James Takes Trump Administration to Court Over Mortgage Interest
The New York prosecutor seeks to prevent national banks from stopping paying interest on funds destined for taxes and insurance
New York Attorney General Letitia James sued the Office of the Comptroller of the Currency (OCC) to stop national banks from stopping paying interest on the money that millions of homeowners keep in escrow accounts.
These accounts are part of many mortgages and are used to collect money to pay property taxes and home insurance. That is, the owner delivers an amount each month that remains under the control of the financial institution until the time comes to cover those expenses.
The problem is what happens to that money while it remains in the account.
In New York, a law in effect since 1974 requires lenders to pay a minimum interest of 2% on certain escrow funds. James argues that such protection directly benefits the owners and prevents banks from using large amounts of money without offering compensation.
“Large banks and mortgage lenders should not be able to force homeowners to tie up large sums of money without paying interest,” James said, according to the statement released by his office.
The dispute with the OCC
The lawsuit, filed along with nine other attorneys general, responds to two rules issued by the OCC on May 15, 2026. The agency maintains that state laws requiring national banks to pay interest on these accounts cannot apply to those institutions.
James and the other attorneys general believe that the OCC exceeded its powers and that its decisions could affect protections established by states for homeowners.
The New York Attorney General's Office notes that nearly 80% of mortgages in the United States had an escrow account associated with them in 2016.
The case comes after the Second Circuit ruled in May that New York's 2% law could not apply to national banks.
Now, James is seeking to have a court declare the new OCC rules illegal and prevent them from taking effect.
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