Salem homeowners with mortgages at national banks could lose hundreds of dollars a year if a new federal rule takes effect, and Oregon Attorney General Dan Rayfield filed suit Aug. 11 to stop it.
The lawsuit, filed in U.S. District Court in Portland, challenges two rules issued by the Office of the Comptroller of the Currency that would override Oregon's 51-year-old law requiring mortgage lenders to pay borrowers interest on escrow accounts. Under Oregon law (ORS 86.245), lenders must pay at least the discount rate on escrowed funds held for property taxes and insurance. That rate is currently 2.61%.
"This is a case in point: the Administration wants to let big banks pad their profits with money that, by law, belongs to Oregon families," Rayfield said in a statement announcing the suit.
The OCC issued the two rules on May 15, claiming broad authority to preempt state escrow-interest laws for national banks and federal savings associations. The agency said in its May announcement that the rules emphasize federal preemption as a tool for reducing regulatory burden and promoting economic growth.
The states argue the OCC exceeded its authority, violated Dodd-Frank's requirements for preemption determinations and acted arbitrarily. The complaint notes the OCC itself acknowledged it "has not relied on any technical studies or data for its analysis."
Who loses
The rules would affect borrowers whose mortgages are held by national banks, including JPMorgan Chase, Bank of America and Wells Fargo, according to Bloomberg Law. Roughly 80% of U.S. mortgages carry an escrow account, according to a Federal Housing Finance Agency report cited in the complaint.
Smaller, state-chartered banks would still have to pay escrow interest under Oregon law, putting them at a competitive disadvantage against the national banks the OCC rule would exempt, the Oregon Department of Justice said.
Coalition and context
Rayfield co-leads the case with New York Attorney General Letitia James. Attorneys general from California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Rhode Island and Vermont joined the 10-state coalition.
The suit is Oregon's 74th legal action against the Trump administration, Rayfield told the Oregon Capital Chronicle.
Oregon's escrow-interest law has been on the books since 1975. Federal appellate courts have split on whether national banks must follow such state laws: the Ninth Circuit ruled they do in a California case, while the Second Circuit ruled against New York's law after the U.S. Supreme Court sent the case back for review in 2024.
What happens next
The states are asking the court to declare both OCC rules unlawful and vacate them. No hearing date has been set. The case is States of Oregon & New York, et al., v. Office of the Comptroller of the Currency & Jonathan Gould, No. 3:26-cv-01672-SI.
