Escrow and its Significance

Escrow is a procedure in which a disinterested neutral third party holds the legal documents and funds on behalf of a seller or a buyer. Also, it is an account created by the lender to pay the property taxes and insurance premiums or to cover repairs.

Escrow Account is established at the time of closing of a mortgage loan. An escrow account is set up by the lender. It is set for future payments as they become due of recurring items relating to the mortgaged property. The borrower makes periodic payments, usually monthly, for-

• Real estate taxes.
  
• Mortgage insurance premiums.
  
• Hazard insurance.
  
• Assessments.
  
• Completion of repairs or improvements to a property that cannot be completed prior to closing.
  

Escrow Analysis is a periodic examination of an escrow account to make sure if current monthly deposits balances will provide sufficient funds to pay-

1. Property taxes.
   
2. Hazard insurance.
   
3. Other bills when they come due.

The method and format of the analysis is prescribed by federal regulation.

Escrow Payment is the part of a borrower's monthly mortgage payment that is held by the loan servicing company to pay for-

• Property taxes.
  
• Hazard insurance.
  
• Mortgage insurance.
  
• Lease payments.
  
• Other items as they become due.
  

Escrow Disbursement is a use of the escrow funds to pay-

• Real estate taxes.
  
• Hazard insurance.
  
• Mortgage insurance.
  
• Other property expenses, as they come due.

Related Article

• Escrow Collection - Payment of tax and insurance
• Impound Account

Related Forums Discussion

• Cancel escrow account
• How is an escrow on a mortgage set up?

Related References:

• Common FAQ's on Escrow Account