Ten states filed a federal lawsuit Tuesday to block new banking rules that could eliminate interest payments on the escrow accounts millions of homeowners use to pay property taxes and insurance premiums.
The suit, filed in U.S. District Court in Oregon, challenges two rules issued by the Office of the Comptroller of the Currency that allow federally-chartered banks to ignore state laws requiring interest payments on escrow balances. The rules affect national banks and federal savings associations under OCC supervision.
How Escrow Accounts Work
When homeowners make monthly mortgage payments, many include extra amounts beyond principal and interest. Those additional funds go into escrow accounts that lenders manage to pay property tax bills and homeowners insurance when they come due. The balances can run into thousands of dollars.
“The rules basically allow OCC-regulated banks not to pay interest on mortgage escrow accounts,” said Solomon Maman, a Chicago attorney specializing in financial services law.
Federal Override of State Consumer Protections
One OCC rule codifies the authority of national banks and federal savings associations to set their own terms for escrow accounts, including whether to pay interest or charge fees. The companion rule declares that federal law preempts state requirements on these accounts for OCC-regulated institutions.
The lawsuit names the OCC and Comptroller Jonathan Gould as defendants. State attorneys general argue the rules strip away consumer protections that state legislatures enacted to ensure homeowners earn returns on money that sits in bank accounts for months at a time.
The distinction matters because banks operate under either state or federal charters. State-chartered banks remain subject to state escrow interest requirements, while federally-chartered institutions can now opt out under the new rules.
What Happens Next
The case will test whether federal banking regulators can override state consumer protection laws designed to benefit homeowners. For families with escrow accounts at federally-chartered banks, the outcome could determine whether they continue receiving interest on funds that often exceed their monthly mortgage payment.
The ten states have not been publicly identified in available court filings. The lawsuit seeks to invalidate both OCC rules before they take widespread effect across the banking industry.
Key Points
- Ten states sued to block OCC rules allowing federally-chartered banks to stop paying interest on mortgage escrow accounts
- The rules let national banks override state laws requiring interest payments on funds homeowners deposit for property taxes and insurance
- Only federally-chartered banks can use the exemption; state-chartered banks still must follow state escrow interest requirements
https://www.cnbc.com/2026/08/13/mortgage-escrow-account-interest-lawsuit-bank-rules.html – August 13, 2026
