Escrow Deposits

Definition

Money a neutral holder keeps on behalf of the parties until set conditions are met, such as a closing, or, in mortgage lending, funds a servicer collects to pay the property's taxes and insurance. For federally related mortgage loans, federal law limits how much a lender may require a borrower to deposit into an escrow account at settlement and each month^[1], and requires an escrow account for taxes and insurance on certain first-lien consumer loans on a principal dwelling^[2].

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

1. Real Estate Settlement Procedures Act of 1974, Pub. L. 93-533, § 10, 88 Stat. 1724 (12 U.S.C. § 2609). Limits advance deposits a lender may require into mortgage escrow accounts (RESPA § 10, 12 U.S.C. § 2609). Official text: govinfo.gov, U.S. Government Publishing Office.
2. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, § 1461, 124 Stat. 2178 (Truth in Lending Act § 129D, 15 U.S.C. § 1639d). Requires escrow or impound accounts for certain first-lien consumer mortgages (15 U.S.C. § 1639d). Official text: govinfo.gov, U.S. Government Publishing Office.