Structured Finance Association Welcomes Court Rulings in Favor of ‘Valid-When-Made’ Doctrine

Separate Decisions in Federal District Court Uphold Agencies’ Rulemakings, Align With Arguments Set Forth in SFA Amicus Briefs

The Structured Finance Association (SFA) today welcomed separate court rulings affirming the “valid-when-made” doctrine, a nearly 200-year-old principle in contract law that ensures the interest on a loan permissible before transfer continues to be permissible after. The rulings granted summary judgment to the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), signaling that the rules in question were properly set forth and promulgated by the respective agencies.

“We welcome these court rulings, which confirm the OCC and FDIC’s rulemaking and allow our industry to move beyond the uncertainty caused by the Madden case,” said Michael Bright, CEO of the Structured Finance Association. “This is the best outcome not only for financial institutions but also more importantly for consumers who would ultimately bear the brunt of continued threats to the secondary market. SFA has long advocated for clarification that a loan’s interest rate remains legally intact if the loan is sold, and we thank the OCC and FDIC for their hard work on this important issue.”

The court’s rulings align with an amicus brief argument set forth by SFA, the Bank Policy Institute (BPI), U.S. Chamber of Commerce, Consumer Bankers Association, and American Bankers Association, and represent a successful culmination of efforts by the association, its members, and the entire securitization industry on the merits of the cases.

In 2020, SFA submitted a joint letter with the BPI to the OCC on its valid-when-made proposed rule and a joint letter to the Federal Deposit Insurance Corporation (FDIC) supporting FDIC’s efforts to address marketing uncertainty due to the Madden ruling. In 2019, SFA and BPI filed amicus briefs in support of association members Chase and Capital One highlighting the potential negative impact on lending markets and the cost of availability of credit for U.S. consumers and businesses.