Rule2026-10036
Real Estate Lending Escrow Accounts
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 19, 2026
Effective
June 18, 2026
Issuing agencies
Treasury Department
Abstract
The OCC is issuing a final rule to codify longstanding and recognized powers of national banks and Federal savings associations (collectively, banks) to establish or maintain real estate lending escrow accounts and to exercise flexibility in making business judgments as to the terms and conditions of such accounts, including whether and to what extent to offer any compensation or to assess any fees related thereto.
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<title>Federal Register, Volume 91 Issue 96 (Tuesday, May 19, 2026)</title>
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[Federal Register Volume 91, Number 96 (Tuesday, May 19, 2026)]
[Rules and Regulations]
[Pages 29340-29347]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10036]
[[Page 29339]]
Vol. 91
Tuesday,
No. 96
May 19, 2026
Part III
Department of the Treasury
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12 CFR Parts 34 and 160
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Office of the Comptroller of the Currency, Final Rule
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Federal Register / Vol. 91, No. 96 / Tuesday, May 19, 2026 / Rules
and Regulations
[[Page 29340]]
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DEPARTMENT OF THE TREASURY
12 CFR Parts 34 and 160
[Docket ID OCC-2025-0736]
RIN 1557-AF46
Real Estate Lending Escrow Accounts
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Final rule.
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SUMMARY: The OCC is issuing a final rule to codify longstanding and
recognized powers of national banks and Federal savings associations
(collectively, banks) to establish or maintain real estate lending
escrow accounts and to exercise flexibility in making business
judgments as to the terms and conditions of such accounts, including
whether and to what extent to offer any compensation or to assess any
fees related thereto.
DATES: This final rule is effective on June 18, 2026.
FOR FURTHER INFORMATION CONTACT: Karen McSweeney, Special Counsel,
Graham Bannon, Counsel, and Priscilla Benner, Counsel, Chief Counsel's
Office, 202-649-5490; Office of the Comptroller of the Currency, 400
7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing,
or have a speech disability, please dial 7-1-1 to access
telecommunications relay services.
SUPPLEMENTARY INFORMATION:
I. Introduction
Real estate lending has been core to the business of national banks
for over 100 years and of Federal savings associations for their entire
existence of over 90 years. Banks are a key pillar supporting
homeownership and commercial real estate in the United States. In order
to engage in effective and efficient real estate lending, banks use a
variety of tools to safely and soundly manage the associated risks.
Mortgages have several features that set them apart from most of banks'
other extensions of credit, including that they are typically
overcollateralized and the collateral is unique, is often illiquid, and
is subject to acts of nature that can rapidly depreciate its value. As
such, a significant risk in mortgage lending is related to a bank's
ability to assess, manage, and preserve the underlying collateral.\1\
Since the late 1930s, escrow accounts have been a crucial risk-
mitigation tool that supports safe and sound mortgage lending. For
example, a lender may require a borrower to prepay a portion of their
annual property taxes, insurance premiums, and certain other payments
relating to the mortgaged property, which the lender places into an
escrow account. When those payments become due, the lender then
forwards the payment to the applicable party to which it is due.\2\
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\1\ See OCC, Comptroller's Handbook, ``Mortgage Banking,'' 15,
53-54 (2014) (Mortgage Banking Handbook).
\2\ See id.; OCC, Comptroller's Handbook, ``Residential Real
Estate,'' 25-27 (2017).
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From the lender's perspective, escrow accounts can ensure in
advance that these payments will be met, which in turn enables the
lender to protect the priority of its mortgage lien and the value of
the collateral. If a borrower fails to pay property taxes, for example,
a tax lien is, in general, superior to the lender's mortgage lien.\3\
If a municipality forces a sale of the property to collect on the taxes
owed to it, there may be insufficient proceeds left over from the sale
of the property to enable the borrower to satisfy the remaining real
estate loan. Similarly, if a borrower fails to pay premiums on an
insurance policy covering the property, the lender may bear the risk of
uninsured damage to the collateral. For example, the borrower may cease
payment on the real estate loan if the property becomes so damaged that
its market price is less than the outstanding mortgage balance. In this
case, the lender may be unable to recover the value of the outstanding
mortgage loan through foreclosure on and sale of the collateral
property.
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\3\ See Mortgage Banking Handbook, supra n.1, at 99; see also
U.S. Gen. Acct. Off., B-114860, Study of the Feasibility of Escrow
Accounts on Residential Mortgages Becoming Interest Bearing, 6
(1973) (``Escrow accounts began during the economic depression of
the 1930s when many homeowners, because of their inability to pay
property taxes, lost their homes through foreclosure.''). Use of
escrow accounts also benefit State and local governments in reducing
the number of delinquent or delayed property tax filings and
associated foreclosure proceedings. Id. at 20.
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From the borrower's perspective, escrow accounts can help the
borrower budget for tax, insurance, and other payments.\4\ Use of an
escrow account also simplifies the operational aspects associated with
making payments and confirming satisfaction of the borrower's
obligations to multiple parties.
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\4\ Unlike principal and interest payments on the mortgage loan,
which are typically due monthly and are consistent over time, tax,
insurance, and certain other payments related to the mortgaged
property are typically due less frequently (e.g., every six months)
and may change throughout the life of the mortgage loan due to, for
example, changes in local property tax rates, the assessed tax value
of the property, or annual insurance premium adjustments. Such lump
sum payments thus mean that total mortgage-related payments on these
tax, insurance, or other payments due dates are typically larger and
may vary over time.
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In light of these benefits to both lenders and borrowers, escrow
accounts are widely used. For example, approximately 80 percent of U.S.
residential real estate mortgages to purchase a property use an escrow
account.\5\ While banks typically provide escrow accounts free of
charge, banks nonetheless incur costs and assume risks related to
administering these accounts, including the operational costs of
building escrow systems, ensuring payments are timely made to the
relevant parties, and complying with contractual terms and applicable
law.\6\ When banks establish and maintain escrow accounts, they make a
variety of decisions that collectively allow them to balance these
costs and risks with the benefits of such accounts. For example, some
banks may choose to pay interest on such accounts or otherwise offer
some form of related compensation to mortgage borrowers. Banks may also
take steps to recoup some of the costs of administering escrow
accounts, including through investing escrow funds, typically in short
term assets. Some banks may also offset costs by imposing additional
fees, such as origination fees, particularly if escrow account
administration becomes more expensive. Increased fees may result in
larger upfront costs that can create
[[Page 29341]]
barriers to homeownership. This burden may fall especially hard on
first-time and lower-income borrowers, as origination fees, for
example, may represent a proportionally larger financing charge
compared to higher-balance mortgages.\7\ A bank's decisions on how to
appropriately balance the applicable costs and benefits may be informed
by a wide variety of factors, including the bank's business strategy,
costs, market demand, competition from other real estate lenders, and
eligibility requirements for certain mortgage insurance programs.\8\ It
is therefore critical that banks have the flexibility to make the
business decisions that adapt to local circumstances and other relevant
considerations; otherwise, inefficient and ineffective results are more
likely to prevail, which may lead to higher prices and reduced mortgage
lending.
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\5\ Fed. Hous. Fin. Agency & Consumer Fin. Prot. Bureau, A
Profile of 2016 Mortgage Borrowers: Statistics from the National
Survey of Mortgage Originations, 27, 30 (2018). In some cases,
including certain government insured or guaranteed loans, the use of
escrow accounts is required. See, e.g., 24 CFR 200.84(b)(3)-(4)
(escrow account requirements for Federal Housing Administration
programs).
\6\ See Mortgage Banking Handbook, supra n.1, at 15 (``Mortgage
servicers are exposed to considerable operational risk when they
manage escrow accounts[.]''); id. at 53-54 (``Escrow account
administration consists of collecting and holding borrower funds in
escrow to pay such items as real estate taxes, flood and hazard
insurance premiums, property tax assessments, and, in some cases,
interest on escrow account balances. The escrow account
administration unit (1) sets up the account, (2) credits the account
for the tax and insurance funds received as part of the borrower's
monthly mortgage payment, (3) makes timely payments of the
borrower's obligations, (4) analyzes the account balance in relation
to anticipated payments annually, and [(]5) reports the account
balance to the borrower annually. Servicers must closely monitor
property taxing authorities and individual insurance contracts to
ensure that escrow calculations are accurate and that insurance
policies have not lapsed. . . . Servicers must comply with
applicable law in connection with [their] management of escrow
accounts, including collecting, holding, and escrowing funds on
behalf of each borrower in accordance with RESPA (12 [U.S.C.] 2609)
and Regulation X (12 CFR 1024.17 and 1024.34). . . . Servicers also
should ensure compliance with legal requirements regarding the
cessation of escrow withholding for [private market insurance] on
serviced loans.'').
\7\ One commenter explicitly noted this concern, providing a
case study of Iowa's repeal of its mandated interest on escrow
account laws, which concludes that the majority of interest payments
pre-repeal were passed on to consumers via higher origination fees,
including at a rate of over 100 percent for lower-income borrowers,
and that origination fees fell substantially post-repeal, as
compared to other similarly situated States.
\8\ See, e.g., U.S. Dep't of Hous. & Urb. Dev., Housing
Handbooks, ``FHA Single Family Housing Policy Handbook 4000.1,''
1164 (2025) (section III(A)(1)(g)(ii) on escrowing of funds).
One commenter suggested that the proposed rule would benefit
large banks over community banks. However, the final rule applies to
all banks. The need to appropriately balance the applicable costs
and benefits may be even more acute for community banks, which, for
example, may have less diversified businesses than larger banks.
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The terms and conditions of escrow accounts, including whether and
to what extent banks pay interest or other compensation, are ultimately
a business judgment made by each bank in accordance with safe and sound
banking principles. This discretion ensures that banks have the
flexibility to make business decisions about how to effectively and
efficiently set the terms and conditions of their escrow accounts,
which allows banks to appropriately balance the costs and benefits of
these accounts and the risks and rewards of real estate lending more
generally. As such, it is a core component of banks' mortgage lending
powers under applicable law, including provisions of the Federal
Reserve Act,\9\ the Home Owners' Loan Act of 1933 (HOLA),\10\ and the
National Bank Act.\11\ This is consistent with longstanding agency
precedent \12\ and bank practices, which the OCC is codifying in its
regulations governing the mortgage lending powers of national banks and
Federal savings associations, respectively, for the sake of
clarity.\13\
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\9\ 12 U.S.C. 371.
\10\ 12 U.S.C. 1464.
\11\ 12 U.S.C. 24(Seventh).
\12\ See OCC, Interpretive Letter No. 1041, at 2-3 (Sept. 28,
2005) (detailing the broad array of escrow services permissible for
national banks and acknowledging that banks may place escrow funds
into accounts that do not pay interest to customers); OCC, Corporate
Decision No. 99-06, at 3 (Jan. 29, 1999) (opining that a bank's
proposed real estate closing and escrow services were permissible as
``functionally and operationally equivalent to activities undertaken
by banks . . . in their ordinary course of business. The real estate
loan closing and escrow services respond to customers' needs and do
not involve risks that are not already assumed by banks in their
capacity as closing and escrow agents, financial intermediaries,
custodians, and trustees.'' (footnote omitted)); OCC, Conditional
Approval No. 276, at 12 (May 8, 1998) (noting that the provision of
tax escrow services ``is an integral part of or a logical outgrowth
of the lending function''); Mortgage Banking Handbook, supra n.1, at
53-54 (detailing the escrow account administration practices of
banks).
\13\ This final rule was initially proposed at 90 FR 61099 (Dec.
30, 2025).
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This final rule will also complement the OCC's preemption
determination, which it is concurrently finalizing along with this
final rule, related to State laws that restrict banks' flexibility to
decide whether and to what extent to pay interest or other compensation
on funds placed in escrow accounts or assess related fees.\14\ As
explained, those State laws prevent or significantly interfere with
banks' exercise of their Federally authorized powers and are thus
preempted. In addition, codifying these Federal powers makes clear that
those State laws also directly conflict with a Federal regulation.
Together, these two rules will reduce uncertainty with regards to
banks' escrow practices and may thereby incentivize reduced fees and
increased mortgage lending.\15\
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\14\ This final preemption determination is published elsewhere
in this issue of the Federal Register. The proposed preemption
determination is available at 90 FR 61093 (Dec. 30, 2025).
\15\ Subsequent to the issuance of the proposal, the U.S. Court
of Appeals for the Second Circuit issued a decision on remand from
the Supreme Court concluding that Federal law preempts a New York
law mandating the payment of interest by certain institutions on
mortgage escrow accounts. See Cantero v. Bank of Am., N.A.,--F.4th--
, 2026 WL 1217467 (2d Cir. May 5, 2026). The court's analysis of
national banks' real estate lending powers, including national
banks' flexibility in making business judgments regarding the terms
and conditions of escrow accounts, was fundamentally consistent with
the analysis provided in, and cited to, the proposal, lending
additional credence to the arguments discussed herein.
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II. National Banks' Real Estate Lending and Escrow Account Powers;
Discussion of Public Comments
The Federal Reserve Act and HOLA both evince clear congressional
intent to provide banks with broad, discretionary real estate lending
powers, which include the flexibility to make business decisions about
how to effectively and efficiently set the terms and conditions of
escrow accounts. Each of these statutes also provides the OCC broad
discretionary grants of rulemaking authority. Additionally, the
flexibility to make business judgments concerning the investment and
use of escrowed funds has long been inherent in the business of banking
as codified in the National Bank Act. These practices are the logical
outgrowth or functional equivalent of other longstanding permissible
bank practices regarding collateral protection. They benefit the bank
and its customers and are well within the types of risks national banks
manage in the ordinary course of business.
Broad Real Estate Lending Powers Under the Federal Reserve Act and HOLA
National banks are authorized under the Federal Reserve Act to
``make, arrange, purchase or sell loans or extensions of credit secured
by liens on interests in real estate,'' subject to requirements imposed
by the OCC.\16\ Congress has progressively expanded national banks'
mortgage lending powers under this law. Initially limited to loans on
farmland,\17\ Congress amended the law to include limited general real
estate lending in 1916 \18\ and, through the years, removed all limits
and conditions on real estate lending other than those prescribed in
regulation by the Comptroller.\19\ The Federal Reserve Act provides the
OCC broad authority to prescribe regulations governing national banks'
loans or extensions of credit secured by liens on interest in real
estate.\20\
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\16\ 12 U.S.C. 371(a).
\17\ Sec. 24, Public Law 63-43, 38 Stat. 251, 273 (1913).
\18\ Public Law 64-270, 39 Stat. 752, 754-55 (1916).
\19\ Sec. 403, Public Law 97-320, 96 Stat. 1469, 1510-11 (1982).
\20\ 12 U.S.C. 371(a); see also Sec. Indus. Ass'n v. Clarke, 885
F.2d 1034, 1048 (2d Cir. 1989) (``Legislative history indicates that
the [1982] amendment [to 12 U.S.C. 371(a)] was intended to
simplif[y] the real estate lending authority of national banks by
deleting rigid statutory [limitations]. Section 403 [which amended
12 U.S.C. 371] is intended to provide national banks with the
ability to engage in more creative and flexible financing, and to
become stronger participants in the home financing market.''
(citation modified)).
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Several commenters commended the proposal as correctly recognizing
and applying the underlying statutes and the OCC's longstanding
practices.\21\ That
[[Page 29342]]
said, one commenter objected to the OCC's reading of the Federal
Reserve Act by noting that 12 U.S.C. 371(a) provides that national
banks' real estate lending powers are also ``subject to section [12
U.S.C. 1828(o)].'' \22\ The commenter asserted that, contrary to the
above description of the history of the Federal Reserve Act, this
evinces that Congress has not removed all limits and conditions on real
estate lending other than those prescribed in regulation by the
Comptroller. Instead, this commenter asserts that national banks' real
estate lending powers remain significantly constrained, and any
regulations must, per section 1828(o), be adopted in concert with the
other Federal banking agencies.\23\ This argument is neither supported
by the plain meaning of the text nor the history of the statute's
various amendments.
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\21\ Several commenters requested that the OCC extend the
comment period, which the OCC declined to do. The OCC determined
that the original comment period provided a meaningful opportunity
to comment consistent with the requirements of the Administrative
Procedure Act and that this rulemaking should be finalized as
expeditiously as possible. The volume and range of comments the OCC
received on the proposal is consistent with the OCC's conclusion
that the comment period was sufficient.
\22\ 12 U.S.C. 1828(o) instructs the Federal banking agencies to
``adopt uniform regulations prescribing standards for extensions of
credit'' related to certain real estate transactions.
\23\ The preamble's statement that the Federal Reserve Act
``removed all limits and conditions on real estate lending other
than those prescribed in regulation by the Comptroller'' is not an
error or oversight. Even when certain regulations are adopted in
concert with other agencies, only the OCC may prescribe rules for
national banks.
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12 U.S.C. 371(a) clearly states that national banks' real estate
lending powers are subject both to 12 U.S.C. 1828(o) ``and such
restrictions and requirements as the Comptroller of the Currency may
prescribe by regulation or order'' (emphasis added). A reading of the
statute that section 1828(o) is the controlling basis for adopting
regulations would render the Comptroller's concurrent rulemaking
authority as surplusage--``[i]t is a cardinal principle of statutory
construction that a statute ought, upon the whole, to be so construed
that, if it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant.'' \24\
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\24\ TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (citation
modified) (rejecting a claim of a general discovery rule that a
statute of limitations starts running when a party knows or has
reason to know she was injured as doing so would render a specific
exception to tolling periods in the relevant statute superfluous in
all but the most unusual circumstances).
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Moreover, the statutory history supports the conclusion that the
OCC has wide discretion to issue regulations under 12 U.S.C. 371(a).
Prior to 1982, section 371(a) variously set detailed and prescriptive
statutory limits on national banks' real estate lending powers,
including, among other things, minimum or maximum mortgage maturities,
minimum loan-amount-to-collateral-value ratios, distinctions based on
real estate type, and restrictions based on a bank's location.\25\
Congress removed these prescriptive requirements in favor of only such
discretionary regulations as the OCC prescribes, indicating Congress's
intent to provide the OCC with wide latitude to regulate national bank
real estate lending. The addition of 12 U.S.C. 1828(o) as an
alternative rulemaking authority does not indicate a contrary intent.
That provision vests the Federal banking agencies with similarly broad
discretion, setting forth general criteria (e.g., ``the risk posed to
the Deposit Insurance Fund'') that the agencies shall ``consider.''
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\25\ See, e.g., Public Law 64-270, 39 Stat. 752, 754-55 (1916);
Secs. 711, 802(i)(1), Public Law 93-383, 88 Stat. 714, 716, 725
(1974).
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Other commenters alternatively asserted that 12 U.S.C. 371(a)'s
grant of rulemaking authority only permits for limitations on national
banks' real estate lending powers and not expansions. These commenters
point to the statute's use of the phrase ``such restrictions and
requirements'' in qualifying the OCC's rulemaking authority. Even
assuming that this assertion is accurate, nothing in the final rule
impermissibly expands national banks' powers beyond the bounds of the
statute. Rather, as discussed throughout the preamble, which details
the extensive statutory, judicial, and historical record, the final
rule merely clarifies longstanding and recognized real estate lending
powers. In addition, judicial precedent contradicts the commenters'
reasoning. The D.C. Circuit, for example, discussing an earlier, though
substantially similar, version of section 371's grant of rulemaking
authority, aptly noted that:
[the plaintiff] maintains that the language and legislative history
of section 371 indicate the Comptroller is permitted only to impose
``conditions and limitations'' on the lending powers of national
banks, not to issue rules that would expand those powers. The short
answer to this argument, as the Comptroller notes, is that
permitting national banks to offer [adjustable-rate mortgages] is
not a new power at all. National banks could offer ARMs before the
promulgation of these regulations. . . . It is significant that, in
its selective recapitulation of the legislative history of section
371, appellant omits the following sentence from the report by the
House Committee on Banking and Currency:
The primary purpose of this provision is to improve and update
the mortgage investment tools of national banks to assist them in
their efforts to respond to the demands of the real estate industry.
This clearly authorizes the Comptroller to regulate the terms
and conditions of mortgages.\26\
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\26\ Conf. of State Bank Supervisors v. Conover, 710 F.2d 878,
884 (D.C. Cir. 1983) (emphasis in original) (citations omitted).
In the case of Federal savings associations, residential mortgage
lending is central to their business.\27\ The explicit purpose of HOLA
is to create a Federal chartering regime for institutions that provide
credit for housing.\28\ HOLA provides Federal savings associations
broad powers to invest in, sell, or otherwise deal in residential real
property loans, subject to regulations issued by the Comptroller.\29\
HOLA also provides the OCC with broad authority to prescribe rules and
regulations to provide for the organization, incorporation,
examination, operation, and regulation \30\ of Federal savings
associations and to specify their powers to invest in, sell, or
otherwise deal in various loans and other investments.\31\
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\27\ The history of savings associations more generally in the
United States dates back to 1831, ``when townspeople in Frankford,
Pa., agreed to pool their money to buy their own homes. The result
was the Oxford Provident Building Association, which lasted until
all 40 original members had been given the opportunity to become
homeowners. The Oxford's example of cooperative finance to promote
home ownership inspired the founding of other associations across
the country.'' OCC, History of the OCC, ``1914-1935: The Federal
Thrift Charter is Created,'' <a href="https://www.occ.gov/about/who-we-are/history/history-of-the-occ/1914-1935/1914-1935-the-federal-thrift-charter-is-created.html">https://www.occ.gov/about/who-we-are/history/history-of-the-occ/1914-1935/1914-1935-the-federal-thrift-charter-is-created.html</a>.
\28\ 12 U.S.C. 1464(a).
\29\ See 12 U.S.C. 1464(c); 12 CFR part 160. HOLA also
authorizes Federal savings associations to engage in nonresidential
real estate lending not in excess of 400 percent of capital or
certain greater amounts as determined by the Comptroller, subject to
regulations issued by the Comptroller. 12 U.S.C. 1464(c)(2)(B).
\30\ 12 U.S.C. 1464(a); see also Fid. Fed. Sav. & Loan Ass'n v.
de la Cuesta, 458 U.S. 141, 145 (1982) (``Pursuant to this
authorization [12 U.S.C. 1464(a)], the [Federal Home Loan Bank]
Board has promulgated regulations governing the powers and
operations of every Federal savings and loan association from its
cradle to its corporate grave.'' (citation modified)). This
authority to promulgate regulations for Federal savings associations
was ultimately transferred to the OCC. 12 U.S.C. 5412(b)(2)(B). The
grant of rule writing authority to the OCC in each of 12 U.S.C.
371(a) and 1464(a) is of a type that ``empower[s] an agency to
prescribe rules to fill up the details of a statutory scheme . . .
or to regulate subject to the limits imposed by a term or phrase
that leaves agencies with flexibility . . . .'' Loper Bright Enters.
v. Raimondo, 603 U.S. 369, 395 (2024) (citation modified). That is,
they are grants of authority to the agency to ``exercise a degree of
discretion.'' Id. at 394.
\31\ 12 U.S.C. 1464(c).
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Since the earliest days of the Federal banking system, courts have
held that banks have wide latitude in managing and protecting property
acquired in the usual course of banking, even where such activities are
not otherwise
[[Page 29343]]
permissible.\32\ Courts have also explicitly linked the power to lend
as inextricably bound up in the power to foreclose on collateral.\33\
As such, it is clear that the discretion afforded a bank in making
business judgments related to real estate lending does not end when a
bank decides the means by which to administer and finance the costs of
managing and protecting property that serves as collateral for its
loans.\34\
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\32\ See, e.g., First Nat'l Bank v. Nat'l Exch. Bank, 92 U.S.
122, 128 (1875) (holding that a bank may accept stock in
satisfaction of a defaulted debt, notwithstanding a prohibition in
dealing in stocks); Cockrill v. Abeles, 86 F. 505, 511 (8th Cir.
1898) (holding that where a national bank acquired an undivided
interest in real property in satisfaction of a debt, it could also
purchase other undivided interests in the property and discharge
thereon where necessary to better enable the bank to manage or
dispose of the property); Cooper v. Hill, 94 F. 582, 586 (8th Cir.
1899) (holding that a bank could expend money to restore a mine
shaft acquired in satisfaction of a debt to presentable condition
for purposes of attracting a buyer); Second Nat'l Bank of
Parkersburg v. U.S. Fid. & Guar. Co., 266 F. 489, 494 (4th Cir.
1920) (citing other cases related to the protection and disposition
of collateral as ``sufficient to illustrate the latitude that is
permitted national banks, not in the character of the acts they may
primarily engage in as a business, but in the management and
protection of property and property rights acquired in the usual
course of banking transactions, and it includes such minor
incidental powers as may be reasonably adapted to the ends in
view.'').
\33\ See JPMorgan Chase Bank, N.A. v. Johnson, 719 F.3d 1010,
1017-18 (8th Cir. 2013) (``There is little doubt the power to
foreclose is closely related to and useful in carrying out the
business of banking. As the district court recognized, [t]he power
to engage in real estate lending would be rendered a nullity if
national banks could not also foreclose when the borrower
defaulted.'' (citation modified)).
\34\ See also 12 CFR 7.4002 (providing that a national bank may
charge non-interest fees, including deposit account service charges,
and that the establishment, amount, and method of calculation are
business decisions made by each national bank it its discretion). As
noted above, escrow accounts are typically provided free of cost to
consumers. However, a bank's decision to not charge permissible fees
may in many cases be underwritten by reasonable short-term returns
that banks are able to earn on escrowed funds. This flexibility may
allow a bank to recoup the costs of escrow accounts rather than
passing them on to borrowers through additional upfront fees.
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This history, and the statutory role of the OCC as the agency
delegated discretion in enacting real estate lending regulations for
both national banks and Federal savings associations, evince a clear
congressional intent to provide banks with broad, discretionary real
estate lending powers.
This intent is clear too from the primary piece of Federal
legislation governing escrow accounts. In the 1970s, Congress
determined that certain abuses in mortgage lenders' real estate
settlement processes necessitated nationwide reform, including with
respect to lenders that were requiring excessive funds be placed in
escrow accounts.\35\ The Real Estate Settlement Procedures Act (RESPA)
of 1974 \36\ regulates elements of the use and operation of escrow
accounts in residential real estate loans. It requires disclosures as
to the nature and purposes of escrow accounts,\37\ mandates the
provision of free annual escrow account statements,\38\ requires
amounts in escrow accounts be paid timely as they become due and any
funds remaining in such accounts after the loan is repaid be promptly
returned to the borrower,\39\ and establishes proportional caps on the
total amounts that may be collected from borrowers in escrow
accounts.\40\ RESPA does not, however, include any provisions related
to the use of funds in escrow accounts or that require lenders to pay
compensation on such accounts. Several commenters argued that the
enactment of RESPA represented a comprehensive reform of banks' use of
mortgage-escrow accounts and reflected a general congressional intent
to constrain or eliminate banks' flexibility regarding these accounts,
even beyond its specific provisions. These commenters do not, however,
provide evidence to support the assertion that RESPA was intended to
restrict previously existing bank powers. Rather, case law has
recognized that RESPA, in legislating a system of escrow account
disclosures and amount limits, implicitly recognizes the flexibility
banks have in deciding how to invest, and whether and to what extent to
pay interest on escrowed funds.\41\
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\35\ See 12 U.S.C. 2601(a), (b)(3).
\36\ Public Law 93-533, 88 Stat. 1724, codified at 12 U.S.C.
2601 et seq.
\37\ 12 U.S.C. 2604(b)(9).
\38\ 12 U.S.C. 2609(c), 2610.
\39\ 12 U.S.C. 2605(g).
\40\ 12 U.S.C. 2609(a). One commenter argued that the proposed
rule would incentivize banks to require borrowers pay a larger
amount into escrow accounts than is necessary. However, no such
incentive exists since such a practice is prohibited under RESPA.
Id.
\41\ See Cantero, 2026 WL 1217467 at *7 (``The omission of an
interest rate requirement from RESPA, a statute regulating many
other aspects of escrow accounts, suggests that national banks have
a broad power to set those rates.''); Flagg v. Yonkers Sav. & Loan
Ass'n, FA, 396 F.3d 178, 185 (2d Cir. 2005) (``RESPA is meant to
regulate the amount of money that a borrower is required to deposit
in escrow by tying that amount to the costs the escrow fund is meant
to secure. RESPA is not, however, designed to reduce the dollar
costs of taxes, fees, and insurance premiums. RESPA can, and does,
accomplish its task by setting rules on required escrow
contributions. That this system may, in the end, be more expensive
to borrowers than, say, keeping their money in interest-bearing
accounts to pay their own bills, does not violate RESPA's stated
goal of `reduc[ing] the amounts home buyers are required to place in
escrow accounts.' '' (citations omitted)).
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Congress has largely refrained from interfering with the
flexibility of banks in setting the terms and conditions of how
escrowed funds are handled by the bank.\42\ This flexibility allows
banks to efficiently and effectively balance the risks and rewards of
mortgage lending, just as banks do with other aspects of the credit
underwriting and lending process. The OCC has long recognized this
principle as well. For example, the Interagency Guidelines for Real
Estate Lending, adopted pursuant to 12 U.S.C. 1828(o), state that each
insured depository institution should establish loan administration
procedures for its real estate portfolio that address ``escrow
administration,'' along with other core aspects of the lending
arrangements, including ``documentation,'' ``loan closing and
disbursement,'' ``payment processing,'' ``collateral administration,''
``loan payoffs,'' ``collections and foreclosure,'' ``claims
processing,'' and ``servicing and participation agreements.'' \43\ That
is, the Guidelines outline broad topics for banks to address, including
escrow administration, but give banks substantial flexibility in how to
address them.
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\42\ Some commenters asserted that 15 U.S.C. 1639d, which
addresses escrow requirements for certain mortgages, evinces broad
Congressional intent to limit banks' flexibility in setting the
terms of escrow accounts under 12 U.S.C. 24(Seventh) and 371,
including for escrow accounts outside the scope of the statute. The
OCC disagrees with these commenters. Section 1639d sets limited
additional requirements related to escrow accounts for certain
mortgages but is not a comprehensive framework for the regulation of
escrow accounts more generally. Furthermore, nothing in section
1639d evinces a broad Congressional intent to carve out the creation
or administration of escrow accounts from Federal law nor limit the
OCC's rulemaking authority with respect thereto. Section 1639d is
not limited to national banks but rather applies to a wide variety
of creditors, including many that are regulated by States. The
references in section 1639d to State law are thus best understood to
reflect Congress's intent to ensure that state law continues to
apply to these other creditors.
\43\ 12 CFR part 34 appendix A to subpart D.
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More generally, the Federal Reserve Act, HOLA, and the National
Bank Act do not individually or together displace a national bank's or
Federal savings association's general business judgment with respect to
compensation paid to or fees assessed on customers. For example, no
Federal law dictates or contemplates a minimum interest rate that
national banks or Federal savings associations must pay on general
deposit accounts. Additionally, a national bank's non-interest charges
and fees are subject to the bank's ``discretion, according to sound
banking judgment and safe and sound banking principles.'' \44\
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\44\ 12 CFR 7.4002(b)(2). See also OCC, Interpretive Letter No.
906, at 6 (Jan. 19, 2001) (``The National Bank Act does not displace
business judgments by dictating any general restrictions on the
kinds or amounts of fees that banks may charge for services, leaving
those decisions to the discretion of bank management.'').
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[[Page 29344]]
Business of Banking
In addition to the abovementioned powers, national banks are
permitted to engage in the business of banking more generally and ``all
such incidental powers as shall be necessary to carry on the business
of banking.'' \45\ Courts have noted that ``the National Bank Act did
not freeze the practices of national banks in their nineteenth century
forms. . . . [W]hatever the scope of such powers may be, we believe the
powers of national banks must be construed so as to permit the use of
new ways of conducting the very old business of banking.'' \46\
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\45\ 12 U.S.C. 24(Seventh); see also NationsBank of N.C., N.A.
v. Variable Annuity Life Ins. Co., 513 U.S. 251, 258 n.2 (1995)
(``We expressly hold that the `business of banking' is not limited
to the enumerated powers in Sec. 24 Seventh . . . .''); 12 U.S.C.
93a (providing the OCC authority to ``prescribe rules and
regulations to carry out the responsibilities of the office.'').
Several commenters argued that NationsBank is no longer good law due
to the opinion's reliance on the now-overturned framework laid out
in Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837
(1984). However, these commenters misread the proposal and caselaw.
The cited proposition in NationsBank stands for the limited
proposition that the term ``business of banking'' is not limited to
the enumerated powers in section 24(Seventh). This proposition is
not itself premised on Chevron. Either way, the case overturning
Chevron makes clear that prior decisions premised on Chevron remain
good law. See Loper Bright Enters. v. Raimondo, 603 U.S. 369, 412
(2024) (``[W]e do not call into question prior cases that relied on
the Chevron framework. The holdings of those cases that specific
agency actions are lawful . . . are still subject to statutory stare
decisis despite our change in interpretive methodology.''). One
commenter argues in the alternative that additional language from
NationsBank is nonetheless dispositive. NationsBank, 513 U.S. at 258
n.2 (``The exercise of the Comptroller's discretion, however, must
be kept within reasonable bounds.''). As discussed in length in this
preamble, the final rule merely clarifies the longstanding and
recognized real estate lending powers that banks have exercised, and
as such is well within reasonable bounds.
\46\ M&M Leasing Corp. v. Seattle First Nat'l Bank, 563 F.2d
1377, 1382 (9th Cir. 1977).
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As reflected in the discussion in the preceding section, the OCC
has consistently taken the position that escrow account activities are
part of the business of banking.\47\ The OCC considers the following
factors when determining whether an activity that is not explicitly
enumerated in 12 U.S.C. 24(Seventh) is nonetheless part of the business
of banking:
---------------------------------------------------------------------------
\47\ See supra n.12.
---------------------------------------------------------------------------
(i) Whether the activity is the functional equivalent to, or a
logical outgrowth of, a recognized banking activity;
(ii) Whether the activity strengthens the bank by benefiting its
customers or its business;
(iii) Whether the activity involves risks similar in nature to
those already assumed by banks; and
(iv) Whether the activity is authorized for State-chartered
banks.\48\
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\48\ 12 CFR 7.1000(c)(1). The weight accorded to each factor
depends on the facts and circumstances of each case. 12 CFR
7.1000(c)(2). Relatedly, an activity is ``incidental to the business
of banking if it is convenient or useful to an activity that is
specifically authorized for national banks or to an activity that is
otherwise part of the business of banking.'' The OCC considers the
following factors in such analysis: ``(i) Whether the activity
facilitates the production or delivery of a bank's products or
services, enhances the bank's ability to sell or market its products
or services, or improves the effectiveness or efficiency of the
bank's operations, in light of risks presented, innovations,
strategies, techniques and new technologies for producing and
delivering financial products and services; and (ii) Whether the
activity enables the bank to use capacity acquired for its banking
operations or otherwise avoid economic loss or waste.'' 12 CFR
7.1000(d)(1).
---------------------------------------------------------------------------
Flexibility to exercise a national bank's business judgment as to
how to structure its escrow operations and whether and to what extent
to offer any compensation to customers is a clear logical outgrowth of
national banks' other powers to manage and protect collateral. As
discussed above, courts have long recognized the wide latitude that
banks have in the activities they may undertake in managing and
protecting collateral on loans.\49\ Furthermore, this flexibility can
also be seen as the functional equivalent of national banks' deposit-
taking powers. It is a fundamental precept of banking that the bank has
flexibility in determining what, if any, interest is paid on the funds
held in customer accounts, including escrow accounts.\50\ One commenter
strongly supported this logical outgrowth argument, noting that banks'
experiences in managing the risks associated with protecting their
collateral is fundamental to real estate lending.
---------------------------------------------------------------------------
\49\ See supra notes 3232-34 and accompanying text.
\50\ See OCC, Interpretive Letter No. 1041, supra note 12, at 3
(``[T]he first three activities listed when the Bank acts as escrow
agent [receiving funds, depositing funds into a separate non-
interest escrow account, and honoring checks written against the
account] constitute depository and check cashing functions that are
enumerated powers set forth in statutory law.''); OCC, Corporate
Decision No. 98-09, at 15 (Jan. 28, 1998) (``[I]nterest rates paid
by the bank on its deposit accounts are generally a business
decision as long as the rates do not violate federal banking laws or
regulations. . . . [I]t is generally a business decision of the bank
to determine which lending programs fit in to its lending goals and
objectives.'').
---------------------------------------------------------------------------
Flexibility to exercise a national bank's business judgment as to
how to structure the financing of its escrow operations can also
strengthen a national bank by benefiting its customers or its business.
As noted above, this flexibility allows banks to defray the costs of
providing escrow services, including coordinating payments by the
customer to multiple different parties free of charge.\51\ While a
bank's customers may not receive any interest payments if the bank
decides not to offer it, the bank's ability to exercise its business
judgment in how it structures its escrow operations may mean that the
bank is less likely to need to recoup these costs through other fees,
which may be large and upfront and create barriers to homeownership, or
which, for some borrowers, may even exceed interest that could
otherwise be earned on escrow accounts. Flexibility may also make it
more likely for the bank to use escrow accounts in its mortgage lending
operations, with their attendant benefits to both the lender and
borrower. For example, if national banks were required to use some
fixed interest calculation to determine what compensation to pay to
customers using escrow accounts, should market interest rates fall
below such threshold, then banks could face losses on their provision
of escrow accounts and may reasonably decide, where practicable, to
desist from using escrow accounts, implement fees, otherwise increase
borrower costs to offset such losses, or reduce their overall mortgage
lending due to decreased profitability.
---------------------------------------------------------------------------
\51\ See Clement Nat'l Bank v. Vermont, 231 U.S. 120, 140-41
(1913) (allowing national banks to pay State taxes on depositors'
accounts from their customers' account balances in part justified by
the benefit to each customer in not having to separately calculate
the tax and submit an individual tax return, which would remove
unnecessary obstacles to the successful prosecution of the bank's
business); M&M Leasing, 563 F.2d at 1381-82 (holding that leases of
personal property constitute the loan of money secured by the
properties leased, and so are part of the business of banking); id.
(``[L]easing yields to the banks a rate of return that compares
favorably to that of lending. A portfolio of prudently-arranged
leases imposes no greater risks than one of equally prudently-
arranged loans. It is small wonder, therefore, that today over 1000
national banks are engaged in the leasing of personal property which
has an aggregate value in excess of $2 billion.'' (citation
omitted)). Compare the flexibility of national banks to structure
secured lending programs as leases and the wide adoption of national
bank leasing programs to the flexibility banks may exercise in
structuring their escrow accounts and their adoption in
approximately 80 percent of mortgages to purchase a property. See
supra n.5 and accompanying text.
---------------------------------------------------------------------------
National banks also have a core competency in managing risks
associated with fee structures and investing funds. In exercising its
business judgment as to how to structure the administration and
financing of its escrow operations, a bank does not ``assume[] material
burdens other than those of a lender of money and is [not] subject to
significant risks not ordinarily incident to a
[[Page 29345]]
secured loan.'' \52\ Rather, it continues to protect its security
interest and the attendant collateral while managing investment risks
associated with what are typically short-term investments using the
escrowed funds.
---------------------------------------------------------------------------
\52\ M&M Leasing, 563 F.2d at 1380.
---------------------------------------------------------------------------
Finally, roughly three quarters of States permit State-chartered
banks flexibility to exercise their business judgment as to how to
structure the financing of their escrow operations for residential real
estate lending, either explicitly \53\ or implicitly through silence on
the subject,\54\ and the OCC is not aware of any State restricting this
flexibility with regards to commercial real estate lending.
---------------------------------------------------------------------------
\53\ See Iowa Code sec. 524.905(2) (2025) (``A bank receiving
funds in escrow pursuant to an escrow agreement executed in
connection with a loan . . . may pay interest to the borrower on
those funds.'' (emphasis added)).
\54\ The States and territories that require their own State-
chartered banks to pay specified interest amounts on mortgage-escrow
accounts include California (Cal. Civ. Code sec. 2954.8 (2025)),
Connecticut (Conn. Gen. Stat. sec. 49-2a (2025)), Guam (11 Guam Code
Ann. sec. 106103 (2024)); Maine (Me. Rev. Stat. Ann. tit. 9-B, sec.
429; id. tit. 33, sec. 504), Maryland (Md. Code Ann., Com. Law secs.
12-109, 12-109.2 (2025)), Massachusetts (Mass. Gen. Laws ch. 183,
sec. 61 (2025)), Minnesota (Minn. Stat. Ann. sec. 47.20, subd. 9
(2025)), New Hampshire (N.H. Rev. Stat. Ann. sec. 383-B:3-
303(a)(7)(E) (2025)), New York (N.Y. Gen. Oblig. Law sec. 5-601
(2025)), Oregon (Or. Rev. Stat. secs. 86.245, 86.250 (2025)), Rhode
Island (19 R.I. Gen. Laws sec. 19-9-2 (2025)), U.S. Virgin Islands
(V.I. Code tit. 9, sec. 67 2025), Utah (Utah Code Ann. sec. 7-17-3
(2025)), Vermont (Vt. Stat. Ann. tit. 8, sec. 10404 (2025)), and
Wisconsin (Wis. Stat. secs. 138.051, 138.052 (2025)).
---------------------------------------------------------------------------
Several commenters rejected this line of reasoning on the basis
that 12 U.S.C. 93a merely allows the OCC to carry out its
responsibilities and does not carry with it authority to confer on
national banks powers that they do not have under existing law. Even
assuming this assertion is accurate, the OCC's rule is fully consistent
with it. The preamble extensively discusses the existing and historical
power of national banks to exercise flexibility to make business
judgments in structuring escrow accounts under 12 U.S.C. 24(Seventh).
The final rule merely clarifies longstanding and recognized real estate
lending powers that banks have exercised under existing law.
Other commenters stated that the agency's rulemaking authority is
limited based on 12 U.S.C. 25b, a statute that does not concern
national banks' real estate lending powers. Specifically, these
commenters pointed to the OCC's concurrent proposed preemption
determination related to State interest-on-escrow laws \55\ and
asserted that the proposed rule on bank powers was merely pretext for
achieving other aims. As explained above, this final rule is clearly
supported by the plain meaning and judicial history of the statutory
authorities cited. Assertions that these authorities are somehow
limited by either context or unrelated statutes that do not
specifically limit application of the cited authorities are not
statutorily grounded. This final rule is a permissible exercise of the
OCC's congressionally granted authority to clarify national banks'
longstanding and recognized real estate lending powers.
---------------------------------------------------------------------------
\55\ 90 FR 61093 (Dec. 30, 2025).
---------------------------------------------------------------------------
Another commenter alleged that the OCC failed to provide technical
studies and data justifying why the terms and conditions of escrow
accounts should be left to a bank's business judgment and why this
codification of flexibility is necessary now. Relevant case law
requires that agencies disclose technical studies, when such studies
form the basis of a proposed rule, to give the public adequate
opportunity to provide comment.\56\ The OCC has not relied on any
technical studies or data for this final rule, nor is it required to do
so.
---------------------------------------------------------------------------
\56\ See Owner-Operator Indep. Drivers Ass'n, Inc. v. Fed. Motor
Carrier Safety Admin., 494 F.3d 188, 199 (D.C. Cir. 2007) (cited by
the commenter).
---------------------------------------------------------------------------
* * * * *
As such, these statutory schemes make clear that the flexibility of
banks to make the appropriate business judgment in structuring escrow
accounts and investing related funds is a core component of banks'
broad mortgage lending powers under applicable law. The OCC has broad
authority to prescribe regulations codifying this flexibility.
III. Description of the Final Rule
After considering all comments received in light of the text and
purpose of the applicable statutes, the OCC has adopted the proposal
without amendment.
The final rule amends the OCC's real estate lending and appraisals
regulations applicable to national banks and its lending and investment
regulations applicable to Federal savings associations to add a
definition of ``escrow account,'' expressly codify banks' power to
establish and maintain escrow accounts, and to clarify that the terms
and conditions of escrow accounts, including the extent of any
compensation paid to customers, are business decisions to be made by
each bank.
First, the final rule defines an ``escrow account'' used by
national banks as an account established in connection with a loan or
extension of credit secured by a lien on interest in real estate in
which the borrower places funds for the purpose of assuring payment of
taxes, insurance premiums, or other charges with respect to the
property. The final rule defines ``escrow accounts'' in substantially
similar terms in the context of Federal savings associations. One
commenter supported the definition but suggested expanding it to avoid
unintended gaps by adding explicit references to other terminology used
to describe escrow accounts, including ``reserve account'' or ``impound
account.'' The OCC believes this change would be unnecessary as the
final rule defines the term ``escrow account'' by way of the account's
use and purpose, rather than the terminology used. Another commenter
suggested expanding the rule to cover other accounts with features
similar to, but distinct from, escrow accounts. The OCC will continue
to monitor whether there are other instances where banks' real estate
lending powers may benefit from further regulatory clarity, but the OCC
has determined not to expand the scope of the final rule at this time.
Second, the final rule codifies national banks' escrow powers,
including the flexibility such banks have as to how to organize and
manage escrow accounts. Specifically, the final rule codifies that (1)
the powers of national banks include establishing and maintaining
escrow accounts in connection with real estate loans; and (2) the terms
and conditions of such escrow accounts (including, but not limited to,
the investment of escrowed funds, fees assessed for the provision of
such accounts, and whether and to what extent interest or other
compensation is calculated and paid to customers whose funds are placed
in the escrow account) are business decisions to be made by each
national bank in its discretion. The final rule codifies these powers
in the context of Federal savings associations in substantially similar
terms.\57\
---------------------------------------------------------------------------
\57\ While Federal law vests banks with broad discretion, banks'
real estate lending operations may be subject to additional
requirements under Federal law, and any such operations should be
conducted pursuant to safe and sound banking principles and the
terms of any applicable agreement with the borrower.
---------------------------------------------------------------------------
One commenter recommended that the final rule establish boundaries
that protect homeowners' escrow funds and prevent abusive or
unpredictable practices. The OCC remains committed to ensuring that
homeowners' escrow funds are protected against abusive practices. The
OCC has determined that sufficient statutory, regulatory, and
supervisory protections and practices already exist addressing this
concern and has accordingly decided that
[[Page 29346]]
additional regulatory requirements here would be redundant.\58\
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\58\ See, e.g., 15 U.S.C. 45(a) (prohibiting unfair or deceptive
acts or practices in or affecting commerce); see also 12 CFR 34.62
(requiring national banks to adopt and maintain written policies
that establish appropriate limits and standards for real estate
lending, including that they be consistent with safe and sound
banking practices); 12 CFR part 34 appendix A to subpart D
(requiring banks to establish loan administration procedures that
address escrow account administration).
---------------------------------------------------------------------------
IV. Administrative Law Matters
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \59\ states that no
agency may conduct or sponsor, nor is the respondent required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The OCC has
reviewed this final rule and determined that it does not create any new
or revise any existing collections of information under the PRA.
Accordingly, no PRA submissions to OMB will be made with respect to
this final rule.
---------------------------------------------------------------------------
\59\ 44 U.S.C. 3501-21.
---------------------------------------------------------------------------
Regulatory Flexibility Act
In general, the Regulatory Flexibility Act (RFA) \60\ requires an
agency, in connection with a final rule, to prepare a final regulatory
flexibility analysis describing the impact of the rule on small
entities (defined by the Small Business Administration for purposes of
the RFA to include commercial banks and savings institutions with total
assets of $850 million or less and trust companies with total assets of
$47 million or less). However, under section 605(b) of the RFA, this
analysis is not required if an agency certifies that the rule would not
have a significant economic impact on a substantial number of small
entities and publishes its certification and a short explanatory
statement in the Federal Register along with its rule.
---------------------------------------------------------------------------
\60\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------
The OCC currently supervises 991 institutions (national banks,
Federal savings associations, and branches or agencies of foreign
banks),\61\ of which approximately 602 are small entities under the
RFA.\62\
---------------------------------------------------------------------------
\61\ Based on data accessed using the OCC's Financial
Institutions Data Retrieval System on May 8, 2026.
\62\ The OCC bases its estimate of the number of small entities
on the Small Business Administration's size thresholds for
commercial banks and savings institutions, and trust companies,
which are $850 million and $47 million, respectively. Consistent
with the General Principles of Affiliation, 13 CFR 121.103(a), the
OCC counts the assets of affiliated financial institutions when
determining if it should classify an OCC-supervised institution as a
small entity. The OCC used average quarterly assets on December 31,
2025, to determine size because a ``financial institution's assets
are determined by averaging the assets reported on its four
quarterly financial statements for the preceding year.'' See
footnote 8 of the U.S. Small Business Administration's Table of Size
Standards.
---------------------------------------------------------------------------
In general, the OCC classifies the economic impact on an individual
small entity as significant if the total estimated impact in one year
is greater than 5 percent of the small entity's total annual salaries
and benefits or greater than 2.5 percent of the small entity's total
non-interest expense. Furthermore, the OCC considers 5 percent or more
of OCC-supervised small entities to be a substantial number, and at
present, 30 OCC-supervised small entities would constitute a
substantial number.
While the final rule will impact a substantial number of OCC-
supervised institutions, it imposes no new mandates, and thus no direct
costs, on affected OCC-supervised institutions. For these reasons, the
OCC certifies that the final rule will not have a significant economic
impact on a substantial number of small entities supervised by the OCC.
Accordingly, a final regulatory flexibility analysis is not required.
Unfunded Mandates Reform Act of 1995
The OCC has analyzed the final rule under the factors in the
Unfunded Mandates Reform Act of 1995 (UMRA).\63\ Under this analysis,
the OCC considered whether the final rule includes a Federal mandate
that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year ($193 million as adjusted annually for
inflation). Pursuant to section 202 of the UMRA,\64\ if a final rule
meets this UMRA threshold, the OCC prepares a written statement that
includes, among other things, a cost-benefit analysis of the rule.
---------------------------------------------------------------------------
\63\ 2 U.S.C. 1531 et seq.
\64\ 2 U.S.C. 1532.
---------------------------------------------------------------------------
This final rule imposes no new mandates, and thus no direct costs,
on affected OCC-supervised institutions. Therefore, the final rule will
not require additional expenditure of $193 million or more annually by
any State, local, or tribal governments, in the aggregate, or by the
private sector. Accordingly, the OCC has not prepared the written
statement described in section 202 of the UMRA.
Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA) of 1994,\65\ in determining the
effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other
requirements on insured depository institutions, the OCC must consider,
consistent with principles of safety and soundness and the public
interest, (1) any administrative burdens that the final rule would
place on depository institutions, including small depository
institutions and customers of depository institutions and (2) the
benefits of the final rule. This rulemaking will not impose any
reporting, disclosure, or other requirements on insured depository
institutions. Therefore, section 302(a) does not apply to this final
rule.
---------------------------------------------------------------------------
\65\ 12 U.S.C. 4802(a).
---------------------------------------------------------------------------
Executive Order 12866 (as Amended)
Executive Order 12866, titled ``Regulatory Planning and Review,''
as amended, requires the Office of Information and Regulatory Affairs
(OIRA), OMB, to determine whether a final rule is a ``significant
regulatory action'' prior to the disclosure of the final rule to the
public. If OIRA finds the final rule to be a ``significant regulatory
action,'' Executive Order 12866 requires the OCC to conduct a cost-
benefit analysis of the final rule and for OIRA to conduct a review of
the final rule prior to publication in the Federal Register. Executive
Order 12866 defines a ``significant regulatory action'' to mean a
regulatory action that is likely to (1) have an annual effect on the
economy of $100 million or more or adversely affect in a material way
the economy, a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, or tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866.
OIRA has determined that this final rule is not a significant
regulatory action under Executive Order 12866 and, therefore, is not
subject to review under Executive Order 12866.
Executive Order 14192
Executive Order 14192, titled ``Unleashing Prosperity Through
Deregulation,'' requires that an agency, unless prohibited by law,
identify at
[[Page 29347]]
least 10 existing regulations to be repealed when the agency publicly
proposes for notice and comment or otherwise promulgates a new
regulation with total costs greater than zero. Executive Order 14192
further requires that new incremental costs associated with new
regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations. The final rule is not an Executive Order 14192 regulatory
action because it is not significant under Executive Order 12866.
Further, the final rule is a deregulatory action under Executive Order
14192 because it would provide legal clarity (and therefore a potential
reduction in legal-related costs) on how banks may structure the
financing of their escrow operations and whether (and, if so, to what
extent) to offer any compensation to customers or assess any fee.
Congressional Review Act
For purposes of the Congressional Review Act, OMB makes a
determination as to whether a final rule constitutes a ``major''
rule.\66\ If a rule is deemed a ``major rule'' by the OMB, the
Congressional Review Act generally provides that the rule may not take
effect until at least 60 days following its publication.\67\
---------------------------------------------------------------------------
\66\ 5 U.S.C. 801 et seq.
\67\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------
The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of OIRA finds has resulted in or is likely to
result in (1) an annual effect on the economy of $100,000,000 or more;
(2) a major increase in costs or prices for consumers, individual
industries, Federal, State, or local government agencies or geographic
regions; or (3) significant adverse effects on competition, employment,
investment, productivity, innovation, or on the ability of United
States-based enterprises to compete with foreign-based enterprises in
domestic and export markets.\68\
---------------------------------------------------------------------------
\68\ 5 U.S.C. 804(2).
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OIRA has determined that this final rule is not a major rule. As
required by the Congressional Review Act, the OCC will submit the final
rule and other appropriate reports to Congress and the Government
Accountability Office for review.
List of Subjects
12 CFR Part 34
Accounting, Banks, banking, Consumer protection, Credit, Mortgages,
National banks, Reporting and recordkeeping requirements, Savings
associations, Truth-in-lending.
12 CFR Part 160
Consumer protection, Investments, Manufactured homes, Mortgages,
Reporting and recordkeeping requirements, Savings associations,
Securities, Usury.
Authority and Issuance
For the reasons set forth in the preamble, the OCC amends parts 34
and 160 of chapter I of title 12 of the Code of Federal Regulations as
follows:
PART 34--REAL ESTATE LENDING AND APPRAISALS
Subpart A--General
0
1. The authority citation for part 34 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463,
1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq.,
5412(b)(2)(B), and 15 U.S.C. 1639h.
0
2. Amend Sec. 34.2 by:
0
a. Redesignating paragraphs (b) and (c) as paragraphs (c) and (d),
respectively; and
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b. Adding a new paragraph (b).
The addition reads as follows:
Sec. 34.2 Definitions.
* * * * *
(b) Escrow account means an account established in connection with
a loan or extension of credit secured by a lien on interest in real
estate in which the borrower places funds for the purpose of assuring
payment of taxes, insurance premiums, or other charges with respect to
the property.
* * * * *
0
3. Amend Sec. 34.3 by adding paragraph (d) to read as follows:
Sec. 34.3 General rule.
* * * * *
(d) National banks may establish or maintain escrow accounts. The
terms and conditions of any such escrow account, including the
investment of escrowed funds, fees assessed for the provision of such
accounts, or whether and to what extent interest or other compensation
is calculated and paid to customers whose funds are placed in the
escrow account, are business decisions to be made by each national bank
in its discretion.
PART 160--LENDING AND INVESTMENT
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4. The authority citation for part 160 continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828,
3803, 3806, 5412(b)(2)(B); 42 U.S.C. 4106.
0
5. Amend Sec. 160.3 by adding the definition of ``Escrow account'' in
alphabetical order to read as follows:
Sec. 160.3 Definitions.
* * * * *
Escrow account means an account established in connection with a
real estate loan in which the borrower places funds for the purpose of
assuring payment of taxes, insurance premiums, or other charges with
respect to the property.
* * * * *
0
6. Amend Sec. 160.30 by:
0
a. Designating the introductory text as paragraph (a);
0
b. In newly designated paragraph (a), revising the table heading; and
0
c. Adding paragraph (b).
The revision and addition read as follows:
Sec. 160.30 General lending and investment powers of Federal savings
associations.
* * * * *
Table 1 to Paragraph (a)
* * * * *
(b) Federal savings associations may establish or maintain escrow
accounts. The terms and conditions of any such escrow account,
including the investment of escrowed funds, fees assessed for the
provision of such accounts, or whether and to what extent interest or
other compensation is calculated and paid to customers whose funds are
placed in the escrow account, are business decisions to be made by each
Federal savings association in its discretion.
Jonathan V. Gould,
Comptroller of the Currency.
[FR Doc. 2026-10036 Filed 5-18-26; 8:45 am]
BILLING CODE 4810-33-P
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</html>Indexed from Federal Register on May 19, 2026.
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