Supreme Court Requested Input on Escrow Interest Rules
The outcome could clarify whether national banks must pay interest on your mortgage escrow account.
Updated on Oct. 6, 2026 in Residential
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Should federally chartered banks be required to follow state laws on mortgage-escrow account interest?
The Supreme Court has asked the solicitor general for views on whether federal law prevents states from mandating interest on mortgage-escrow accounts. The decision affects homeowners in states with interest requirements, such as California, where laws mandate at least 2% interest on certain accounts.
Why it matters
Federal appeals courts are currently split, leaving homeowners in some states entitled to escrow interest while others are not. This legal uncertainty impacts the total cost of homeownership for those holding escrow accounts with national banks.
The Ninth Circuit upheld California’s requirement for at least 2% interest on certain accounts, while the Second Circuit ruled federal law preempts New York’s mandates. Borrowers in the Kivett case were awarded over $9 million, illustrating the financial impact of the split rulings.
The players
Supreme Court of the United States
The nation's highest judicial body that is currently deciding whether to hear cases involving federal versus state financial regulations.
Office of the Comptroller of the Currency
A federal agency that charters and regulates national banks and has issued rules regarding the payment of interest on escrow accounts.
The details
The dispute centers on whether the National Bank Act supersedes state laws that force banks to pay interest on money held in escrow for taxes and insurance. While the Office of the Comptroller of the Currency has adopted administrative rules allowing national banks to decide on interest payments, state courts remain divided. The Supreme Court is now weighing whether to intervene to reconcile these conflicting legal standards across the country.
Timeline
2024: The Supreme Court issued a unanimous decision regarding the Cantero case.
May 5, 2026: The Second Circuit ruled on New York escrow law preemption.
October 5, 2026: The Supreme Court requested the solicitor general's views.
The Home Front
This litigation highlights an ongoing tension between state consumer-protection laws and federal banking deregulation. It follows a decade of evolving interpretations regarding whether national banks must comply with local state mandates on escrow account management.
Check your mortgage statement to see if your lender currently pays interest on your escrow account balance. If you live in a state with an interest mandate, review your account documentation to ensure your bank is in compliance with state-specific requirements.
The takeaway
The Supreme Court is weighing whether national banks must follow state laws that require interest payments on escrow funds. Homeowners should track this case to see if it changes the income earned on their tax and insurance reserves.
Further reading
Learn more about homeownership legal issues in our Residential section.
Source note: This article includes information reported by CUToday.
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Should federally chartered banks be required to follow state laws on mortgage-escrow account interest?
