What aspect of a mortgage loan does the term "escrow" encompass?

The term "escrow" primarily refers to the practice of holding funds on behalf of the borrower for specific purposes, particularly for property taxes and insurance. In a mortgage context, this means that a portion of the borrower’s monthly payment is set aside and accumulated in an escrow account, which is then used to pay property taxes and insurance premiums when they come due. This arrangement helps ensure that these critical payments are made on time, protecting both the borrower and the lender from potential issues such as tax liens or lapses in insurance coverage.

The other choices involve different aspects of mortgage servicing and management, but they do not accurately define what escrow specifically entails. The ongoing management of the loan relates to broader loan administration practices, calculating the interest rate pertains to the financing terms set initially, and reviewing the borrower's credit history is part of the loan approval process. None of these options capture the specific money-holding function of an escrow account, making the correct choice the focus on funds being held for property taxes and insurance.