BPI, Trades File Brief Supporting BofA Argument that National Law Preempts N.Y. Mortgage Escrow Rate Requirements

BPI and other financial trades recently filed an amici curiae brief supporting Bank of America’s appeal to the Second Circuit in Hymes v. Bank of America.  The specific question at issue is whether the National Bank Act preempts a New York state law setting minimum interest rates that lenders must pay on borrower mortgage escrow accounts.  Bank of America is seeking reversal of the District Court judgment that held that the state law is not preempted by the NBA notwithstanding an OCC regulation on point that states that national banks should not be subject to state interest-on-escrow account laws.  BPI’s brief notes that the lower court’s precedent-defying ruling exposes national banks to uneven state mortgage lending requirements and interferes with banks’ ability to do business in a safe, sound manner.   The brief also points out that the New York Department of Financial Services acknowledged that national banks can establish escrow accounts without interest-payment restrictions under the law aligning with the OCC’s stance. 
The OCC also filed its own brief supporting Bank of America, arguing that the District Court erred in its interpretation that the state law was not superseded by the NBA.  The OCC’s brief weighs in on the degree of deference that courts should give to its preemption regulation thereby defending the OCC’s own rule in the case.  The OCC “has reasonably concluded that state interest-on-escrow laws significantly interfere with national banks’ exercise of their power to establish the terms and conditions of mortgage loans, including the terms on which they will establish and service escrow accounts,” the agency wrote in its brief.

To access the brief, please click the “Download” button below.