Condo Association Fees

Question: We are making a loan secured by a condominium unit. The condo association has a flood insurance policy that covers all the units. My question is do we have to disclose the cost of the flood insurance on the HUD-1? Our understanding from the condo association is that the flood insurance premium is included in the monthly condo fees that the members pay.

Answer: The quick answer is no. Generally, a fee that is a part of the condo association fee does not have to be disclosed on the HUD-1. This is the case even if the condo fee includes costs such as flood or hazard insurance that would otherwise be disclosed on the HUD-1. The only exception would be if the lender was placing condo fees in escrow and making the condo fee payments from the escrow account. In that situation, the HUD-1 would show the condo fee calculations as a part of the escrow account. However, the HUD-1 would not have to specify what services the condo fees purchased.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 3, 3/05