Mortgage Owner’s Claim Not Preempted and Allowed to Proceed to Obtain Statutory Interest

On September 30, 2019, the Honorable Roslynn R. Mauskopf, United States District Judge for the Eastern District of New York, allowed home mortgage owners to proceed with their claims that Bank of America, N.A. failed to comply with a New York state law requiring the payment of interest on home mortgage escrow accounts.  The bank had argued that compliance with the New York State law was unnecessary due to the National Bank Act preempting state regulation.  In a thorough and nuanced decision, Judge Mauskopf concluded:

At bottom, this case is about how to reconcile two acts of Congress that, to some extent, speak past each other. Section 1639d(g)(3) represents Congress’s judgment that mortgage lenders can comply with reasonable state escrow interest laws. The [National Bank Act (“NBA”), however, represents Congress’s judgment that national banks’ power to engage in mortgage lending and offer escrow services is a “grant[] of authority not normally limited by, but rather ordinarily preempting, contrary state law.” Id. at 32. If Congress had the NBA in mind when it enacted section 1639d [of Dodd Frank], it is not obvious. Nevertheless, the two acts can be read harmoniously, and they must be so read if each is to be given full effect. As the Supreme Court has explained, “[i]n the final analysis, there can be no one crystal clear distinctly marked formula. Our primary function is to determine whether, under the circumstances of this particular case, [the state’s] law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67 (1941) (emphasis added). Here, in view of the purposes and objectives of Congress expressed in both the NBA and Dodd–Frank, the Court concludes that GOL § 5-601 is not – and has never been – such obstacle. Bank of America’s motions to dismiss on this ground are denied.

Following this decision, Wolf Haldenstein has continued to seek recovery of the 2% per annum interest owed on the escrow accounts for mortgage owners under New York’s State’s GOL § 5-601.  Wolf Haldenstein represents the mortgage owners in Hymes v. Bank of America, N.A., 18-cv-2352 (E.D.N.Y.)

Read the September 30, 2019 Order here.