States Oppose OCC’s Interest‑on‑Escrow Rule Preemption
Attorney General‑led coalition of ten states urges a federal court to reject the OCC’s request to delay scrutiny of new mortgage rules that could erode state preemption.
The OCC issued rules effective mid‑2026 that allow the FDIC to recover interest accrued during escrow, potentially preempting state mortgage interest‑on‑escrow statutes. Ten states challenged the agency’s request to pause judicial review while the preemption authority remains in effect, filing a brief to a federal court. The states argue that the pause undermines consumer‑protection laws and that the OCC is misusing its preemption power. A ruling in favor of the states would reinforce state preemption over mortgage regulation, reshaping the legal landscape for lenders nationwide. Firms should monitor the decision closely, as it will determine whether state laws can continue to impose escrow‑interest restrictions and how banks and mortgage servicers must adjust compliance frameworks under the new federal rules today. The court’s decision will clarify the scope of OCC’s authority and could influence future regulatory approaches to mortgage escrow practices across the country.