Ten AGs challenge OCC rules that threaten homeowners' escrow interest in 14 states
A coalition of ten state attorneys general filed a federal lawsuit Tuesday against the Office of the Comptroller of the Currency (OCC), seeking to block a pair of new federal rules affecting mortgage escrow accounts.
Critics say the rules would allow national banks and federal savings associations to stop paying interest on escrow balances, redirecting hundreds of millions of dollars from homeowners into lender profits.
The lawsuit was filed in US District Court in Oregon and names OCC Comptroller Jonathan Gould as a co-defendant. Oregon Attorney General Dan Rayfield is leading the coalition, joined by California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Rhode Island, and Vermont.
The OCC issued two final rules in May, which took effect June 18. The first gives national banks and federal savings associations discretion over whether to pay interest or charge fees on escrow accounts. The second asserts that federal law preempts state escrow interest statutes. Fourteen states and territories currently have laws requiring such payments.
What's at stake for homeowners
Approximately 80% of US mortgage holders carry an escrow account, according to Lereta, a real estate tax and flood data provider. Those accounts accumulate substantial balances. The average annual property tax bill for the country's 87 million owner-occupied homes was $4,271 in 2024, per the National Association of Home Builders (NAHB), while average homeowners insurance premiums are projected to reach $3,057 by end of 2026, according to Insurify.com.
Interest rates applied to escrow balances vary by state — from the national savings account average of 0.63%, per Bankrate, to nearly 4%, the approximate yield on a one-year US Treasury. On a $5,000 balance, that gap means the difference between $31.50 and $200 in annual interest.
"Time and again, we've seen the Trump administration hand out favors to insiders and corporate special interests," Rayfield said in a statement.
"The administration wants to let big banks pad their profits with money that, by law, belongs to Oregon families."
New York Attorney General Letitia James, whose state enacted its escrow interest law in 1974, said the OCC failed to demonstrate that existing state protections impose any burden on bank operations.
"Big banks and mortgage lenders should not be able to force homeowners to lock away significant amounts of money without paying interest," she said.
The legal challenge rests on Dodd-Frank
The coalition argues the OCC rules violate the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), enacted after the 2008 financial crisis to limit federal preemption of state consumer protection laws.
The lawsuit, which was previously covered in the context of an earlier First Circuit ruling on Citizens Bank escrow interest obligations, argues the OCC failed to show state escrow laws "substantially interfere" with national bank operations — the threshold Dodd-Frank requires.
The OCC cited a May 2026 Second Circuit ruling that found federal law preempts New York's interest-on-escrow statute as justification for its rules, saying the framework reduces regulatory burdens and supports economic growth.
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