The American Bankers Association today joined with other industry groups in expressing support for two regulatory proposals to clarify that national banks are exempt from state laws regulating real estate escrow accounts.
New York, California and at least 10 other states have enacted interest-on-escrow laws in recent years. In December, the Office of the Comptroller of the Currency issued a proposed rule to reassert preemption of federal law over state escrow law in the case of national banks and federal savings associations. The OCC also released a second, related proposal to codify the longstanding powers of national banks and federal savings associations to establish or maintain the terms and conditions for real estate lending escrow accounts.
In a joint letter, ABA and the Mortgage Bankers Association said the federal preemption rule “rightly recognizes that escrow account management is not an ancillary or ministerial function, but rather an integral aspect of real estate lending grounded in federal statute, longstanding agency precedent, and safety and soundness principles.”
Still, the associations recommended that the OCC broaden the definition of “escrow accounts” in the proposal, noting that banks and services use various terminology for the accounts. “Escrow account” should be defined to include “any account established for this purpose, regardless of nomenclature, including trust, reserve, impound, insurance claims, or similarly designated accounts,” they said
ABA also joined with the U.S. Chamber of Commerce in a separate letter to express support for both proposals. In addition, they offered recommendations for improving the proposed preemption determination, such as adding language to emphasize the low bar for triggering federal preemption.
“As the OCC recognizes, robust federal preemption is essential to ensuring that national banks can serve American consumers efficiently and effectively,” they said.
