I think many banks, given a choice of escrowing funds or simply filing the statements and receipts sent in by customers, would choose the latter. We would.
But in real life you have to call, send letters, remind people and discover that they robbed peter to pay paul and the tax money was spent on a vacation. Is that a good customer? You can argue that all day long and perhaps when the loan was made 10 years ago things were different.
Escrows are a necessary evil. We have to use them. Should we charge a separate fee for the work that goes into maintaining them, well that is a good question. While I personally believe that should be considered a part of doing business and included in the interest rate, I can see a management argument that it isn't.
In the compliance world, we often address the problems, we don't necessarily create them.
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Andy Zavoina
Opinions stated are not necessarily that of my employer.