ALL of the answers below left out some important critical information:
1. For ALL purchase and refinance loans, tax authorities (IRS, state) are in 1st position meaning if the owner / buyer is delinquent with payments on their tax liens only, the tax authorities can foreclose on the property and when the home sells, the tax authorities collect what is owed them. If there is still a balance owed on the mortgage loan, the profits from the sale of the house go to the tax authorities - not the lender. Therefore the lender is out the money. The lender is in 2nd position and cannot collect anything.
2. When it comes to property taxes, owners can pay property taxes separate and it does not have to be included in escrow. However, lenders don't trust that buyers will pay property taxes on time, therefore, lenders make it easy for themselves to include property taxes in the mortgage payments so this way the taxes are paid on time. If the taxes ever increase, your escrow payments will increase. If you cannot afford increased escrow payments, your lender will foreclose on your home and they will be in 1st position - not your county because of unpaid property taxes.
3. Lenders are independent contractors and self employed. Therefore, they can pick and choose which buyers to give loans to. If you have tax liens with the IRS or your state, this tells lenders they don't have to give you a loan if they don't want to. It has nothing to do with requirements or IRS rules. It has to do with their business model. Lenders weigh the risks of giving you a loan. If they think it's too risky, the answer is NO. Lenders need to make a profit. Giving a loan to a buyer that has tax liens spells lousy deal for the lender. This is discrimination and it's legal to discriminate if a buyer has tax liens.