Roughly 15 states require mortgage servicers to pay interest on the money sitting in your residential escrow account. Those states are Alaska, California, Connecticut, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont, and Wisconsin.1Office of the Comptroller of the Currency. Notice of Proposed Rulemaking – Real Estate Lending Escrow Accounts Everywhere else, the servicer keeps whatever the balance earns and owes you nothing. A federal rule proposed at the end of 2025 could also carve nationally chartered banks out of the state requirements, so the charter of the company that services your loan matters as much as your address.
These laws generally apply only to owner-occupied residential property, and the scope varies. New York’s statute covers one-to-six family homes occupied by the owner; California’s covers one-to-four family residences.2New York State Senate. New York General Obligations Law 5-601 – Interest on Deposits in Escrow With Mortgage Investing Institutions Federal law caps how much cushion a servicer can hold but does not require any interest on the balance, which is why state law is the whole ballgame here.3eCFR. 12 CFR 1024.17 – Escrow Accounts
What Rate You Should Expect
States take one of two approaches. Some set a fixed statutory minimum; others tie the rate to a published financial index that moves with the market.
The clearest fixed and index-linked rates on the list:
- New York: at least 2% per year, calculated on the average balance for each quarterly period.2New York State Senate. New York General Obligations Law 5-601 – Interest on Deposits in Escrow With Mortgage Investing Institutions
- California: at least 2% simple interest per year on funds held in impound accounts, which is the state’s term for escrow.4LegiScan. California Assembly Bill 493 (2025-2026 Session)
- Minnesota: at least 3% per year, the highest fixed floor on the list.5Minnesota Office of the Revisor of Statutes. Minnesota Statutes Section 47.20
- Maryland: the one-year Treasury constant maturity yield published by the Federal Reserve as of the first business day of the calendar year.6Maryland General Assembly. Maryland Commercial Law Code Section 12-109 – Interest on Escrow Accounts; Statement of Balance
- New Hampshire: the FDIC’s published National Deposit Rate for Savings Accounts from January, applied in six-month periods beginning each April.7New Hampshire General Court. New Hampshire Revised Statutes Section 397-A:9 – Escrow Accounts
The other states on the list set their requirements through statute as well, often using formulas tied to local banking regulations or indices. If your property is in Alaska, Connecticut, Iowa, Maine, Massachusetts, Oregon, Rhode Island, Utah, Vermont, or Wisconsin, check your state’s banking code or ask your state’s financial regulator for the current rate.
Payment mechanics are consistent across most of these states. Interest is generally calculated on the average daily balance and credited to the escrow account once a year, which effectively lowers your required monthly escrow payment the following year rather than arriving as a separate check. Maryland’s statute spells this annual credit out expressly.6Maryland General Assembly. Maryland Commercial Law Code Section 12-109 – Interest on Escrow Accounts; Statement of Balance California credits interest annually or when the account is closed, whichever comes first.4LegiScan. California Assembly Bill 493 (2025-2026 Session) When you pay off the loan, any accrued interest should be included in the final escrow refund.
The dollars are modest for a single borrower. On a $5,000 average escrow balance at 2%, that’s about $100 a year. Real money over the life of a mortgage, but not enough to reshape your budget.
Why a National-Bank Servicer May Not Have to Pay
Being in a state with an escrow interest law doesn’t guarantee you’ll actually receive it. Nationally chartered banks have argued for years that federal banking law overrides state requirements, and the fight over that question is live.
In Cantero v. Bank of America (2024), the U.S. Supreme Court took up New York’s escrow interest law but did not decide whether federal law preempted it. The Court vacated the lower court’s ruling and instructed judges to apply a fact-specific test: a state law is preempted only if it “prevents or significantly interferes” with a national bank’s exercise of its federal powers.8Supreme Court of the United States. Cantero v. Bank of America, N.A. (22-529)
While that analysis works its way through the courts, the Office of the Comptroller of the Currency moved to settle the question by rule. In December 2025 the OCC proposed to declare that federal law preempts state escrow interest requirements for national banks and federal savings associations in 12 of the 15 states: California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Utah, Vermont, and Wisconsin. Comments were due January 29, 2026.9Federal Register. Preemption Determination: State Interest-on-Escrow Laws
If the OCC finalizes the rule, borrowers in those 12 states whose loans are serviced by nationally chartered banks would lose the state-mandated interest. State-chartered banks and credit unions would still be bound by state law.
How to Check Your Servicer’s Charter
Look up your servicer on the OCC’s Financial Institution Search tool.10Office of the Comptroller of the Currency. Financial Institution Search If it appears there, it’s an OCC-regulated national bank or federal savings association, and the proposed preemption would apply to it if finalized. If it isn’t listed, it’s likely state-chartered and stays subject to your state’s law. Bank of America, JPMorgan Chase, and Wells Fargo are all nationally chartered.
If Your State Doesn’t Require Interest
In the majority of states, your servicer pools escrow balances across thousands of borrowers, earns interest on the float, and keeps it. If that bothers you and you have enough equity, ask about waiving escrow altogether.
Fannie Mae’s servicing guidelines require servicers to deny waiver requests when the loan balance is 80% or more of the original appraised value.11Fannie Mae. Administering an Escrow Account and Paying Expenses Once you’re below that threshold, a waiver becomes possible. Some lenders charge a one-time fee, and you take on responsibility for paying property taxes and insurance yourself. Miss a tax bill or let coverage lapse and the consequences (penalties, a tax lien, force-placed insurance at a steep markup) will dwarf the interest you were trying to capture. If you go this route, park the tax and insurance money each month in a dedicated high-yield savings account.
If You’re Owed Interest and Not Getting It
Before you complain, confirm two things. First, that your servicer is actually subject to your state’s law given the preemption question above. Second, check whether the interest was credited to the escrow balance itself rather than paid out separately, since most state statutes require a credit to the account.
If a credit is genuinely missing, the CFPB recommends sending a written notice of error to your servicer’s designated dispute address, which appears on your monthly mortgage statement.12Consumer Financial Protection Bureau. Your Mortgage Servicer Must Comply With Federal Rules State that your property qualifies under your state’s escrow interest statute, identify the account, and request a retroactive credit for any unpaid interest. If the notice goes unanswered or the servicer refuses to comply, file a complaint with the CFPB or your state’s financial regulator.
A Note on Taxes
Escrow interest is ordinary taxable income. If your servicer pays you $10 or more in a year, it will report the amount to the IRS on Form 1099-INT and send you a copy.13Internal Revenue Service. About Form 1099-INT, Interest Income Under $10 you may not get a form, but the interest is still reportable.