What is one requirement for a Higher-Priced Loan?

A Higher-Priced Loan, as defined under federal regulations, is a loan that has an annual percentage rate (APR) that exceeds a certain threshold above the average prime offer rate. One of the requirements that comes into play with these loans is often the establishment of tax escrows for the first five years, which helps protect both the lender and the borrower by ensuring that property taxes are paid. This requirement is particularly relevant because higher-priced loans can carry a greater risk for lenders, and having tax escrows in place helps ensure that the property remains protected from tax liens.

The other options do not align with the standard requirements for Higher-Priced Loans. For instance, property insurance is typically a requirement for any mortgage, as it protects the lender's investment in the real estate. Lower down payment options can apply to various loan types but are not a specific characteristic of Higher-Priced Loans. Additionally, waiving appraisal requirements poses significant risk to the lender, as appraisals help establish the current value of the property, which is crucial in determining the loan amount and terms. Thus, maintaining tax escrows for the first five years is a critical measure to mitigate risk and ensure compliance in the context of Higher-Priced Loans.