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When are property taxes and hazard insurance required to be disclosed on the Loan Estimate?
The regulation states amounts required to paid in advance of their first scheduled payment.
For example: if the loan is a refinance and property taxes have already been paid for the previous year and hazard insurance is paid for a 12 month period, prior to consummation, would anything need to be disclosed?From clarification that we received via phone call from the CFPB last fall, you should only disclose items in the Prepaids section if you (the lender) require them to be paid at or before closing.
We do require the customer to maintain insurance and pay their property taxes, but we do not require those amounts to be paid AT closing…UNLESS we are escrowing (we only escrow if 1st lien HPML). Therefore, we do not need to list any amounts in the Prepaids section of the LE nor the CloD. The CFPB said we are good because this is our “consistent” policy of not collecting those items at closing unless the loan is escrowed, so they are not costs associated with our loan.
We will only list items in the prepaids section if we are escrowing them.In your example above, if we were not escrowing those items then we would not disclose them in the Prepaids section (pg 2, “Other Costs”, section “F. Prepaids”). We would, however, always include the estimate for those items on page 1 (“Projected Payments” box in the row “Estimated Taxes, Insurance, & Assessments”).
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