© Fannie Mae Single Family Selling Guide
Escrow Accounts
First mortgages generally must provide for the deposit of escrow funds to pay as they come due, including taxes, ground rents, premiums for property insurance, and premiums for flood insurance. However, escrow deposits for the payment of premiums for borrower-purchased mortgage insurance (if applicable) are mandatory.
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With the exception of DU Refi Plus and Refi Plus transactions, for certain refinance transactions where the borrower is financing real estate taxes in the loan amount, an escrow account is required, subject to applicable law or regulation. Refer to B2to B2-1.2-02, Limited Cash-Out Refinance Transactions, and B2and B2-1.2-03, Cash-Out Refinance Transactions.
Escrow Waivers
Fannie Mae advocates the establishment of an escrow account for the payment of taxes and insurance, particularly for borrowers with blemished credit histories or first-time homeowners.
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Lenders must have a written policy governing the circumstances under which escrow accounts may be waived. When a lender permits escrow waivers, subject to the mortgage documents and applicable law, the lender’s written policies must provide that the waiver not be based solely on the LTV ratio of a loan, but also on whether the borrower has the financial ability to handle the lump sum payments of taxes, insurance, and other items described above.Additional Information: https://www.fanniemae.com/content/guide/selling/b2/1.4/04.html