Real Estate Lending Escrow Accounts

DEPARTMENT OF THE TREASURY <SUBAGY>Office of the Comptroller of the Currency</SUBAGY> <CFR>12 CFR Parts 34 and 160</CFR> <DEPDOC>[Docket ID OCC-2025-0736]</DEPDOC> <RIN>RIN 1557-AF46</RIN> <SUBJECT>Real Estate Lending Escrow Accounts</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of the Comptroller of the Currency (OCC), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The OCC is issuing a notice of proposed rulemaking to codify longstanding 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 judgment 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. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before January 29, 2026. </DATES> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are encouraged to submit comments through the Federal eRulemaking Portal. Please use the title “Real Estate Lending Escrow Accounts” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • <E T="03">Federal eRulemaking Portal—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter Docket ID “OCC-2025-0736” in the Search Box and click “Search.” Public comments can be submitted via the “Comment” box below the displayed document information or by clicking on the document title and then clicking the “Comment” box on the top-left side of the screen. For help with submitting effective comments, please click on “Commenter's Checklist.” For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, or email <E T="03">regulationshelpdesk@gsa.gov.</E> • <E T="03">Mail:</E> Chief Counsel's Office, Attention: Comment Processing, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219. • <E T="03">Hand Delivery/Courier:</E> 400 7th Street SW, Suite 3E-218, Washington, DC 20219. <E T="03">Instructions:</E> You must include “OCC” as the agency name and Docket ID “OCC-2025-0736” in your comment. In general, the OCC will enter all comments received into the docket and publish the comments on the <E T="03">Regulations.gov</E> website without change, including any business or personal information provided such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this action by the following method: • <E T="03">Viewing Comments Electronically—Regulations.gov:</E> Go to <E T="03">https://regulations.gov/.</E> Enter Docket ID “OCC-2025-0736” in the Search Box and click “Search.” Click on the “Dockets” tab and then the document's title. After clicking the document's title, click the “Browse All Comments” tab. Comments can be viewed and filtered by clicking on the “Sort By” drop-down on the right side of the screen or the “Refine Comments Results” options on the left side of the screen. Supporting materials can be viewed by clicking on the “Browse Documents” tab. Click on the “Sort By” drop-down on the right side of the screen or the “Refine Results” options on the left side of the screen checking the “Supporting & Related Material” checkbox. For assistance with the <E T="03">Regulations.gov</E> site, please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, or email <E T="03">regulationshelpdesk@gsa.gov.</E> The docket may be viewed after the close of the comment period in the same manner as during the comment period. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> 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. </FURINF> <SUPLINF> <HD SOURCE="HED"> SUPPLEMENTARY INFORMATION: </HD> <HD SOURCE="HD1">I. Introduction</HD> 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 U.S. In order for banks to engage in effective and efficient real estate lending, they 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 can be subject to acts of nature that 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. <SU>1</SU> <FTREF/> Since the late 1930s, escrow accounts have become a crucial risk mitigation tool that supports safe and sound mortgage lending. Specifically, 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. <SU>2</SU> <FTREF/> <FTNT> <SU>1</SU>   <E T="03">See</E> “Mortgage Banking,” 15, 53-54 (2014) (“Mortgage Banking Handbook”). </FTNT> <FTNT> <SU>2</SU>   <E T="03">See id.;</E> OCC, <E T="03">Comptroller's Handbook,</E> “Residential Real Estate,” 25-27 (2015). </FTNT> 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. Should a borrower fail to pay property taxes, for example, a tax lien is, in general, superior to the lender's mortgage lien. <SU>3</SU> <FTREF/> If a municipality forced 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, should a borrower fail 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. <FTNT> <SU>3</SU>   <E T="03">See</E> Mortgage Banking Handbook at 99. <E T="03">See also</E> Gen. Acct. Off., B-114860, <E T="03">Study of the Feasibility of Escrow Accounts on Residential Mortgages Becoming Interest Bearing,</E> 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. <E T="03">Id.</E> at 20. </FTNT> From the borrower's perspective, escrow accounts can help the borrower budget for tax, insurance, and other payments. <SU>4</SU> <FTREF/> 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. <FTNT> <SU>4</SU>  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 T="03">e.g.,</E> 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. </FTNT> In light of those benefits to both lenders and borrowers, escrow accounts are widely used. For example, approximately 80% of U.S. residential real estate mortgages use an escrow account. <SU>5</SU> <FTREF/> 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. <SU>6</SU> <FTREF/> 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, banks may recoup some of these costs through investing escrow funds, typically in short term assets. Banks may also choose to pay interest on such accounts or otherwise offer some form of related compensation to mortgage borrowers. These decisions may be informed by the bank's ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 57k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━