finance
escrow impound account
An escrow (impound) account is an account a mortgage lender or servicer sets up to collect part of the borrower's monthly payment for property taxes and hazard insurance, and sometimes mortgage insurance, then pay those bills when due. It protects the lender's security interest. At closing, the borrower usually funds an initial deposit. Federal RESPA rules limit how much cushion the servicer may hold and require annual account statements.
- Exam tip
- The "T" and "I" in PITI are what the escrow account covers. RESPA generally limits the cushion to two months of escrow payments.
- Example
- Annual taxes are $4,800 and insurance is $1,200, so the lender adds $500 a month to the borrower's payment for the escrow account.
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Last verified: 2026-10-23