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Profile picture for pawg

Are escrow accounts generally required or optional?

I have a mortgage with no escrow account.  I was asked if I wanted one prior to closing and chose not to use one.  Most of my other mortgages have had escrow accounts.  Based on past experience I generally prefer to not have an escrow account and pay the insurance and property tax myself rather than trust an unreliable mortgage servicer not to accumulate penalties with the county for late payments.  Is there a general industry wide position with regards to the need for an excrow account or is it lender specific?

  • January 02 2009 - Washington
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Answers (12)

Profile picture for BeckyBrown5
I assume you have insurance on your house. This would also be paid out of the escrow account, or always has been in my experience.
  • January 17 2012
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Profile picture for BeachBum34
I do understand why they may charge this fee but the fact that I am tax exempt means there is nothing to actually escrow.  I am very greatful for this benefit but it seems like I am  being penalized for being tax exempt.  This benefit is granted by the state of FL.  There is no work involved on part of the bank, i.e. paying my tax bill every year from the escrowed funds.  This benefit is ongoing and does not require annual renewal.  Thank you everyone for the input.
  • April 17 2009
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While it's by no means are rule across the board, many lenders have done away with allowing borrowers to NOT escrow, regardless of the LTV, so if you run into a lender that doesn't even give you the option, don't be too surprised.  By requiring escrows, lenders remove one part of the equation (taxes) that may possibly get in their way of making a loan profitable to them.
  • April 16 2009
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Profile picture for BeachBum34
No, a conventional 20 yr fixed refinance.
  • April 16 2009
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Are you doing a VA loan?
  • April 16 2009
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Profile picture for BeachBum34
I live in FLorida and I am a 100% disabled veteran.  As a result of being 100% service connected I do not pay property taxes.  I am refinancing now and the lender wants to charge me .25% point due to waiving my escrow.  The thing is I am not waiving it....I am tax exempt.  They still want to charge me the ,25%.  Is this legal?  Ethical?  Discriminatory?
  • April 16 2009
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I agree with my peers. It depends on your state, lender, loan program and loan to value. In Oregon impounds are not required, but most lenders charge if you don't have them as a part of your payment. I do have several Banks who do not require it unless the LTV is over 80%.
  • January 04 2009
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Profile picture for pawg
Thanks for the feedback, it was very informative.
  • January 03 2009
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You are going to be charged a fee (usually higher points) if you choose to have your taxes and insurance paid by yourself. The lender views this as a risk. The exact pts charged will vary by state. I believe Texas is .5 pts and other states are only .125 pts. In most states the charge is .25 pts. I guess it would depend on your loan amount to determine whether you think this is worth it or not. A 300k loan in Texas would cost you $1500

  • January 03 2009
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pawg, to my knowledge all lenders require an impound account if your loan to value is over 80% with the exception of CA where it is 89.99%. The 1/4 percent waiver fee applies in all states except CA, IL, OR, WI and MN.
  • January 03 2009
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I do not lend in nationwide so I am not familiar with state specific guides but if you are doing a Fannie/Freddie loan, you have to escrow if loan to value is over 80%. If under 80%, then you have to pay the lender 1/4 point to waive escrow. I have 2 portfolio lenders who do not escrow at all.  
  • January 03 2009
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Profile picture for Planners
States have specific laws about this. There is no general rule, other than lenders will typically pay about a quarter point more for a loan with an escrow account than they will for one without.

Tom O
  • January 02 2009
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