Have you had a home loan with Flagstar Bank?

Flagstar Bank may have withheld escrow interest from you, in violation of state law. You may be entitled to interest on the amounts held in your escrow account since 2011. Fill out the form to find out your rights »

Case Status
Class Certified
Practice Areas
U.S. District Court for the Northern District of California
Case Number
Flagstar Bank
File Date

Hagens Berman has filed a class-action lawsuit against Flagstar Bank for its policy and practice of failing to pay interest on money it holds in mortgage escrow accounts for borrowers, robbing homeowners of their rightful funds in violation of California and other state law.


The lawsuit states that Flagstar's practices are in direct violation of California Civil Code § 2954.8(a), which dictates that Flagstar and other financial institutions like it "shall pay interest on the amount so held to the borrower" when it makes loans on properties and receives money in advance for payment of taxes or assessments on the property. That law states: "The interest on such amounts shall be at the rate of at least 2 percent simple interest per annum. Such interest shall be credited to the borrower’s account annually or upon termination of such account, whichever is earlier." Other states, including New York have similar laws that Flagstar may have flouted.

The suit's plaintiff, who lives in Contra Costa County, secured a home loan. Their deed of trust provides for the lender to establish an escrow account for the payment of property taxes, insurance premiums and other potential charges related to the property.

At some point prior to 2012 Flagstar took over the servicing of the homeowners' mortgage account. During the period that it serviced the plaintiffs’ mortgage, Flagstar created an escrow account (pursuant to the deed of trust) and held their money in that escrow account, but did not pay them for interest on those funds as required by Section 2954.8(a). On July 13, 2018, the homeowners gave written notice and demanded that Flagstar correct this issue.

Under Section 2954.8(a) and under the deed of trust, the loan servicer was required to pay interest on the escrow account funds.


Our firm believes that Flagstar has been purposefully refusing to pay interest on escrow accounts to enrich itself at its customers’ expense. Our firm's investigation has found Flagstar's practices violate California laws including the Unfair Competition Law, and constitutes a breach of contract. You have a right to what Flagstar has intentionally withheld, and our firm intends to fight for payback.


Hagens Berman is one of the most successful litigation law firms in the U.S. and has achieved more than $320 billion in settlements for consumers in lawsuits against big banks, mortgage companies and others. Our firm has proudly stood up against Bank of America, Wells Fargo, First American Title, Countrywide and others in the fight for homeowners' rights. Your claim will be handled by attorneys experienced in consumer law.


There is no cost or fee whatsoever involved in joining this case. In the event Hagens Berman or any other firm obtains a settlement that provides benefits to class members, the court will decide a reasonable fee to be awarded to the class' legal team. In no case will any class member ever be asked to pay any out-of-pocket sum.


Status Update

Flagstar's petition for rehearing has been denied by the 9th Circuit. But Flagstar indicates that it will seek review from the US Supreme Court. This will further delay the final disposition of the case and distribution of the Class judgment funds to Class members. Assuming the US Supreme Court denies review, Class Counsel hopes to complete the case before the end of this year. 

Status Update

The Ninth Circuit Court of Appeals denied most of Flagstar's appeal on May 17, 2022. The Memorandum of disposition is posted to the Court Documents section of this website. 

However, Flagstar has announced that it plans to ask for a rehearing, which will further delay the final resolution of this case, including the disbursement of the judgment to the Class. 

Class Counsel now estimates that the final disposition of the court of appeals will occur approximately July 2022, that they will file their motion for attorney fees approximately August 2022 (to be posted in the Court Document section of this website when it is filed), and that the final distribution of the Class judgment should occur approximately October 2022. These estimates could change based on unexpected activity by the appellate courts. 

Also please note that, per the Memorandum, the Court of Appeals changed the dates of the class period to make the Class slightly smaller. Whereas the class period reached back to April 18, 2014, previously, it now reaches back to August 22, 2014.  This results in a reduction of the Class judgment from $9,262,769.24 to $9,180,580.15 (less than 1%).

Status Update

The Court has entered judgment in the amount of $9,262,769.24. The entry of the judgment also triggers an injunctive order requiring Flagstar to pay interest-on-escrow to sub-class members (current customers) on an ongoing basis.

However, Flagstar has appealed the judgment to the Ninth Circuit Court of Appeals (where it is case number 21-15667). Resolution of the appeal will likely take 18-24 months or longer.

Status Update

The Court's order of December 10, 2020 has been amended by stipulation so that the judgment shall be entered on or about March 1, 2021.

As amended, the money judgment in favor of the Class against Flagstar shall cover the period through December 31, 2020 and interest-on-escrow shall accrue to sub-class members January 1, 2021 and be payable directly to sub-class members effective January 1, 2022, or when a sub-class member's relationship with Flagstar terminates, whichever is sooner. It remains the case that, if Flagstar appeals the judgment, it could take years for this case to resolve. In the event of a proposed settlement, class members will be sent a notice.

Status Update

The Court granted summary judgment in favor of the Class on December 10, 2020. The order provides for a money judgment in favor of the Class against Flagstar covering the period through December 31, 2019, and requires Flagstar to begin paying interest-on-escrow to all sub-class members effective January 1, 2020.  If Flagstar appeals the judgment, it could take years for this case to resolve. In the event of a proposed settlement, class members will be sent a notice. 

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