Preemption Determination: State Interest-on-Escrow Laws
Key claim: The OCC has determined that federal law preempts state laws restricting national banks’ discretion to pay interest or charge fees on real estate escrow accounts.
Abstract
(Rule · Treasury Department, Comptroller of the Currency) The OCC is issuing a preemption determination concluding that Federal law preempts State laws that restrict OCC-regulated banks’ flexibility to decide whether and to what extent to pay interest or other compensation on funds placed in real estate escrow accounts; or assess fees in connection with such accounts. This preemption determination will provide much-needed clarity to banks and other stakeholders.
Why this matters
The OCC’s preemption determination clarifies that national banks are not bound by state interest-on-escrow requirements, which directly shapes closing costs and monthly escrow economics for homebuyers whose mortgages are held by national banks versus state-chartered lenders. For builders and buyers, this reinforces a two-tier lending environment where the identity of the lender — not the state of the property — governs escrow treatment, with neutral but material implications for housing finance uniformity.