Escrow account

Many monthly mortgage payments are larger than principal and interest alone. Part of the extra amount may go into an escrow account. The servicer then pays the tax collector and the insurer when those bills are due. Not every mortgage has this account. If it does not, the owner usually pays those bills directly. Real-estate contracts also use “in escrow” for earnest money or a closing agent’s holding of funds. The alias “Escrow” still points here, while the prose keeps saying mortgage escrow account or servicing escrow.

Freddie Mac’s Guide term for a custodial account used in servicing is a narrower GSE operations concept. It does not redefine this consumer account.

Payment-shortage notices and servicer complaints often start from this account. If every “escrow” were one thing, closing and servicing conversations would collapse.

Each month, part of Reese’s payment goes to an escrow account. In December the servicer pays the county tax bill from that account. Separately, Reese’s purchase contract once held earnest money with a title company. Only the first arrangement is this glossary concept.

• Closing Disclosure
• Mortgage servicer
• Private mortgage insurance

The “Escrow” alias on this page means a mortgage servicing escrow account. It does not cover every real-estate use of the word escrow.