Ten States Push Back Against OCC Dismissal Bid in Mortgage Escrow Lawsuit
Ten states oppose the OCC's motion to dismiss their challenge to new mortgage escrow rules.
Why it matters: This lawsuit tests the limits of federal banking authority and could influence how mortgage servicers manage escrow interest, affecting consumers nationwide.
- On May 15, 2026, the OCC issued two rules that preempt state laws on mortgage escrow interest.
- Ten states filed suit on August 11, 2026, claiming the OCC exceeded its authority and violated the Administrative Procedure Act.
- On October 19, 2026, the states opposed the OCC's motion to dismiss, asserting sovereign injury and proper venue in Oregon.
- The court is expected to rule on the OCC's motions by November 20, 2026.
On May 15, 2026, the Office of the Comptroller of the Currency (OCC) issued the Escrow Powers Rule and the Preemption Rule, effective June 18, 2026. These rules grant national banks broad authority over escrow accounts, including discretion on whether to pay interest, while federal law preempts state laws that require interest payments on such accounts.
In response, ten states—Oregon, New York, California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island, and Vermont—filed a lawsuit on August 11, 2026, challenging the rules. They argue that the OCC exceeded its statutory authority and violated the Administrative Procedure Act by issuing these sweeping regulations.
On October 19, 2026, the states filed opposition briefs against the OCC's motion to dismiss or transfer the lawsuit. They maintained that their injuries are immediate and concrete, fulfilling Article III standing requirements, and asserted that venue in Oregon is proper because of the state's interest and involvement. In contrast, the OCC contends that the states lack standing, claiming any injury is speculative since no national bank has yet stopped paying interest on escrow accounts under the new rules.
Rhode Island Attorney General Peter F. Neronha summarized the states' concerns: "The OCC's decision ultimately results in less money being returned to homeowners and more money put into the pockets of big banks." Legal experts like Alan S. Kaplinsky have noted the OCC's standing argument centers on the lack of an actual or imminent injury.
The lawsuit outcome will shape enforcement of federal banking regulations and impact mortgage servicers and borrowers nationwide. The court is expected to rule on the OCC's motions by November 20, 2026.
By the numbers:
- May 15, 2026 — OCC issues escrow powers and preemption rules
- August 11, 2026 — Ten states file suit challenging OCC rules
- November 20, 2026 — Court expected to rule on motion to dismiss
Yes, but: The OCC argues the states' injury claims are speculative, noting no national bank has yet ceased paying interest on escrow under the new rules.
What's next: The court is expected to issue a ruling on the OCC's motion to dismiss or transfer the case by November 20, 2026.