FHA mortgage insurance protects against loan defaults and decreases risk for lenders. In the event of default, the FHA mortgage insurance pays claims based on certain requirements. FHA mortgage insurance is available for both single-family homes, through programs such as the 203(b) and 203(k) insurance programs, and for multifamily properties, through programs including the HUD 223(f) loan program for the acquisition and refinancing of multifamily properties.
Assets in escrow are those held by a third party on behalf of two other parties prior to the completion of a transaction. Examples of things held in escrow are money, funds, and securities. When it comes to HUD 223(f) loans, a loan will typically require an escrow account to hold funds during the closing process. In addition, HUD 223(f) loans require funds for taxes, insurance, and replacement reserves to escrowed on a monthly basis.