It wouldnt be the smartest move, but theres really nothing to prevent it from happening. The money does not sit in an escrow account managed by a third party.
It sits in the borrowers bank account, where its totally accessible. So the lender has no assurance the borrower will keep the money to serve as a safety net (which is the intended purposes of cash reserves).
More Prevalent in Wake of Housing Crash. Cash reserves are nothing new. Theyve been around as long as the lending industry itself. But two things have changed over the last few years.
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