It is a special bank account held by the lender to collect monthly payments from the borrower to pay property taxes, mortgage insurance, and hazard insurance. These accounts also are impound or reserve accounts. Lenders like to set up escrow accounts to ensure the property taxes and insurance will be paid on time. They typically also collect a two-month cushion for taxes and insurance at the closing. A few states require the lender to pay interest on funds held in these accounts.
Posted in: FAQs for Buyers