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☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
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Inspiration Quote for the Day
“Beware of little expenses. A small leak will sink a great ship.”
— Benjamin Franklin
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The Morning Ritual
Your Lender Is Holding Thousands of Your Dollars. A New Federal Rule Made the Interest Optional.
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Once a year your loan servicer mails you an escrow analysis. Two pages, windowed envelope, nothing urgent on the outside. Mine sat on the kitchen counter under a stack of grocery coupons for most of March. I opened it because I ran out of counter.
That envelope tracks a real pile of money. Property taxes and insurance, collected monthly, held by somebody else until the bill comes due. In `14` states the law says they owe you interest on it. On Tuesday, August 11, ten state attorneys general went to federal court to keep it that way.
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In One Sip
► The Office of the Comptroller of the Currency issued two rules in May. They took effect June 18. National banks now decide for themselves whether to pay interest on your escrow, whatever your state requires.
► `14` states and territories require that interest. Rhode Island sets it at the same rate as a regular savings account. Maryland ties it to the one-year Treasury.
► Ten state attorneys general sued Tuesday, August 11, in federal court in Oregon. They argue the agency went past its authority.
► About `80%` of homeowners with a loan have one of these accounts. The average property tax bill runs `$4,271` a year. Homeowners insurance is projected to reach `$3,057` by year end.
► Here is the part nobody printed in a headline. The average savings account pays `0.63%`. The one-year Treasury pays `3.97%`. On a `$5,000` escrow balance that is `$31.50` a year against `$200`. Same money, same account, different rulebook.
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Why It Matters for Your Money
Add the two bills. Taxes at `$4,271` plus insurance at `$3,057` is `$7,328` a year. You pay it in twelve pieces, about `$611` a month. The bills go out once or twice. So the account carries a balance almost all year. That balance is yours.
Nobody is going to write you about this. No letter, no call, no line on your statement saying the rule changed. If your servicer used to send a 1099-INT every January, you find out when one does not arrive.
State-chartered banks are not covered by the new rules. But several states have parity laws on the books. Those let a state bank do whatever a national bank can do. That is how a federal rule reaches a local lender without anybody voting on it.
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The Wealth Angle
I think `$200` is the least interesting number in this story. Call it seventeen dollars a month. Nobody reorganizes a budget around that.
What matters is the shape of it. Money you earned, sitting in an account with your name on the paperwork. You cannot move it, invest it, or negotiate its rate. Financial people have a word for cash that sits still while somebody else decides what it earns. They call it float. Insurance companies were built on it. So were banks.
Multiply one household by tens of millions of accounts and the float stops being pocket change. That is why an agency wrote two rules about it in May. It is why ten attorneys general drove to a courthouse in Oregon in August. Both sides can do that multiplication. The only person who has never seen the number is the one whose money it is.
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☕ Key Insight:
You cannot shop this account or negotiate its rate. All you can do is know whether you are being paid on it. Until June 18 that was law in `14` states, and now it is a decision somebody else makes.
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Coffee Break Move
If you are comfortable: Go find that escrow analysis. It is in a drawer, or in your servicer’s portal under statements. Look for the line that says interest paid. Then check whether your state is one of the `14`. If you have been earning it, set a January reminder and watch for the 1099-INT.
If you are stretched: Look at the same statement for a different line, the surplus. Your servicer has to run this analysis every year. When the account is overfunded past a set threshold, the rules say the extra comes back to you. That is not `$17` a month. On an over-collected account it can be a few hundred dollars, waiting for somebody to ask.
My envelope went back on the counter after I read it. Wrong instinct. Those two pages describe an account you fund every month and have never once been asked about. Go dig yours out before the coffee gets cold.
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