Authorization by the lender that gives the borrower the right to pay taxes and insurance directly. This action is in contrast to the standard procedure when a lender adds a charge to the monthly mortgage payment deposited into an escrow account, from which the lender then pays the borrower's taxes and insurance when due.

Lenders will not always waive escrows, especially for borrowers with large down payments. If lenders agree to waive escrows, they will typically charge a small increase of points as a fee.