A coalition of Democratic state attorneys general filed a lawsuit on Tuesday, August 11, 2026, in a federal court in Oregon seeking to block the Trump administration's attempt to invalidate state laws that require mortgage lenders to pay homeowners interest on money held in escrow accounts. The suit, filed on behalf of 10 blue states, challenges two rules issued in May by the Office of the Comptroller of the Currency (OCC) that assert federal law preempts these state interest-on-escrow requirements in over a dozen states and two U.S. territories.

The attorneys general argue that the OCC's rules exceed its rulemaking authority and violate procedural safeguards enacted by Congress after the 2008 financial crisis, as well as Supreme Court precedent. Oregon Attorney General Dan Rayfield (D) criticized the administration, stating, “Time and again, we’ve seen the Trump Administration hand out favors to insiders and corporate special interests at the expense of Oregonians. 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.”

Mortgage lenders typically require homeowners to deposit monthly payments into escrow accounts to cover property taxes and insurance premiums. Because these deposits often exceed immediate needs, lenders hold large sums for weeks, which critics say allows them to profit from funds that do not belong to them.

The attorneys general emphasized that the state interest-on-escrow laws align with the Real Estate Settlement Procedures Act, aiming to protect consumers and prevent mortgage lender abuses by discouraging over-collection into escrow accounts.

In response, the OCC stated in a news release that its actions highlight federal preemption as a tool to reduce unnecessary burdens, promote local and national prosperity, and stimulate economic growth.

Attorney General Letitia James (D) condemned the rules, saying, “At a time when homeownership is more expensive than ever, the Trump administration is trying to make it even more costly with these unlawful rules. Big banks and mortgage lenders should not be able to force homeowners to lock away significant amounts of money without paying interest.”

The lawsuit represents a significant legal challenge to the Trump administration's regulatory approach to mortgage lending and escrow account management.

Sources