If a lender fails to make timely payments from an escrow account, what can the borrower claim as liability?

The correct response indicates that if a lender neglects to make timely payments from an escrow account, the borrower can claim damages resulting from this failure, in addition to a stipulated penalty of $500.

In the context of mortgage loans, an escrow account is often established to ensure the timely payment of property taxes and insurance premiums. When a lender does not make these payments as agreed upon, the borrower may face negative consequences such as late fees or even the risk of losing their insurance coverage or facing tax liens. Therefore, the ability to claim damages reflects the real harm that a borrower could experience due to the lender's negligence. The inclusion of a specific penalty, such as $500, underscores an additional enforcement mechanism that aims to protect borrowers from lenders' inaction, reinforcing the seriousness of timely payment responsibilities.

Other options may imply limited or no recourse against the lender, which does not adequately address the potential negative impact on the borrower resulting from the lender’s failures. This establishes a clear liability framework to ensure compliance and accountability from lenders toward their borrowers for managing escrow accounts responsibly.