Perhaps. The Form 1098 may not be required unless you meet the IRS guidelines posted below. Your borrower should get an amortization schedule and the letter you mention for the escrow received as well as amounts paid from escrow. Be sure to include the balance of the escrow as of December 31st.
File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest (or $600 or more of MIP, if section 163(h)(3)(E) applies for the reporting year) on any one mortgage during the calendar year. See the instructions for box 5, later, for MIP reporting requirements. You are not required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence. The buyer makes mortgage payments to you. You are not required to file Form 1098.
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