What is Escrow?

Escrow in Relation to HUD 232 Loans

In the process of escrow, assets (money, funds, and securities) are held by a third party on behalf of two other parties prior to the completion of a transaction. When it comes to properties purchased with HUD 232 and 232/223(f) loans, escrow is used both in the initial closing, and funds are also be placed in escrow on a regular basis to contribute to a property’s required replacement reserves, as well as to pay property taxes and MIP. Typically, HUD 232 properties require a replacement reserve of at least $1,000 per unit, at least for the first 15 years of property operation.

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