In our view, the National Bank Act preempts state laws relating to escrow accounts for both residential and nonresidential loans for national banks. At the same time, we believe that some national banks in Illinois do comply with the Illinois law relating to the termination of escrow accounts when a loan is paid down to 65% of the original loan amount, for competitive purposes.

For resources related to our guidance, please see:

• OCC Regulations, 12 CFR 34.4 (“A national bank may make real estate loans under 12 U.S.C. 371 and §34.4, without regard to state law limitations concerning: . . . (6) Escrow accounts, impound accounts, or similar accounts; . . .”)

• OCC Regulations, 12 CFR 7.4008(d) (“A national bank may make non-real estate loans without regard to state law limitations concerning: . . . (5) Escrow accounts, impound accounts, and similar accounts; . . .”)

• Illinois Mortgage Escrow Account Act, 765 ILCS 910/5 (“When the mortgage is reduced to 65% of its original amount by payments of the borrower, timely made according to the provisions of the loan agreement secured by the mortgage, and the borrower is otherwise not in default on the loan agreement, the mortgage lender must notify the borrower that he may terminate such escrow account or that he may elect to continue it until he requests a termination thereof, or until the mortgage is paid in full, whichever occurs first.”)