California Escrow Law Survives Latest Brush With Ninth Circuit

A California law requiring banks to pay interest on mortgage escrow accounts remains in effect after a federal appeals court declined a full-court review of a panel decision holding that the state’s law applies to national banks.

Flagstar Bank had asked the full US Court of Appeals for the Ninth Circuit to take a second look at an October 2025 decision holding that California’s law isn’t preempted by the National Bank Act. Only a state law that “significantly interferes” with a national bank’s operations can be preempted, a split Ninth Circuit panel determined.

Judges Jay S. Bybee and Susan ...