What is ‘Impound’
An account maintained by mortgage companies to collect amounts such as hazard insurance, property taxes, private mortgage insurance and other required payments from the mortgage holders; these payments are necessary to keep the home but are not technically part of the mortgage. Impound accounts are often required of borrowers who put down less than 20%, but are usually optional in other cases. The purpose of the impound account is to protect the lender. Because low down-payment borrowers are considered high risk, the impound account assures the lender that the borrower will not lose the home because of liens or loss, as the lender pays insurance, taxes, etc. from the impound account when they are due.
Explaining ‘Impound’
Though the impound account is designed to protect the lender, it can also help the mortgage holder. By paying for these big-ticket housing expenses gradually throughout the year, the borrower avoids the sticker shock of paying large bills once or twice a year, and is assured that the money to pay those bills will be there when they need it. However, if the mortgage company does not pay these bills when they are due, the borrower will be held responsible, so borrowers should keep an eye out to make sure their mortgage companies are fulfilling their end of the bargain.
Further Reading
- Financial analysts, insider information and efficiency of capital market: Evidence from relative amount of the firm-specific information impounded into stock prices in … – en.cnki.com.cn [PDF]
- Are shareholder dividend taxes on corporate retained earnings impounded in equity prices? Additional evidence and analysis – www.sciencedirect.com [PDF]
- The case for mandatory municipal disclosure: Do seasoned municipal bond yields impound publicly available information? – www.sciencedirect.com [PDF]
- The value relevance of changes in financial leverage – papers.ssrn.com [PDF]
- Myopic management behavior with efficient, but imperfect, financial markets: A comparison of information asymmetries in the US and Japan – www.sciencedirect.com [PDF]
- Financial markets and the allocation of capital – www.sciencedirect.com [PDF]
- The impact of the Federal Reserve's interest rate target announcement on stock prices: A closer look at how the market impounds new information – papers.ssrn.com [PDF]
- Does financial structure matter for economic growth? A corporate finance perspective – books.google.com [PDF]
- The value-relevance of changes in financial leverage beyond growth in assets and GAAP earnings – journals.sagepub.com [PDF]
- The economic and financial gains from water markets in Chile – www.sciencedirect.com [PDF]
