Is There a Substitute For Mortgage Escrows?

April 5, 1999

"Your recent article on avoiding escrows did not consider the problem of the owner-seller who takes back a mortgage and does not want the responsibility of paying taxes and insurance. Yet the individual lender still needs to know that they are paid…"

Unlike institutional lenders, who prefer to assume responsibility for paying taxes and insurance, individual lenders usually want to avoid it. Yet they also need to know that the payments are being made. The writer of the above letter took back a mortgage and protected himself by requiring the borrower to provide photocopies of tax and insurance receipts. When the co-borrower who handled the family finances died unexpectedly, the seller knew quickly that the taxes had not been paid and could take prompt action to prevent sale of the property for non-payment of taxes.

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