The Department of Housing and Urban Development has reminded mortgagees and servicers that it is illegal to use mortgage escrow funds for purposes other than those stated in federal regulation. In a recent FHA notice, HUD warned approved lenders and servicers against applying escrow funds to reduce the outstanding balance in the payoff amount of an existing loan. The department said it has not authorized the use of borrower money in escrow accounts for reasons other than making legitimate payments. Escrow funds are borrowers’ funds collected at ...