OCC Proposes Rules Regarding the Federal Preemption of State Laws Regarding Escrow Interest

The OCC recently published two notices of proposed rulemaking regarding federal preemption of state laws that require national banks to pay minimum interest rates on mortgage escrow accounts.  The OCC’s proposals aim to address the ongoing uncertainty and ambiguity regarding how to evaluate National Bank Act preemption in line with the Supreme Court’s holding in Cantero v. Bank of America (see prior coverage here).

The first proposal seeks to codify longstanding powers of national banks to establish or maintain mortgage escrow accounts and to exercise business judgment in determining the terms and conditions of such accounts, including whether to pay interest and assess related fees.

The second proposal seeks to issue a formal OCC preemption determination concluding that federal law preempts mandatory interest-on-escrow state laws in California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Utah, Vermont, Wisconsin, and any other state law with substantially equivalent terms. 

The OCC relayed that these proposals are aimed at providing clarity regarding escrow practices, which may incentivize increased lending and economic growth.  Comments to the proposals must be received by January 29, 2026.