New Congressional Resolution Blocks Federal Rule, Preserving State-Mandated Interest on Mortgage Escrow Accounts

This joint resolution uses the Congressional Review Act to strike down a specific rule from the Office of the Comptroller of the Currency (OCC). The rule in question, published at 91 Federal Register 29350, attempted to establish that federal law could override (or "preempt") state laws requiring banks to pay interest on mortgage escrow accounts. By disapproving this rule, Congress is effectively hitting the 'undo' button, ensuring the OCC’s attempt to sideload state regulations has no legal force or effect.

The Escrow Interest Tug-of-War

When you pay your mortgage, your lender often collects extra cash for property taxes and insurance, holding it in an escrow account until those bills are due. In many states, laws require banks to pay you interest on that balance—it is your money, after all. The OCC rule aimed to let national banks ignore those state requirements, arguing that federal oversight should trump local rules. For a homeowner in a state like New York or California, where interest on escrow is mandated, this resolution ensures your bank can't use federal status as an excuse to stop paying you those small but steady interest credits every year.

Impact on the Ledger

For the average person juggling a mortgage, this isn't a windfall, but it is a matter of principle and pocket change. If you live in one of the roughly 15 states with these laws, the resolution keeps money flowing from the bank to your account rather than the other way around. On the flip side, national banks and financial institutions lose the regulatory shortcut the OCC tried to provide. Instead of a single federal standard that allowed them to skip interest payments, they must continue navigating a patchwork of state laws and maintaining the systems necessary to calculate and distribute those interest payments to borrowers.

Regulatory Guardrails

This move highlights a significant boundary between federal banking regulators and state consumer protection powers. By nullifying the OCC’s preemption determination, the resolution reinforces the idea that state-level financial protections remain valid even for large, national institutions. While the OCC argued that these state laws interfered with the efficiency of national banking, this legislative action prioritizes the existing state-level benefits for homeowners. The practical result is a maintenance of the status quo: if your state says you get interest on your escrow, your bank still has to pay up.