Maryland AG Joins Lawsuit to Protect Homeowners’ Escrow Interest

Maryland Attorney General Anthony G. Brown is part of a coalition of 10 state attorneys general who have filed a lawsuit aimed at blocking a recent federal regulation. This regulation, issued by the Office of the Comptroller of the Currency (OCC), seeks to invalidate state laws that mandate mortgage lenders pay interest to homeowners on funds held in escrow accounts. These escrow accounts are typically used by lenders to collect funds from borrowers to cover property taxes and homeowner’s insurance premiums. The lawsuit argues that the OCC’s decision unfairly benefits large financial institutions at the expense of ordinary homeowners, diverting money that should rightfully belong to them.

The challenged OCC rule, which was reportedly issued in response to requests from banking industry lobbyists, asserts the authority to override state-specific laws requiring lenders to share the interest earned on escrowed funds with borrowers. According to the coalition of states, this federal action disregards prior court decisions that have upheld the legality of state interest-on-escrow laws. Furthermore, the lawsuit contends that the OCC has bypassed established procedural safeguards designed to prevent such federal overreach into state regulatory authority. If the legal challenge is successful, the OCC’s rule would be nullified, potentially restoring the financial benefits of escrow interest to homeowners across Maryland and other participating states.

Beyond the direct financial impact on homeowners, the lawsuit also highlights a competitive imbalance created by the OCC’s rule. By exempting national banks from Maryland’s interest-on-escrow law, the regulation places smaller, state-chartered banks at a disadvantage. This situation could potentially stifle competition within the mortgage lending market. The legal action, titled “States of Oregon & New York, et al., v. Office of the Comptroller of the Currency & Jonathan Gould,” has been filed in the U.S. District Court in Portland. The coalition filing the suit includes the attorneys general from California, Connecticut, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Maryland.

Article by Mel Anara, based upon information from the Maryland Attorney General’s Office.

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