
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 94-1479                            ROBERT AND JENNIFER GRUNBECK,                               Plaintiffs, Appellants,                                          v.                       THE DIME SAVINGS BANK OF NEW YORK, FSB,                                 Defendant, Appellee.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                    [Hon. Paul J. Barbadoro, U.S. District Judge]                                             ___________________                                                                                      ____________________                               Torruella, Chief Judge,                                          ___________                           Campbell, Senior Circuit Judge,                                     ____________________                               and Cyr, Circuit Judge.                                        _____________                                                                                      ____________________             Jewel  N.  Klein, with  whom Holstein,  Mack  & Klein,  George P.             ________________             ________________________   _________        Dickson   and  Law  Offices  of  George  Dickson  were  on  brief  for        _______        _________________________________        appellants.             Douglas G.  Verge, with  whom Richard  P.  Hazelton and  Sheehan,             _________________             _____________________      ________        Phinney, Bass & Green were on brief for appellee.        _____________________                                                                                      ____________________                                   January 23, 1996                                                                                      ____________________                    CYR,  Circuit Judge.   The  interesting issue  of first                    CYR,  Circuit Judge                          _____________          impression presented in this case is whether section 501(a)(1) of          the Depository Institutions Deregulation and Monetary Control Act          of  1980, 12  U.S.C.    1735f-7a(a)(1) (1988)  ("Monetary Control          Act"), preempts New Hampshire Rev. Stat. Ann.   397-A:14(I) (West          Supp.  1994) ("Simple Interest Statute" or "SIS").  In a thought-          ful and comprehensive opinion, the district  court ruled that the          Simple  Interest Statute,  as applied  to a  residential mortgage          loan permitting  negative amortization,  is preempted  by section          501(a)(1).                                            I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    On January  15, 1988, Dime  Real Estate Services  - New          Hampshire,  Inc.  ("Dime  Real  Estate NH")  made  a  thirty-year          adjustable rate loan to Timothy Ray and Thomas F. Richards in the          approximate amount  of $111,000, secured  by a first  mortgage on          their  residence in Milford, New Hampshire.  Dime Real Estate NH,          incorporated  in New  York and  licensed to  extend loans  in New          Hampshire, is a wholly-owned  subsidiary of Dime Savings Bank  of          New  York,  FSB ("Dime  Savings"), a  federally-chartered savings          institution  also incorporated in New York.  The Ray and Richards          note, which  contained a provision  permitting negative amortiza-          tion, was assigned to Dime Savings the day it was made.                    The  interest rate was fixed at 7.75% for the first six          months, adjustable monthly thereafter at a margin of 3% above the          "monthly median  cost  of  funds" ratio,  as  determined  by  the                                          2          Federal  Home Loan  Bank  Board  ("FHLBB"),  and rounded  to  the          nearest one-eighth  of one percentage  point.  The  interest rate          was capped, by agreement, at 9.75% for the second six months, and          13.875% thereafter.  The  note afforded protection from unantici-          pated variable interest rate increases by permitting the borrower          to pay either the total principal and interest due for the month,                 ______          or a lower "minimum required  payment amount."  In the  event the          __   _____          borrower elected  to make  the lower "minimum  required payment,"          however, the  interest remaining unpaid  for that month  would be          added onto  the loan principal, resulting  in "negative amortiza-          tion," and the interest  due the following month would  be calcu-          lated on the basis of the higher adjusted loan principal.                      On October  31, 1990,  Ray and Richards  conveyed their          Milford  residence,  subject to  the  Dime  Savings mortgage,  to          appellants Robert and Jennifer Grunbeck, who occupied it as their          principal residence.  After the Grunbecks  ceased payments on the          mortgage in 1993,  Dime Savings  instituted foreclosure  proceed-          ings.   The  Grunbecks responded  with an  Ex Parte  Petition for          Injunctive Relief  in New Hampshire state  court, claiming, inter                                                                      _____          alia,  that  the  negative  amortization  provision  "compounded"          ____          interest and, therefore, violated  the Simple Interest  Statute.1                                        ____________________               1The Simple Interest Statute provides:                                Any first mortgage  home loan made  under the                    provisions  of  this chapter  [Chapter 397-A:                    Licensing  of  Nondepository  First  Mortgage                    Bankers and  Brokers  of Title  35 Banks  and                    Banking;  Loan  Associations; Credit  Unions]                    shall provide for the computation of interest                    on a simple interest basis.                                            3          Dime Savings promptly removed the case to federal district court,          see  28 U.S.C.     1441,  1446; see  also id.     1332 (diversity          ___                             ___  ____ ___          jurisdiction),  then  moved to  dismiss  on  the ground,  amongst          others,2  that  section 501(a)(1)  of  the  Monetary Control  Act          preempts the Simple Interest Statute.  In due course the district          court  entered judgment  for Dime  Savings, see Grunbeck  v. Dime                                                      ___ ________     ____          Sav. Bank of New York, FSB, 848 F. Supp. 294,  (D.N.H. 1994), and          __________________________          the Grunbecks appealed.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________          A.   Standard of Review          A.   Standard of Review               __________________                    We review  Rule 12(b)(6) dismissals de  novo, crediting                                                        __  ____          all well-pleaded  allegations.  Clarke v.  Kentucky Fried Chicken                                          ______     ______________________          of Cal., Inc., 57 F.3d 21,  22 n.1 (1st Cir. 1995).   For present          _____________          purposes, therefore,  we accept the allegation  that the negative          amortization provision in the loan agreement "compounds" interest          and thus  contravenes the Simple Interest  Statute.  Accordingly,                                        ____________________          N.H. Rev. Stat. Ann.   397-A:14(I).                 2Dime Savings presented  additional defensive claims  below,          including  that (1)  the SIS  is  preempted by     804(c) of  the                                                                              Alternative  Mortgage Transaction Parity Act of 1982, 12 U.S.C.            3803(c) (1988),  (2) the  negative amortization provision  in the          Dime Savings  note does  not "compound" interest  and, therefore,          does not violate  the SIS, and 3) for  various reasons, the Grun-          becks lack "standing" to  challenge the SIS.  The  district court          bypassed these  claims, and dismissed on the Monetary Control Act          preemption ground.  Grunbeck v. Dime  Sav. Bank of New York, FSB,                              ________    ________________________________          848 F. Supp. 294, 296 n.2 (D.N.H. 1994).  We do not address these          claims.   In particular, we  bypass the "standing"  claim because          the undeveloped  record does  not enable its  reliable determina-          tion.                                            4          we  turn to consider whether  the statute, so  construed, is pre-          empted by section 501(a)(1).3            B.   Monetary Control Act Preemption          B.   Monetary Control Act Preemption               _______________________________                    Congress' power  to preempt state law  derives from the          Supremacy Clause of the United States Constitution.   E.E.O.C. v.                                                                ________          Massachusetts,  987 F.2d  64,  67 (1st  Cir.  1993).   "[I]n  any          _____________          preemption analysis,  'the question  of whether federal  law pre-          empts a state statute  is one of congressional intent.'"   Green-                                                                     ______          wood  Trust Co.  v. Massachusetts,  971 F.2d  818, 823  (1st Cir.          _______________     _____________          1992), cert. denied, 113 S. Ct. 974 (1993) (quoting French v. Pan                 _____ ______                                 ______    ___          Am Express, Inc., 869 F.2d  1, 2 (1st Cir. 1989)).   Although the          ________________          preemption  power is  not  liberally exercised  by Congress,  id.                                                                        ___          (citing Gregory v. Ashcroft,  111 S. Ct. 2395, 2400 (1991)), if a                  ________   ________          federal  statute  includes  an express  preemption  provision the          court  need only determine its  scope.  Id.  (citing Cipollone v.                                                  ___          _________          Liggett Group, Inc., 112 S. Ct. 2608, 2618 (1992)).            ___________________               1.   Rules of Construction               1.   Rules of Construction                    _____________________                    The  scope  of  an  express  preemption   provision  is          gleaned,  first and  foremost, from the  language of  the federal          statute,  employing traditional rules  of statutory construction.                                        ____________________               3The  district court construed the SIS as a ban on "compound          interest," or  "charg[ing] interest on interest."   Grunbeck, 848                                                              ________          F. Supp. at 296 n.2, 298-300, 302-03.  The parties do not dispute          its  construction.   In  addition,  the  State of  New  Hampshire          asserted in  its amicus memorandum below, that "The New Hampshire          Banking Department  has construed the [SIS]  as banning regulated          mortgage companies from using any computational method other than          simple  interest in  loan  products     including,  specifically,          assessments  of  interest  on  deferred interest      unless  the          practice is permitted by overriding federal law."                                            5          CSX Transp., Inc.  v. Easterwood,  113 S. Ct.  1732, 1737  (1993)          _________________     __________          ("If the statute contains an express pre-emption clause, the task          of statutory construction must in the first instance focus on the          plain wording of  the clause, which necessarily contains the best          evidence of Congress' pre-emptive intent.").   Of course, if  the          statutory  language  is  ambiguous,  Burlington N.  R.R.  Co.  v.                                               ________________________          Oklahoma Tax Comm'n, 481 U.S.  454, 461 (1987), or would  work an          ___________________          unreasonable result, we may consult relevant legislative history,          Cabral v.  INS, 15 F.3d 193,  194 (1st Cir. 1994),  to confirm an          ______     ___          interpretation indicated  by the  plain language.   Strickland v.                                                              __________          Commissioner, Maine Dep't. of  Human Servs., 48 F.3d 12,  17 (1st          ___________________________________________          Cir.),  cert. denied,  116  S. Ct.  145  (1995), (citing  INS  v.                                                                             ____  ______                                      ___          Cardoza-Fonseca, 480 U.S. 421, 432-43, 446 (1987)).            _______________                    Where  Congress has  spoken directly  to the  issue, an          interpretation rendered by the agency responsible for administer-          ing  the statute is entitled  to no special  deference.  Chevron,                                                                   ________          U.S.A.  Inc. v. Natural Resources Defense Council, Inc., 467 U.S.          ____________    _______________________________________          837, 842 (1984).  In all events, the courts will reject an agency          interpretation which conflicts with congressional intent.  Id. at                                                                     __          843  n.9.   Finally,  we attribute  "ordinary  meaning" to  plain          statutory terms,  see Greenwood Trust,  971 F.2d  at 824  (citing                            ___ _______________          Morales  v. Trans  World Airlines,  Inc., 112  S. Ct.  2031, 2036          _______     ____________________________          (1992)), but  may  reject an  express preemption  claim absent  a          sufficiently clear license to trespass on state sovereignty.  See                                                                        ___          E.E.O.C., 987 F.2d at 68 (citing Gregory, 111 S. Ct. at 2401).            ________                         _______                    The  Monetary Control  Act preemption  provision relied                                          6          upon by the district court states in relevant part:                    The provisions of the constitution or laws of                                                          ____                    any  State expressly  limiting  the  rate  or                               _________  ________  ___  ____  __                    amount of interest, discount  points, finance                    ______ __ ________                    charges,  or  other  charges  which   may  be                                                  _____   ___  __                    charged, taken, received,  or reserved  shall                    _______                                 _____                    not apply to any loan, mortgage, credit sale,                    ___ _____ __ ___ ____  ________                    or advance which is                                    _____ __                         (A)  secured by  a  first  lien  on                              _______ __  _  _____  ____  __                         residential real property . . .;                         ___________ ____ ________                         (B) made after March 31, 1980; and                         (C) described in section  527(b) of                         the National Housing Act . . . .           12 U.S.C.    1735f-7a(a)(1) (emphasis added).4  Like the district          court,  see Grunbeck, 848 F.  Supp. at 297-98,  the parties focus                  ___ ________          their preemption  analyses primarily on the  phrase "limiting the          rate or amount of interest."                     As  Dime  Savings views  the  matter,  the SIS  plainly          "limits" the "rate or  amount of interest" received in  the sense          that  more interest would be paid by the borrower were "compound-                ____          ing" not banned under  the SIS; and the SIS  effectively "limits"          the "amount" of interest the lender can recover in the sense that          the lender could earn  more interest were it permitted  to charge          interest at the same "rate" calculated on a compound basis.                          ____        __________ __ _ ________ _____                    These arguments  rest on the implicit  premise that the          "amount"  of interest the lender  may charge is  "limited" by the          SIS.  On  the contrary, the SIS imposes no  restriction on either          the  "rate" or  the  "amount" of  interest  the borrower  may  be          charged,  but merely  requires that any  interest rate  or amount                                              ___                                        ____________________               4The Grunbecks do not dispute that the Dime Savings mortgage          loan  meets the three criteria set out in   s (A)-(C).  Grunbeck,                                                                  ________          848 F. Supp. at 297 n.4.                                            7          agreed  to  by the  parties be  computed  on a  "simple interest"                                          ________          basis.  Thus, nothing in the SIS prevents a lender from contract-          ing  for whatever  simple  interest rate  will exact  an interest                             ______          return  equal  to or  greater than  whatever  rate and  amount of          interest  would  be recoverable  through  compounding.   The  SIS          leaves  entirely to  the parties  the rate  and amount  of simple          interest to be exacted.                     The  Dime Savings interpretation  blurs the distinction          between the terms  "rate" and  "amount" of interest,  as used  in          section  501(a)(1).   It  assumes  that the  central  question                                       _______          whether  the SIS limits  the "rate" of  interest    is  to be re-                                                                                        ______          solved through  reference  to  the  effect the  SIS  ban  against                                              ______          charging interest  on interest  might have  upon the "amount"  of          interest  the lender may be  able to command  in the marketplace.                    ___ ______ ___ __  ____ __ _______  __ ___ ___________          Not only does this assumption implicitly acknowledge that the SIS          itself imposes no statutory  limit on the simple  interest "rate"                            _________  _____          lenders  may charge, but it  alters the fundamental  focus of the          preemption debate by inquiring whether the SIS might make it more          difficult for lenders to command    in a better-informed  market-          place (i.e., wherein a  "simple interest" calculation is mandato-          ry)    either the rate or amount of interest otherwise obtainable          by "compounding."5                                          ____________________               5As  the district  court  observed, "without  being able  to          charge interest  on interest, many lenders would not allow poten-          tial  borrowers to  defer accrued  interest."   Grunbeck, 848  F.                                                          ________          Supp.  at 299.  In other words,  many lenders might choose not to                                                              ______          compensate by increasing the simple interest rate, and  might not          permit  borrowers to defer interest payments on which no interest          ______          could be  charged.  Although unimpeachable,  these considerations                                          8                    No  less  importantly,  the  shift  in  analytic  focus          attending the  Dime Savings'  assumption undermines  the required          "plain  language"  interpretation,  see  Morales v.  Trans  World                                              ___  _______     ____________          Airlines, Inc., 504  U.S. 374, 383-84  (1992), by extirpating              ______________          from the pivotal section 501(a) clause:   "expressly limiting the          rate or amount of  interest"    the important modifier  "express-          ly."   Thus, the preemption  inquiry urged by  Dime Savings would          focus not on whether the "express" language of the SIS "limit[s]"          the rate  or amount of interest which  the lender may charge, but          on broad-gauged assessments concerning  the likely impact the SIS                                                             ______          ban on  compounding would have  on home-mortgage lenders  and the          industry at large.                     When engaged in  the task of  statutory interpretation,          "[c]ourts . . . should . . . attempt to give meaning to each word          and  phrase."  See United  States v. Flores,  968 F.2d 1366, 1371                         ___ ______________    ______          (1st Cir. 1992).  Thus, in our view the district court mistakenly          inquired  whether the SIS ban against charging interest on inter-          est  could affect the amount of interest lenders might command in               _____ ______                                        ____________________          are inapposite to the present discussion.               First,  were a  lender to  opt not  to permit  deferments of          interest payments, it nonetheless would receive both the rate and          amount of simple interest  for which it contracted on  all monies          loaned.   Second, in any  such transaction  it could not  be said          that  the SIS, either directly  or effectively, limited the legal                    ___          rate or amount of interest chargeable by the lender.  To be sure,          lenders who chose not to offset the SIS ban by raising the simple          interest rate,  or chose  not  to permit  deferments of  interest          payments, would realize less total interest income as a result of          their lending  decision.  But  as the  State noted in  its amicus          memorandum  below, "[t]o  the  extent that  this requirement  may          affect the total amount  of interest potentially realizable under          the Dime [Savings]  loan, such  effect is incidental  to the  re-          quirement and cannot be viewed as an 'express' usury ceiling."                                            9          the marketplace,  thereby not  only eliding the  term "expressly"          but overlooking the term "limiting" however defined.6                    Moreover,  the language  Congress  employed in  section          501(a)(1)    "expressly  limiting the rate or amount of interest"             contrasts  sharply with  the preemption language  in companion          section 521  of the Monetary  Control Act, whereby  Congress pre-          empted all state legislation "with respect  to interest rates" in                                        ____ _______  __          order  to protect  federally insured  State-chartered banks  from          State  regulation of credit card  transactions.  See  12 U.S.C.                                                             ___          1831d(a) (emphasis added).  See also Greenwood Trust, 971 F.2d at                                      ___ ____ _______________          830  n.10  ("[S]ection  501  addresses  different  categories  of          lenders and  loans and contains  materially different  preemption          terms than does section  521.").  Thus, it is important to recog-                                        ____________________               6In parsing  the   501(a)(1) text, the district court recog-          nized that the parties' differing views as to the significance of          the term  "limiting" accounted for their  widely divergent inter-          pretations.  The court  observed that "Dime [Savings] essentially          construes 'limiting' as an adjective meaning 'serving to restrict          or restrain.' .  . . The Grunbecks and  the State ... essentially          construe  'limiting' as a verb meaning to impose a 'final, utmost          or furthest boundary' on  permissible interest rates or amounts."          Grunbeck, 848 F. Supp. at 298.            ________               In our view, however, the plain statutory language cannot be          read as  Dime Savings  suggests, without  ignoring the  term "ex-                                                    ________          pressly," see Flores, 968 F.2d at  1371, and without disregarding                    ___ ______                                 ____________          the  "ordinary meaning"  of  the term  "limiting," see  Greenwood                                                             ___  _________          Trust, 971  F.2d at 824.   The SIS itself, as  distinguished from          _____                                      __  _____________ ____          market forces, does not "serve to . . . restrain" either the rate          ______ ______          or amount of  simple interest  which may be  obtained, since  the          lender  remains  free  to  compensate by  increasing  the  simple          interest rate.   Thus, the  SIS does not  "expressly" limit  "the          rate  or amount of interest."  Nor,  in the alternative, does the          SIS    as distinguished from market forces    "limit" the rate or                    _____________ ____ ______ ______          amount  of interest if "limit" means a "final, utmost or furthest          boundary"  on the  rate  or amount  of  interest, since  the  SIS          imposes no ceiling  whatsoever on  either the rate  or amount  of                     _______          simple interest that may be exacted.                                           10          nize that the Congress which enacted the Monetary Control Act was          acutely aware that  its choice of the  distinctive terminology             "expressly limiting"     would serve as  the primary interpretive          tool through which its preemptive intent would be revealed to the          courts.  See BFP v. Resolution Trust Corp., 114 S. Ct. 1757, 1761                   ___ ___    ______________________          (1994)  (Congress is presumed to act with intent and purpose when          it uses particular language in  one section of a statute  and not          in another.).7                                          ____________________               7The  district court  drew encouragement for  its preemption          ruling from "[p]revious  interpretations of  similar language  in          similar legislation," with particular  reference to the  National          Bank Act  of 1864, ch. 106,  13 Stat. 99 (codified  as amended in          various sections of Title 12, United States Code).  Grunbeck, 848                                                              ________          F. Supp.  at 300.  Section  85 of the National  Bank Act provided          that "a bank may charge 'interest at the rate allowed by the laws          of the  State, .  . . where  the bank is  located and  no more.'"          Citizens' Nat'l Bank of Kansas City v. Donnell, 195 U.S. 369, 373          ___________________________________    _______          (1904).  Section 86 stated  that "taking, receiving, or  charging          'a  rate of  interest greater  than is  allowed by  the preceding          section, when knowingly done, shall be deemed a forfeiture of the          entire interest which the  note, bill, or other evidence  of debt          carries with it,  or which has been agreed to  be paid thereon.'"          Id.            ___               The district court expressed  the view that Donnell supports                                                           _______          a broad reading of   501(a)(1), in two respects.                    First, it offers persuasive support  for con-                    struing "laws limiting the rate or amount  of                    interest"  to  include laws  prohibiting com-                    pound  interest. .  . . Second,  it indicates                    that such laws  also qualify as state  "usury                    laws" which  the title  to   501(a)(1)  indi-                    cates Congress intended to preempt.          Grunbeck,  848 F.  Supp.  at 301.   We  think the  district court          ________          misapprehended  the purport of  Donnell, as  well as  its bearing                                          _______          upon the question before us.                 First,  the National Bank Act is largely inapposite to   501                                                                        501          of the Monetary Control Act.  In drafting   501, Congress did not          borrow language from the National  Bank Act.  On the other  hand,          Congress did  borrow  language  from  the National  Bank  Act  in          drafting   521 of the Monetary Control Act.  Greenwood Trust, 971                     521                               _______________          F.2d at  827.   "[S]ection 521 was  conceived as an  offspring of                                          11               2.   Legislative History                 2.   Legislative History                      ___________________                    Even  assuming  ambiguity  in  the   phrase  "expressly          limiting the rate or amount of interest," see  Cabral, 15 F.3d at                                                    ___  ______          194, relevant  legislative  history clearly  reflects a  congres-          sional  intention  to  confine  the scope  of  section  501(a)(1)          preemption  to state  laws which  impose express ceilings  on the                                                           ________          rate or amount of interest which may be charged, as distinguished          from bans  against charging interest on  interest or compounding.               ____          The legislative  aim in  enacting section  501 focused  on "state          usury ceilings," S.  Rep. No.  368, 96th Cong.,  2d Sess.  18-19,                ________          reprinted in 1980 U.S.C.C.A.N. 236, 254-55 (emphasis added), with          _________ __          particular emphasis  on state usury laws  which restrict interest          rates to below-market levels and result in artificial disruptions                   ____________                      __________ ___________          in the supply of home-loan mortgage funds.                    The  Committee finds  that where  state usury                    laws  require  mortgage  rates  below  market                    levels of interest,  mortgage funds in  those                    states  will  not  be readily  available  and                    those funds will  flow to other states  where                                        ____________________          section 85 of the Bank Act . . . ."  Id. at 830 n.10.   Thus, the                                               ___          Monetary  Control  Act  includes  two  separate  and dramatically          different preemption provisions.  Id.  Consequently, an interpre-                                            __          tation of  the progenitor of   521,  i.e., the National Bank Act,                                         521          affords  little, if any, insight into the   501 preemption provi-                                                      501          sion at issue in the present case.      Second,     Donnell    is                                                              _______          inapposite to the  present inquiry not only because  it construed          an  unrelated statute       85  of the  National Bank  Act    but          because the SIS does not "expressly limit[] the rate or amount of                                    _________          interest"  even assuming that  a ban  against compounding  can be                                           ___          considered a limitation on  the rate of interest "allowed  by the                       __________          laws of the State . . . ."  Donnell, 195 U.S. at 373.  Indeed, it                                      _______          is surpassingly awkward to ascribe  meaning to the term "express-          ly"  if the  SIS ban  against compounding  is considered  an "ex-                           ___                                          ___          press[] limit[ation on] the rate or amount of interest" which may          _____   ___________         ____ __ ______          be charged, since no rate or amount of "interest on interest" may                            __          be charged under the SIS.                                          12                    market yields are available.  This artificial                    disruption of funds  availability not only is                    harmful  to  potential  homebuyers in  states                    with  usury laws, it also frustrates national                    housing policies and programs.                                Id.  at 254.  Congress thus  sought to  facilitate first-mortgage          ___          home loans at market rates, in order to enable an adequate credit          supply and strengthen the financial system.                          In  addition to  the adverse  effects of                    usury ceilings on credit  availability, mort-                    _____ ________                    gage rate ceilings must be removed if savings                              ________                    and  loan institutions . .  . are to begin to                    pay market  rates of interest on  savings de-                    posits.   Without  enhancing the  ability  of                    institutions  to achieve market rates on both                    sides of their  balance sheets, the stability                    and  continued viability of  our nation's fi-                    nancial system would not be assured.             Id. at 255 (emphasis added).            ___                    The  district  court   correctly  noted  that  Congress          intended to preempt state laws imposing usury ceilings, Grunbeck,                                                        ________  ________          848 F. Supp.  at 299, but nonetheless concluded that "the [SIS] .          .  .  would limit  the availability  of mortgage  funds in  a way                                                                  __  _ ___          comparable  to a numerical cap on interest rates."  Id. (emphasis          __________  __                                      ___          added).  True, demand  for home mortgage credit could  be reduced          were lenders to decline  to defer interest payments, even  though          the  SIS does not place a ceiling  on simple interest rates.  But          though potential  homebuyers might  borrow less (or  not at  all)          were  lenders to decline to defer interest payments or demand too          high a  rate or  amount  of simple  interest  for doing  so,  the          potential  homebuyer's decision  would  be the  result of  market          forces,  the phenomenon  Congress  set out  to facilitate  in its                   ___ __________  ________  ___ ___  __ __________  __ ___          enactment  of section  501(a)(1).   That is  to say, the  SIS ban          _________  __ _______  _________                                          13          against  charging interest  on  interest  would neither  "require                                                                    _______          mortgage  rates  below  market  levels of  interest,"  nor  cause                                                                      _____          "artificial disruption in funds  availability."  See 1980 U.S.C.-           __________                                      ___          C.A.N. at 254 (emphasis added).                                            Moreover, market adjustments in simple  interest rates,          which New Hampshire home mortgage lenders are free to adopt under          the SIS, tend  to promote equilibrium  between credit supply  and          credit demand.  In contrast, lenders  may be forced from a credit                                                       ______          marketplace  governed by  interest rate  ceilings where  the only                                                   ________          alternative is to make  loans at interest rates below  the levels          obtainable in competing  loan markets.  Credit  supply is artifi-                                                                 __ _______          cially  disrupted in  such a  lending environment  because credit          ______  _________          demand  tends to go unmet where borrowers are attracted by below-          ______          market interest rates but lenders  are not.  As a result,  credit                                ___ _______  ___ ___          demand and credit supply are less likely to attain equilibrium at          the usury-ceiling  level.  In these  respects at least, a  ban on          compounding is in no sense comparable to a mortgage interest rate          ceiling.8   Thus, an  outright ban  against charging  interest on                                        ____________________               8As  a "[p]revious  interpretation  of  similar language  in          similar legislation," the district court cited to "Fourchon, Inc.                                                             ______________          v.  Louisiana Nat'l Leasing Corp., 723 F.2d 376, 381-83 (5th Cir.              _____________________________          1984)  (construing phrase 'rate of interest' in [  926(d) of the]          Preferred Ship Mortgage Act in accordance with previous construc-          tion of similar phrase in National Bank  Act to preempt state law          prohibiting charging of interest on interest)."  Grunbeck, 848 F.                                                           ________          Supp. at  300.  But  the policies  subserved by    926(d) of  the          Preferred Ship Mortgage Act are much broader than those  underly-          ing    501  of the  Monetary Control  Act.   "The  Preferred Ship          Mortgage Act was  designed to avoid parochial  limitations on the          ready availability of credit  to the shipping industry  by wholly                                                                     ______          and  completely  superseding  state  law and  practice  in  every          ___  __________  ___________          respect."   Fourchon,  723 F.2d  at  387 (Shaw,  J.,  dissenting)                      ________          (emphasis  added).   "[T]he  policies behind  the Preferred  Ship                                          14          interest  does not work the adverse effects on the credit market-          place  which  concerned  Congress  in  section  501(a)(1),  viz.,          artificial  disruptions  in credit  availability caused  by State          __________          ceilings  on  interest  rates  resulting  in below-market  rates.          ________                                     ____________          Accordingly, we believe the relevant legislative history provides          sturdy support for the view that the important modifier "express-          ly" may not be read out of section 501(a)(1) and the term "limit-          ing" is not to be equated with "banning."                     Congress  also signaled  its  narrow preemptive  intent          under section  501(a)(1) by insulating these  mortgage loans from          state  usury  limitations  only,  and not  from  other  state-law                 _____  ___________  ____          limitations encompassed  within the "annual  percentage rate" nor          other state-law limitations designed to protect borrowers:                    In exempting mortgage loans from  state usury                    limitations, the Committee intends  to exempt                    only those  limitations that are  included in                    the  annual percentage  rate.   The Committee                    does  not intend  to  exempt  limitations  on                    prepayment charges, attorney fees, late char-                    ges  or similar limitations  designed to pro-                         __ _______ ___________  ________ __ ____                    tect borrowers.                      ____ _________          1980  U.S.C.C.A.N. at 255  (emphasis added).   The district court          concluded,  without  elaboration,   that  "interest  on  interest          prohibitions . . .  are 'included' in the interest  rate."  Grun-                                                                      _____          beck, 848 F. Supp. at  300.  Dime Savings so contends  on appeal,          ____                                        ____________________          Mortgage  Act support  an  expansive interpretation  of the  term          'rate of interest'  in section  926(d)."  Fourchon,  723 F.2d  at                                                    ________          382.   As discussed above, however, see Section B.2, the policies                                              ___          underlying    501  of the  Monetary Control Act do  not support a          broad interpretation of  the term "rate  or amount of  interest."          Consequently, the Fourchon  interpretation affords little insight                            ________          into the  preemptive  intent underlying     501 of  the  Monetary          Control Act.                                           15          maintaining that the SIS ban against charging interest on  inter-          est is included in the "annual interest rate."  We cannot agree.                     In the first place,  a ban against compounding interest          affords significant consumer protections to homebuyers.  Charging          interest on  deferred interest  under a residential  mortgage not          only increases  the "unseen" costs  of home ownership  but erodes                                       _____          home equity.  Moreover, the relevant legislative history address-          es "state usury  limitations" only.  The SIS, on  the other hand,                           ___________          is no mere  "limitation" but an outright  ban against calculating          interest on interest.   The ordinary meaning of the  term "limit-          ing" is  either    as the district court and Dime Savings view it             "serving to restrict or restrain" or    as the Grunbecks  urge             to enforce  a "final,  utmost or furthest  boundary."  Id.  at                                                                    ___          298.   But the  SIS does not  merely "limit," nor  does it simply                                                        ___          "restrain,"  compounding;  it prohibits  it.    Thus, the  "plain                                        _________          language"  interpretation advocated  by  Dime  Savings cannot  be          endorsed  without  disregarding  the  ordinary  meanings  of  the          distinctive terms "ban" or  "prohibit" and "limit" or "restrain."          See Greenwood Trust, 971 F.2d at 824.                                                           ___ _______________               3.   Administrative Regulations and Opinions                 3.   Administrative Regulations and Opinions                      _______________________________________                    Congress authorized  the FHLBB  and its successor,  the          Office of Thrift Supervision ("OTS"), "to issue rules and regula-          tions and to publish interpretations governing the implementation          of [section 501]."   12 U.S.C.   1735f-7a(f).  Judicial review of          an agency's  interpretation of the statute  it administers impli-          cates two  preliminary  inquiries.   Strickland,  48 F.3d  at  16                                               __________                                          16          (citing  Chevron, 467  U.S.  at  842-43).  The first  is  whether                   _______          Congress has "directly spoken to  the precise question at issue."          Id.  (quoting Chevron, 467 U.S. at 842) (internal quotation marks          ___           _______          omitted).  If  not, we  inquire "whether the  agency's answer  is          based  on a permissible construction of the statute."  Id. (quot-                                                                 ___          ing Chevron, 467 U.S. at 843) (internal quotation marks omitted).              _______          Although we accord deference  to the agency's interpretation, the          final  word  on  statutory  interpretation  is  for  the  courts.          Chevron, 467 U.S. at 843 n.9 ("The judiciary is the final author-          _______          ity on issues of statutory construction and must reject  adminis-          trative  constructions which are  contrary to clear congressional          intent.").   Furthermore,  "[i]f  a court,  employing traditional          tools of statutory construction,  ascertains that Congress had an          intention on the precise question at issue, that intention is the          law and must be given effect."   Id.  Where an agency interpreta-                                           ___          tion  is based exclusively on  its reading of  the bare statutory          language, no special deference  is due.  See Strickland,  48 F.3d                                                   ___ __________          at 16.  Furthermore, if "the statute itself, viewed in connection          with the statutory design and the legislative history, reveals an          unequivocal  answer  to the  interpretive  question, the  court's          inquiry ends."  Id. at 17.                          __                    a. FHLBB Regulations                    a. FHLBB Regulations                       _________________                    The FHLBB has issued administrative regulations for the          implementation  of section  501, see  12 C.F.R. Part  590 (1988),                                           ___          which  focus upon the effect  of interest ceilings  on the avail-                                                    ________          ability of  mortgage  credit.   "The  purpose of  this  permanent                                          17          preemption of state interest-rate ceilings applicable to Federal-                                            ________          ly-related  residential  mortgage loans  is  to  ensure that  the          availability of  such  loans  is  not impeded  in  states  having          restrictive  interest limitations. . .  ."  12  C.F.R.   590.1(b)          (emphasis  added).  The  FHLBB has reaffirmed  that "[n]othing in          this  section preempts  limitations in  state laws  on prepayment          charges,  attorneys'  fees,  late  charges  or  other  provisions          designed to protect borrowers."  Id.   590.3(c).                                             ___                    A  statute that  imposes an  outright ban  against com-          pounding does not place a "ceiling" on interest rates or amounts.          See  supra pps.  12-14.   Moreover, assuming  it may  affect loan          ___  _____          demand,  a ban  against  charging interest  on interest  does not          artificially  disrupt the  availability of home  mortgage credit.          ____________  _______          See  supra at pps. 12-15.   Finally, given  the commercial reali-          ___  _____          ties,  it is reasonably clear  that the SIS  ban against charging          interest on  interest not  only affords important  protections to          homebuyers  but  does so  without  "expressly  limiting" interest          rates.                    b. The FHLBB and OTS Opinions                      b. The FHLBB and OTS Opinions                       __________________________                    In response to an inquiry in 1984 as to whether "Michi-          gan laws regarding the charging of interest on deferred interest"          were  preempted by section 501, the FHLBB opined that "state laws          which would prohibit the charging of [interest on] interest would          constitute provisions  'limiting the rate or amount of interest .          . . which  may be charged. .  . .'  It  is our opinion that  such          charges  are  not  consumer  protection provisions  of  the  type                                          18          contemplated by  12 C.F.R.   590.2(c) (1984)  such as limitations          on prepayment  charges, attorney's fees  and late charges."   Op.          Off. Gen. Counsel, FHLBB 1097 (November 15, 1984).   In 1991, the          OTS  followed suit  with an  opinion reaffirming  the  1984 FHLBB          opinion that a state statute regulating "compounding" is preempt-          ed by  section 501.   Op. Off. Chief Counsel,  OTS 91/CC-37 (Aug.          16, 1991).                    We agree  with the  district court that  these opinions          are not controlling.   See Grunbeck,  848 F. Supp.  at 298  ("Al-                                 ___ ________          though these two  opinions unequivocally support [Dime  Savings']          reading of   501(a)(1), the regulators have failed to provide any          analytical support for [their conclusion].  In this circumstance,          absolute  deference   would  be  nothing  more   than  blind  al-          legiance.").   The  district  court's  observations  are  plainly          correct.   Neither regulatory body  tendered a rationale  for its                                                         _________          opinion.   The  FHLBB     the first  to address  the question              neither described, nor cited, the Michigan provision to which its          opinion related.9  And neither  agency parsed the section 501(a)-          (1) preemption clause language.                      As deference ultimately "depends on  the persuasiveness          of  the agency's position," Strickland,  48 F.3d at  18, we agree                                      __________          that none is due in this instance.  The interpretation adopted by                                        ____________________               9The OTS indicated that the party requesting its opinion had          represented  that Michigan has no statute on the subject and that          the Michigan provision relating  to "interest on interest" origi-          nated  in uncited caselaw announced around the turn of the centu-          ry.                                           19          these agencies disregarded entirely the term "expressly"    which          plainly constrains the scope  of the section 501(a)(1) preemption          clause    and overlooked the relevant legislative history explic-          itly declaring a congressional  intention to preempt state usury-          law ceilings      as distinguished  from bans  on compounding                  ________          which  result  in artificial  disruptions  in home-mortgage  loan          credit by  mandating below-market interest rates.   Finally, even                               ____________          assuming the  FHLBB interpretation  were apposite to  the present          discussion, in the respect that the Michigan provision with which          it  dealt  imposed a  ban on  compounding,  there is  no explicit          indication that either agency considered the significant consumer          protections, see supra  at 15, afforded by state  bans    such as                       ___ _____          the SIS    against  charging interest on interest.  For these and          other  reasons discussed at  length in this  opinion, we conclude          that  the agency  interpretation  relied on  by  Dime Savings  is          unpersuasive and entitled to no deference in the present context.                    c.  The Parity Act                    c.  The Parity Act                        ______________                    The district  court rejected the  State's argument that          passage  of the  Alternative Mortgage  Transaction Parity  Act of          1982 ("Parity Act"), 12 U.S.C.     3801 et seq., two years  after                                                  __ ___          passage of the  Monetary Control Act, supports a narrow construc-          tion of the preemptive scope of section 501(a)(1).  Grunbeck, 848                                                              ________          F. Supp.  at 301-02.   We  nonetheless  believe that  significant          insight can be gleaned from the Parity Act.                      The Parity Act preempts State bans on certain "alterna-                                          20          tive mortgage  transactions,"10 by which is meant  "all manner of          mortgage  instruments  that do  not  conform  to the  traditional          fully-amortized,  fixed-interest-rate  mortgage  loan."     First                                                                      _____          Gibraltar  Bank, FSB  v. Morales,  19 F.3d  1032, 1037  (5th Cir.          ____________________     _______          1994), cert. denied, 115 S. Ct. 204, vacated on other grounds, 42                 _____ ______                  _______ __ _____ _______          F.3d 895 (5th Cir. 1995) (per curiam).  Common forms of "alterna-          tive  mortgage transactions"  include  adjustable  interest  rate          mortgages, which may permit  negative amortization, and graduated          payment  mortgages,  which  may temporarily  lower  the  mortgage          payment  to  less than  the  monthly interest  due,  resulting in          planned negative amortization whereby  interest is charged on the          deferred  interest.  Id. (citing  generally to Grant  S. Nelson &                               ___          Dale A.  Whitman, Real Estate Transfer,  Finance, and Development                            _______________________________________________          1000-13  (4th ed.  1992)).   Other planned  negative amortization                                        ____________________               10The  term  "alternative  mortgage  transaction"   means  a          residential mortgage loan                           (A) in  which the interest  rate or                         finance charge may  be adjusted  or                         renegotiated;                         (B)  involving  a  fixed-rate,  but                         which  implicitly permits  rate ad-                         justments by having the debt mature                         at the  end of an  interval shorter                         than the term  of the  amortization                         schedule; or                         (C) involving any  similar type  of                         rate, method of determining return,                         term, repayment, or other variation                         not  common  to traditional  fixed-                         rate, fixed-term  transactions, in-                         cluding without limitation,  trans-                         actions that involve the sharing of                         equity or appreciation;                    described and defined  by applicable  regula-                    tion.           12 U.S.C.   3802(1).                                           21          provisions include  the reverse annuity mortgage  ("RAM") and the          credit  conversion mortgage,  both  of which  charge interest  on          deferred interest.  Id.  "An alternative mortgage transaction may                              ___          be  made by a housing creditor in accordance with [section 3803],          notwithstanding any  State constitution, law or  regulation."  12          U.S.C.   3803(c).   It is a requirement of  section 3803 that for          "housing creditors [other  than banks  and credit unions]  . .  .          transactions  [must  be]  made  in  accordance  with  regulations          governing  alternative mortgage  transactions  as  issued by  the          [OTS]  . . . ."  Id.   3803(a)(3).  These OTS regulations, see 12                                                          ___                                       ___          C.F.R.    545.33(f)(4)-(11) (1988),  impose, inter alia, substan-                                                       _____ ____          tial lender  disclosure requirements relating  to features unique          to alternative mortgage transactions.                      The State argued below that it would be "'illogical and          contrary  to  public policy'"  for Congress  to  require     as a          precondition to preemption under the Parity  Act    that negative          amortization loans conform  with OTS  disclosure regulations  "if          lenders could  claim preemption  for the same  transactions under          [the Monetary  Control Act]  without making the  required disclo-          sures."   Grunbeck, 848 F. Supp.  at 302.  Although,  as the dis-                    ________          trict  court  correctly   observed,  "[c]onstruing  the  Monetary          Control Act to  preempt simple interest  laws does not  eliminate                                                                  _________          the incentive for lenders to comply with the Parity Act's disclo-          sure  requirements,"  id. (emphasis  added),11  it  must also  be                                __                                        ____________________               11The court explained that "negative amortization provisions          are  not the  only  characteristics that  qualify  a loan  as  an          alternative mortgage transaction,"  and, further, that  "[s]imple                                          22          noted that  negative amortization provisions whereby  interest is          assessed  on deferred  interest  are common  features in  various                                                                    _______          forms  of  alternative  mortgage  transactions;  e.g.,  graduated          _____          payment  mortgages,  RAMs,   and  credit  conversion   mortgages.          Because  a ban against  charging interest on  interest would pre-          clude  a central  feature  common to  many  forms of  alternative          mortgage  transactions,  simple interest  statutes unquestionably          infringe upon alternative mortgage loans, even though they do not          impose  an outright ban.  Thus, as the State contends, construing          the Monetary Control Act  so as to preempt simple  interest laws,          such  as the  SIS, would  significantly reduce  these alternative                                                  ______          mortgage lenders' incentive to comply with the Parity Act disclo-          sure requirements.  Whether or not illogical, there can be little          question that this result would conflict with the policy underly-          ing the Parity Act and, thus, with the intent of Congress.                      As the district  court noted, "the  Parity Act and  the          Monetary  Control  Act  serve  related but  distinctly  different          functions."     Id.   The Parity  Act represents  a congressional                          ___          response to a concern,  amongst others, that State bans  on mort-          gages  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.                     The Congress hereby finds that                                            ____________________          interest laws are merely one of several categories of" state laws          "inconsistent with a qualifying  lender's right to issue alterna-          tive mortgage loans."  Id.                                   ___                                          23                         (1)  increasingly volatile  and dy-                         namic  changes  in  interest  rates                         have seriously impaired the ability                         of  housing  creditors  to  provide                         consumers  with fixed-term,  fixed-                         rate credit secured by interests in                         real property, cooperative housing,                         manufactured homes, and other dwel-                         lings;                         (2)  alternative  mortgage transac-                         tions are essential  to the  provi-                         sion of an adequate supply of cred-                         it secured  by residential property                         necessary  to  meet the  demand ex-                         pected in the 1980's; . . . .          12  U.S.C.   3801(a).  These concerns prompted Congress to autho-          rize State-chartered  housing lenders,  such as Dime  Real Estate               _____          NH, to enter into alternative mortgage transactions.                      It is the purpose of [the Parity Act]  to ...                    provide [nonfederally chartered housing cred-                             ____________                    itors]  . . . parity with federally chartered                    institutions by authorizing all housing cred-                    itors to make, purchase, and enforce alterna-                    tive  mortgage  transactions so  long  as the                    transactions are in conformity with the regu-                    lations issued by the Federal agencies.          Id. at   3801(b).  See also First Gibraltar Bank, FSB, 19 F.3d at          ___                ___ ____ _________________________          1043.   Thus, the purpose of the  Parity Act was to preempt State          bans  on alternative mortgage  transactions, including adjustable          ____          rate mortgages permitting  negative amortization whereby interest          may be charged on deferred interest payments.12                    In  the Monetary Control  Act, on the  other hand, Con-          gress was  responding to  the very  different concern  that State                                        ____________________               12The parties do not  dispute that the Dime Savings  loan is          an  "alternative  mortgage  transaction,"  though  they  disagree          whether the loan was made in accordance with OTS regulations.  We          do not resolve the  Dime Savings' Parity Act preemption  claim as          applied to the present  loan, however, since it has  not yet been          considered by the district court.                                           24          interest-rate  ceilings  were  depressing home-mortgage  interest                         ________          rates to below-market levels, thereby artificially disrupting the                   ____________          availability of funds  for both traditional fixed-rate  mortgages          and "alternative  mortgage  transactions."   The  latter  concern          prompted Congress to preempt  only state laws "expressly limiting          the rate or amount of interest."  Thus, section  501(a)(1) of the          Monetary Control Act was not aimed at preempting State laws, such          as the  SIS, which  prohibit "alternative  mortgage transactions"          permitting negative amortization whereby  interest may be charged          on deferred interest.                                          III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    We hold that the New Hampshire Simple Interest Statute,          as applied to the Dime Savings loan, is not preempted  by section          501(a)(1) of the  Monetary Control Act.   Consequently, we remand          to permit  the district court  to consider  the remaining  issues          relating to the  petition to enjoin  foreclosure on the  Grunbeck          residence.                     The judgment  is vacated and  the case is  remanded for                    The judgment  is vacated and  the case is  remanded for                    _______________________________________________________          further  proceedings consistent  with  this opinion.   Costs  are          further  proceedings consistent  with  this opinion.   Costs  are          ___________________________________________________    __________          awarded to appellants.          awarded to appellants.          _____________________                                          25
