What does Section 10 of RESPA limit?

Section 10 of the Real Estate Settlement Procedures Act (RESPA) specifically addresses the limits on escrow accounts, also known as impound accounts. This section regulates how much money lenders can require from borrowers to be held in escrow for property taxes and insurance.

Essentially, it sets a cap on the amount that can be collected for these escrow accounts, typically preventing lenders from demanding more than two months' worth of escrow payments in advance. The intention of this regulation is to protect consumers from having their funds unnecessarily tied up, thereby promoting transparency and fairness in the management of escrow accounts during the homebuying process.

By limiting the amount held in escrow, the act ensures that borrowers are not overburdened with excessive upfront payments, which helps maintain affordability and financial stability for homeowners. Understanding this aspect of RESPA helps clarify the protections in place for consumers when it comes to the handling of their funds related to property ownership.