What account may a lender use to add 1/12th of the estimated cost of annual property taxes and hazard insurance to the monthly loan payment?

The correct answer involves an impound, escrow, or reserve account, which is commonly utilized by lenders to manage property taxes and hazard insurance payments. When a borrower takes out a mortgage, the lender often requires the borrower to contribute monthly to this account. Each month, 1/12th of the estimated annual costs for property taxes and hazard insurance is added to the borrower's monthly loan payment.

This arrangement ensures that there are sufficient funds available to pay these essential expenses when they come due, thus protecting both the lender’s and the borrower’s interests. By collecting these amounts monthly, the lender can avoid instances where the homeowner might neglect these payments, which are critical to maintaining ownership of the property.

Establishing an impound, escrow, or reserve account provides a structured way to handle these costs over time, making budgeting easier for borrowers and ensuring compliance with loan agreements. Other options, like PMI accounts, are specifically related to private mortgage insurance, while margin accounts pertain to investment funding and adjustments deal with temporary financial changes, neither of which addresses the collection of property taxes or insurance in this context.