Finance
A Minnesota real estate transaction requires an escrow account for property taxes and insurance as part of the mortgage. This escrow account is established to:
AAllow the lender to earn interest on the buyer's funds
BEnsure taxes and insurance are paid, protecting the lender's security interest✓ Correct
CProvide the buyer with a savings account for home expenses
DComply with a requirement unique to Minnesota state law
Explanation
Mortgage escrow accounts (also called impound accounts) are established by lenders to ensure property taxes and insurance premiums are paid on time. Unpaid taxes create liens senior to the mortgage, and lapsed insurance leaves the lender's collateral unprotected. The lender collects 1/12 of annual taxes and insurance with each mortgage payment. RESPA regulates escrow account administration.
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