A legal battle is brewing over new federal rules related to accounts that hold money to pay homeowners' property taxes and insurance payments.
Ten state attorneys general filed a lawsuit on Tuesday seeking to invalidate a pair of Office of the Comptroller of the Currency rules that allow certain banking institutions under its supervision to sidestep state laws requiring them to pay interest on mortgage escrow balances. The federal lawsuit, filed in U.S. District Court in Oregon, names the OCC and Comptroller Jonathan Gould as defendants.
One new OCC rule codified the power of national banks and federal savings associations to determine the terms of escrow accounts, including whether to pay interest or charge fees. The other rule says federal law preempts state laws when it comes to OCC-regulated banks' flexibility in determining those aspects of escrow accounts. Banks are either chartered by a state or the federal government.
The OCC issued the new rules in May, and they became effective June 18.
