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Escrow is when funds are held by a neutral third party. When it comes to mortgages, escrow is used in more than one way. First, escrow is used in relation the funds that are received from the lender that are disbursed by the title company/escrow agent, paying off all lien holders on the property, as specified by the mortgage lender's funding agent. A second use of the term escrow refers to monies that a lender collects from a borrower that are to be sent to a third party.  A lender can require a borrower to include homeowner's insurance and property taxes  in the mortgage payment. These monies are deposited into an escrow account, assuring that the insurance and taxes will be paid. Keeping these funds in escrow protects the lender's interests, which would be jeopardized if the insurance or taxes went unpaid.


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