Can lenders require borrowers to have their escrows reviewed for costs?

The correct answer indicates that lenders are required to review and verify escrow accounts annually. This practice is important for maintaining compliance with regulations set forth in the Real Estate Settlement Procedures Act (RESPA). RESPA mandates that lenders must accurately assess and manage escrow accounts to ensure that they reflect the actual costs related to taxes and insurance for the property.

By conducting an annual review, lenders can make necessary adjustments to the escrow amounts collected from borrowers, ensuring that the funds held are adequate to cover anticipated costs without being excessive. This not only protects the lender’s interests but also ensures that borrowers are not overpaying into their escrow accounts.

While escalations in property taxes could necessitate reviews, it is not the only condition under which a review is required. Regular annual assessments help in addressing any fluctuations in costs and safeguarding the financial well-being of both lenders and borrowers. This practice underscores the importance of transparency and accuracy in mortgage lending operations.