When a home mortgage transaction includes a provision for escrow, as most do, the borrower is required to pay a fixed amount every month in addition to the payment covering interest and principal. This escrow payment is deposited into a fiduciary account from which the company servicing the loan makes payments for taxes and insurance as they come due. In previous articles on escrows, I gave convenience as the major advantage to the borrower, and loss of interest on the escrow account as the major cost. I also mentioned the possibility that the lender might accidentally fail to make the payment, which could result in a tax delinquency or a cancelled homeowner's insurance policy. These are serious matters, to be sure, but I viewed the risk as very small. More recently, however, I became awa...
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