Are HUD-approved mortgage lenders exempt from Oregon's interest-rate caps on all their loans, or only on FHA-insured loans?

Plain-English summary

Oregon's Division of Finance and Corporate Securities asked whether a mortgage company approved by HUD for participation in National Housing Act insurance programs was exempt from Oregon's interest-rate cap (ORS 82.010(3)) on all of its real-estate loans, or only on the federally insured ones.

Chief Counsel Donald Arnold concluded that the exemption applied to all of the lender's loans. ORS 82.025(2) exempted "any lender approved by the Secretary of Housing and Urban Development for participation in any mortgage insurance program under the National Housing Act." The text exempted lenders, not loans. The opinion noted that this conclusion overruled a 1985 advice letter that had read the statute more narrowly.

The shift came from applying the PGE v. BOLI method of statutory interpretation. Where the 1985 letter had jumped straight to legislative history (concluding the legislature meant a narrow exemption), the 1997 opinion stopped at the plain text: ORS 82.025(2) is lender-specific, not loan-specific.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What was Oregon's interest-rate cap?
A: ORS 82.010(3) limited the interest rate on certain small business loans, agricultural loans, and personal loans of $50,000 or less. The cap was the greater of 12 percent or five percent above the 90-day commercial paper discount rate.

Q: Why is HUD approval relevant?
A: ORS 82.025 listed exemptions from the interest-rate cap. Subsection (2) exempted any lender approved by HUD for participation in any mortgage insurance program under the National Housing Act. The lender had to be approved; the loan didn't have to be FHA-insured.

Q: Why did the AG reverse the 1985 interpretation?
A: The 1985 advice letter declared the statutory language ambiguous and went to legislative history, which suggested the legislature wanted a narrow exemption tied to federally insured loans. After Oregon's Supreme Court decided PGE v. BOLI in 1993, the analytic method changed: courts must start with text and context, and only look at legislative history if intent is not clear from those sources. Under the new method, the text of ORS 82.025(2) was clear: "any lender" approved by HUD, no further qualification.

Q: Does this open the door to high-rate consumer lending?
A: The exemption applied to real-estate loans. A HUD-approved mortgage lender could write any of its real-estate loans without complying with the interest-rate cap. The opinion did not address consumer or personal loans generally; ORS 82.025(2) is keyed to mortgage insurance participation, so the lenders covered are by definition real-estate lenders.

Q: What is "any lender" in practice?
A: Lenders approved by the HUD Secretary for participation in mortgage insurance programs under the National Housing Act (12 USC 1701 et seq.). Approval status is a HUD determination, separate from any individual loan's insurance status.

Background and statutory framework

ORS 82.010(3) capped interest rates on certain loans of $50,000 or less. ORS 82.025 contained a long list of exemptions. The exemptions are a mix of lender-based (national banks, mutual savings banks, savings and loan associations, HUD-approved lenders) and loan-based (loans secured by first liens on real property, loans insured by the Federal Housing Administration or the Veterans Administration, loans secured by real property where the lender writes more than $1 million per year).

ORS 82.025(2)'s text is plain: "Any lender approved by the Secretary of Housing and Urban Development of the United States for participation in any mortgage insurance program under the National Housing Act." No phrase qualifies that to specific loans.

The PGE v. BOLI methodology, adopted by the Oregon Supreme Court in 1993, requires courts to begin with text and context. Only if intent remains unclear after that first level do courts consider legislative history. The 1985 advice letter had jumped to legislative history without first finding ambiguity in the statute's text. The 1997 opinion found the text unambiguous and so never reached the history. Under that method, "any lender" really means "any lender."

Citations and references

Statutes:
- ORS 82.010(3), interest-rate cap on certain loans
- ORS 82.025(2), HUD-approved lender exemption
- ORS 82.025(3), (4), (5), other lender and loan exemptions
- 12 USC 1701 et seq., National Housing Act

Cases:
- PGE v. Bureau of Labor & Industries, 317 Or 606, 859 P2d 1143 (1993), text-context-history method of statutory interpretation

Source

• Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
• Original PDF: https://www.doj.state.or.us/wp-content/uploads/1997/01/op1997-1.pdf

Original opinion text

January 24, 1997
Cecil R. Monroe, Administrator
Division of Finance and Corporate Securities
Department of Consumer and Business Services
21 Labor & Industries Building
Salem, OR 97310
Re: Opinion Request OP-1997-1
Dear Mr. Monroe:
You ask whether a lender that is approved by the federal Housing and Urban Development (HUD)
agency for participation in mortgage insurance programs under the National Housing Act (NHA) is
exempt from the interest rate limitations imposed by ORS 82.010(3). The question arises because the
HUD-approved lender, which functions under the federal laws, also makes real estate mortgage loans
that are not, for example, eligible for mortgage insurance under the NHA. The lender seeks assurance
from your office that it may make all of its real estate loans without being subject to the interest rate
restrictions imposed by ORS 82.010(3). We believe that such a lender is exempt from the interest rate
limitations with respect to all of its real estate loans.
ORS 82.010(3) subjects persons making small loans to interest rate limitations, unless the loans or
lenders are specifically exempted by ORS 82.025.(1) The exemption at issue here is ORS 82.025(2),
which provides that ORS 82.010(3) does not apply to:
Any lender approved by the Secretary of Housing and Urban Development of the United
States for participation in any mortgage insurance program under the National Housing Act
(12 U.S.C. 1701 et seq.)
In interpreting this section, we previously concluded that the interest rate limitation exemption applied to
HUD-approved lenders dealing in otherwise regulated loans (e.g., mortgage loans approved for NHA
participation) and did not extend to HUD-approved lenders making personal loans. Letter of Advice
dated February 5, 1985, to Keith Boyer, Supervisor, Consumer Finance Section (OP-5734).(2)
We now take another look at ORS 82.025(2), this time in light of the proposal that a HUD-approved
lender be permitted to set interest rates in excess of the state's limitation for all of its real estate mortgage
loans. In a case decided after our 1985 opinion, the Supreme Court set out a template for interpreting
statutory provisions. See PGE v. Bureau of Labor & Industries (PGE), 317 Or 606, 610-12, 859 P2d
1143 (1993). The court's first level of analysis examines both the text and context of the statute. In doing
so, the court considers statutory and case law rules of construction that bear directly on the interpretation
of the text and context of the statute, such as "words of common usage typically should be given their
plain, natural, and ordinary meaning." Id. at 611. If, but only if, the legislature's intent is not clear from
the text and context inquiry, the court will then consider legislative history. If, after consideration of text,
context and legislative history, the intent of the legislature remains unclear, then the court may resort to
general maxims of statutory construction for aid in resolving the remaining uncertainty. Id. at 611-12
Our earlier review of ORS 82.025(2) was based almost entirely upon its legislative history.(3) In
considering this provision again, we first focus on its text and context.

The immediate context of ORS 82.025(2) is its relation to the other exemptions in that statute. These
exemptions include a mix both of lenders, such as banks, national banks, mutual savings banks and
savings and loan associations, ORS 82.025(1), and of loans, such as those secured by first liens on real
property and loans secured or covered, in whole or in part, by the Federal Housing Administration, the
United States Department of Veterans Affairs or the Farmers Home Administration, ORS 82.025(3), (5).
ORS 82.025(2) is a lender-specific provision, not a loan-specific provision. ORS 82.025(2) exempts "any
lender approved by the Secretary of [HUD] for participation in any mortgage insurance program under
the [NHA]." The text of this provision does not require that the loan itself be subject to mortgage
insurance. In contrast, ORS 82.025(4) exempts "any loan which is secured by real property," but further
defines the lender for such loans as "one who makes, invests in or arranges real property loans * * *
aggregating more than $1 million per year." Thus, it would appear from the text and context of ORS
82.025(2) that it is intended to exempt HUD-approved lenders, not loans or classes of loans.(4)
The exemption from interest rate limitations contained in ORS 82.025(2) is for "any lender" approved by
the Secretary of HUD "for participation in any mortgage insurance program" under the NHA. Following
the template for statutory interpretation set out in PGE, it is unnecessary to reach and rely upon the
legislative history of ORS 82.025(2), as we did in our 1985 opinion. Looking at the "plain, natural, and
ordinary meaning" of the statutory language, PGE, 317 Or at 611, we conclude that ORS 82.025(2)
exempts "any lender" approved by the Secretary of HUD and does not restrict the exemption to lenders
making only a certain type of loan, e.g., a federally insured loan.
A HUD-approved mortgage lender may make all of its real estate loans without being subject to the
interest rate restrictions imposed by ORS 82.010(3). As a result of our review of ORS 82.025(2), based
on the PGE analysis, we also conclude that our 1985 opinion was incorrect and hereby overrule that
opinion. Under the plain language of ORS 82.025(2), a lender approved by HUD for participation in an
NHA mortgage insurance program may make any of its loans without being subject to the interest rate
restrictions imposed by ORS 82.010(3).
Sincerely,
Donald Arnold
Chief Counsel
General Counsel Division

1. ORS 82.010(3) provides, in part:
   Except as provided in ORS 82.025, no person shall:
   (a) Make a business or agricultural loan of $50,000 or less at an annual rate of interest exceeding the greater of 12 percent, or five percent in excess of the discount rate * * * on 90-day commercial paper * * * ; or
   (b) Make a loan of $50,000 or less, except a loan made under paragraph (a) of this subsection, at an annual rate of interest exceeding the greater of 12 percent, or five percent in excess of the discount rate on 90-day commercial paper * * *.

2. Our 1985 opinion interpreted ORS 725.031 and 725.041, which were repealed by Oregon Laws 1987, chapter 215, section 24, and reenacted by Oregon Laws 1987, chapter 215, sections 18 and 21. The reenacted laws became ORS 82.010 and 82.025, respectively.

3. In our 1985 opinion we stated, without fully analyzing its text and context, that the language of ORS 82.025(2) was ambiguous and therefore concluded that the courts would consider the legislative history of the enactment. OP-5734, supra, at 2. In reviewing the legislative history of the enactment, we concluded that the Oregon legislature intended to provide a limited exemption for HUD-approved lenders dealing in otherwise regulated mortgage loans, an exemption not applicable to personal loans. Id. at 5.

4. Language virtually identical to that in ORS 82.025(2) is also found in federal statutes, but each of these statutes contains additional, qualifying language. By the terms of the qualifying language, the federal statutes are limited to particular loans or particular lenders. See 12 USC § 3802(2) (defining a "housing creditor" and qualifying status as to alternative mortgage transactions); 12 USC § 1735f-7a(a)(1)(C)(vi) (defining "lender" for use in conjunction with "federally related mortgage loan," 12 USC § 1735f-5(b)(2)(A)).