What condition allows a borrower to discontinue the use of an escrow account after five years?

The correct response indicates that a borrower can discontinue the use of an escrow account after five years if they have not been delinquent for more than 60 days in that time period. This condition is significant because it reflects the borrower's overall reliability and financial responsibility in managing their mortgage payment obligations. Lenders typically require borrowers to maintain an escrow account for property taxes and insurance to ensure these essential payments are made on time and to protect both the lender’s and borrower’s interests.

Lenders may evaluate a borrower’s payment history before allowing them to opt out of escrow. If a borrower has missed payments or been delinquent, the lender may consider them a higher risk, and thus may require an escrow account to ensure that property taxes and insurance premiums are paid as agreed.

This does not mean that being simply current on all payments or having sold the property would automatically grant permission to discontinue the escrow account, as each of these scenarios has its own implications. Similarly, refinancing the mortgage also typically resets terms and conditions, including those surrounding the escrow account but does not inherently grant the ability to end escrow after a certain period of time unless the specific conditions are met.