Oregon leads multi-state lawsuit to block federal rule on mortgage escrow interest

SALEM, Ore. (KTVZ) -- Oregon Attorney General Dan Rayfield and New York Attorney General Letitia James led a coalition of 10 states in filing a lawsuit today against the Office of the Comptroller of the Currency. The legal action challenges a federal rule that invalidates state laws requiring mortgage lenders to pay interest on escrow accounts.

The lawsuit, filed in the U.S. District Court in Portland, seeks to block a May 2026 rule issued by the federal banking agency following requests from industry lobbyists. Under Oregon law, mortgage lenders are required to share earnings on money that borrowers deposit into escrow accounts to cover property taxes and home insurance.

Oregon Rayfield announced the multi-state legal action, criticizing the federal regulation. “Time and again, we've seen the Trump Administration hand out favors to insiders and corporate special interests at the expense of Oregonians,” Rayfield said. “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.”

The lawsuit, States of Oregon & New York, et al., v. Office of the Comptroller of the Currency & Jonathan Gould, names both the agency and Gould as defendants. According to the court filing, the federal rule ignores prior federal court rulings that upheld state interest-on-escrow laws and bypasses congressional safeguards designed to prevent administrative overreach.

Joining Oregon and New York in the 10-state coalition are the attorneys general of California, Conn., Maine, Md., Mass., Minn., R.I. and Vermont. State officials contend the federal decision creates an uneven playing field, as exempting only national banks leaves smaller, state-chartered banks at a competitive disadvantage.