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I'm refinancing my existing mortgage, just to lower my payment, no cash out, in California. I currently have an impound account to pay for taxes and insurance but don't plan on having one for the new loan. The taxes are not due until December 10th, but the lender wants me to either pay them to the county now, before closing, or pay the amount in to the lender at closing so (I assume) they can pay them. Is there some law or state rule in California that says the property taxes have to be paid before a refinance is done?

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Must not be a law about it. I was able to push back on the mortgage broker, who told me he received special dispensation from the title company to not collect the taxes up front. If there had been a law to quote, I'm sure they would have enforced it.

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Tax liens take first position. Therefore even if you opt for no monthly impounds a lender will require current taxes installment to be paid in order to limit liability on their collateral. (the property). Enlighten me if I'm wrong.

This is my understanding.

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    It may depend on your credit score and/or LTV. I've self-escrowed my last four mortgages, but I also could show years of history of paying my insurance and taxes on-time and had a low LTV (there was plenty of equity left even if back taxes needed to be paid). For a high LTV loan I can imagine banks requiring escrow.
    – D Stanley
    Commented Nov 4, 2020 at 13:38
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Looks like this situation is fairly common. I doubt it's a specific law in California, rather, lenders trying to be overly cautious on external risks. From a Q&A at Zillow:

One week before the closing we're being told the title company has a rule that property taxes (which are paid ahead here) due within 60 days of closing must be paid in full at closing (which is 30 days ahead of when the city says they are due).

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    it is best to quote the relevant parts of a link. That way if the link rots the answer still has value.
    – mhoran_psprep
    Commented Sep 28, 2016 at 10:47
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I recently refinanced in Oregon and there was no property taxes or insurance collected. The lender wanted to setup an Escrow, but I told them that I did not want it and they let me pay separately. I've been doing this for many years.

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