate at consummation of the
transaction will exceed by more than 10 percentage
points the yield on Treasury securities . . . or the
total points and fees payable by the consumer at or
before closing will exceed the greater of 8 percent
of the total loan amount; or $400."
15 U.S.C.A. § 1602(aa)(1) (emphasis added).
The legislative history of HOEPA, in both the Senate and House
Reports, explains that the purpose of the HOEPA amendments to
TILA is to address the problem of "reverse redlining," which is
the practice of targeting residents in certain geographic areas
for credit on unfair terms. H.R.Rep. No. 103-652, at 158 (1994),
U.S.Code Cong. & Admin.News 1994, pp. 1977, 1988. "The triggers
in the legislation are not intended as caps, but rather to
ensure that enhanced protections are provided to consumers that
are most vulnerable to abuse without impeding the flow of
credit." H.R.Rep. No. 103-652, at 159 (1994), U.S.Code Cong. &
Admin.News 1994, pp. 1977, 1989.
3. Comparing AMTPA and HOEPA to the new OBRE regulations.
AMTPA and HOEPA were both enacted to help stabilize the
lending market by dealing with situations involving mortgages
and the lending practices
behind them. That is were the similarities end between the two
statutes. AMTPA's purpose was to increase the availability of
credit through alternative mortgage transactions for the average
home owner. HOEPA was enacted to prevent mortgage companies from
taking advantage of the average home owner acquiring an
alternative home mortgage.
HOEPA, which was enacted 12 years after AMTPA, was enacted in
response to the growing abuses by mortgage companies. HOEPA
specifically lays out the guidelines, rules, and parameters
governing alternative mortgages. 15 U.S.C.A. § 1602. The new
OBRE regulations closely resemble the guidelines and rules set
forth in HOEPA, and even track the verbiage of HOEPA, addressing
the terms for giving alternative home mortgages to high risk
individuals. See generally Ill.Admin.Code tit. 38, §
The purpose of the new OBRE regulations, although dealing with
alternative home mortgages similar to those in AMTPA and HOEPA,
is aimed at preventing predatory lending. AMTPA does not go into
the specifics that both HOEPA and the new OBRE regulations
discuss about predatory lending and high cost loans. "The
specificity of HOEPA in addressing this subject as to all high
cost loans prevails over the more general provisions of AMTPA."
Williams v. Gelt Financial Corp., 232 B.R. 629, 637
(Bankr.E.D.Pa. 1999). Therefore, HOEPA, being the more recent
and specific statute dealing with predatory lending and high
cost loans, is the statute the court must analyze to determine
if it pre-empts the new OBRE regulation.
4. Determining the consistency between the new OBRE
regulations and HOEPA
In making the determination of whether state law conflicts
with federal law, the questions that must be answered are
whether "it is impossible to comply with both state and federal
law" or whether "the state law stands as an obstacle to the
accomplishment of the full purposes and objectives" of the
relevant federal law. Silkwood v. Kerr-McGee Corp.,
464 U.S. 238, 248, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984); see also
Feikema v. Texaco, Inc., 16 F.3d 1408, 1413 (4th Cir. 1994).
"The principles for determining whether a state law
is preempted are well established. If a state and
federal regulation directly conflict, the Supremacy
Clause, U.S. Const., art. VI, has been interpreted to
mandate preemption whenever the state action `stands
as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress.' Absent
a direct conflict, preemption depends on the intent
Bucyrus-Erie Co. v. the Dept. of Industry, Labor and Human
Relations of the State of Wisc.,