Are banks allowed to borrow against escrow accounts without having to pay a dime to the escrow account holder?
2006-11-25 09:17:32 · 3 answers · asked by bow_wow_wow_yippieo_yippiea 3 in Business & Finance ➔ Renting & Real Estate
And no interest is allowed to be paid to the money in the escrow account, so the bank gets an interest free loan.
2006-11-25 09:25:42 · answer #1 · answered by Anonymous · 0⤊ 0⤋
A bank would be the escrow account holder. The money has to be set aside for a purpose, such as paying real estate taxes, and cannot be used for other purposes.
For accounting purposes, it's counted as an asset and banks can borrow against assets, but not pledging any specific account as collateral.
2006-11-25 09:22:24 · answer #2 · answered by regerugged 7 · 0⤊ 0⤋
Yes, escrow accounts are heavily regulated. They are usually called IOLTA or IOLA accounts. All 50 states have these accounts and strict regulations concerning these accounts in place.
IOLTA means interest on lawyer trust accounts, and IOLA means interest on lawyer account.
Theses accounts earn interest, and the interest is turned over to various state funds. The exact fund varies by state. If you google the name of your state and IOLTA, you will see where the money goes.
2006-11-26 05:01:39 · answer #3 · answered by BoomChikkaBoom 6 · 0⤊ 0⤋