A servicer is considered unable to disburse funds from a borrower's escrow account for hazard insurance if:

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A servicer is considered unable to disburse funds from a borrower's escrow account for hazard insurance when it has a reasonable basis to believe that the borrower's hazard insurance has been canceled for nonpayment of premiums. This situation is significant because it implies a risk associated with the property. If the hazard insurance is canceled, the servicer cannot use the escrow funds to pay premiums that are no longer valid or applicable. This policy protects the servicer from disbursing funds that would not cover an active policy, thereby safeguarding their interests and maintaining compliance with regulations surrounding mortgage servicing.

The other options address different scenarios, but they do not specifically relate to the fundamental need for active hazard insurance coverage for disbursal. Therefore, they do not provide a valid reason for the servicer to withhold the funds for that particular purpose.

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