Why do lenders typically include taxes with principal and interest payments?

Lenders typically include taxes with principal and interest payments to prevent a tax lien from delaying repayment. When homeowners pay their property taxes along with their mortgage, it ensures that those tax obligations are settled on time. This practice is crucial because if property taxes remain unpaid, the local government can place a lien on the property. This lien can complicate or delay the lender's ability to recover their investment if the borrower defaults. By collecting taxes upfront and holding them in an escrow account, lenders can manage this risk and ensure that taxes are paid promptly, thereby protecting their financial interest in the property.