The New Reverse Mortgage Formula: How to Convert Home Equity into Tax-Free Income Escrow is not an absolute requirement. To make escrows the norm in the subprime market would require that escrows be made mandatory for all mortgage borrowers. Escrows can’t be required for only subprime loans because that term can’t be precisely defined. And if the law requires simply that escrows be offered to borrowers, loan officers and mortgage brokers could work around it. But the requirement for an escrow could be short-term. Its purpose would be to force borrowers at the outset to confront their ability to afford the major expenses of homeownership. This would be served by an escrow requirement that applies only to the first year. After that, borrowers should be allowed to opt out if they want.

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