RESPA Q&A - Block 11 - question number three allows the "new lender" to put a zero ($0) for hazard insurance when the borrower is "refinancing the mortgage" and where the borrower is already maintaining hazard insurance.

Does this apply to subordinate liens....in other words, new loans on homestead property where the borrower is already maintaining hazard insurance.....such as a 2nd lien home improvement or home equity loan?

Swiggles, I may be wrong, but I know this was discussed, and it seemed like the conclusion was you would have to quote it because it wasn't specifically covered otherwise by RESPA.

IMHO - I would equate a second lien to the refinance situation. The borrower already owns the home, already has insurance, and while insurance may be required it will not have to be purchased specifically for the transaction.

If someone has something different from HUD, I would be interested in looking at it.

What I received from HUD last spring in a discussion about the same issue:

I almost hate it when loan staff attend seminars that I don't also attend. Because undoubtedly, they come back with some idea, fact, rule, opinion, that was stated at the seminar....that may have been actually misinterpreted by the attendee. And I'm left with having to make sense of it all.

Some of the home equity/home improvement loan staff attended a seminar. They came back stating that we MUST put a zero on the GFE for junior liens and pushed the printed HUD Q&A under my nose. I had ignored that particular Q&A as applying to junior liens because it simply doesn't read that way.....nothing about junior liens...only "refinances" and "new lenders."

And so if I allow a zero to be stated on the GFE for junior liens, is the premium also shown on the settlement statement as zero? Or should the premium be entered as POC? I'm super duper confused.

I don't believe it would be required to be carried over to the HUD at all.

Someone correct me if I'm wrong, please...but it wouldn't make sense to show something that wasn't requird. It's simply 'acknowledged' on the GFE.

From my notes taken in the HUD 3/18/10 teleconference:


7. Block 11 - for homeowners insurance we no longer have to disclose a premium for refinancings and subordinate lien loans unless the premium is coming due and we will require it to be paid as a condition of the closing. You must still disclose homeowners insurance in Block 11 but you will show a $0.00 premium due and you must show $0.00. You cannot use NA.

So we would need to list the insurance company and the amount as $0, we can't leave the entire block blank. Am I understanding that correctly?

correct, don't leave it blank.

OMG!! Just when I think... Oh wait, that's the problem!

We have never put the $0 for block 11 on refi's. Our system doesn't support that!! So that means I need to have the team start entering that information in there..

That is what you are saying... Correct? It must say either $0 or the Premium???

Call your software provider and get it to support it. I've currently got three oopsies in the hopper with mine. The system is supposed to work FOR you, not against you.

But to answer your question, Jewels..yes, one or the other.

Sorry to re-open this thread but I have a questionable scenario. We disclosed $0.00 on the GFE for Box 11. At the time we needed to disclose right away because it was the holiday and we received the loan app right on Jan 1. We did not have figures in for Insurance and the borrower did not know who they wanted to use, however, it was thought that this was ok and disclosed $0.00 because it's a 12 month construction loan. The only reason why it's subject to RESPA is that part of the loan proceeds go to the transfer of title. All the insurance needed would be builders risk. Did we need to disclose that in box 11 and would the change qualify as a changed circumstance if the borrower finally decides on an insurer?

Yes, you needed to disclose it. The only time you don't have to is for a refinance where insurance is in force and not about to expire.

It's not subject to tolerance, it's already a technical violation...I would leave it alone. It's not a changed circumstance, it's a FI error.

Were you OPEN On Jan 1? If not, then how could you have received an app then?

fwiw, you don't need exact numbers from the borrower's agent. You can use a ballpark number from a trusted source if the borrower doesn't have what you need within the 3 day time frame.

Thank you, RR. Do you happen to know what the ramifications are? Are there any monetary penalties? We deal with 99% commercial loans and then once in a blue moon we do a RESPA one...

You're not likely to get knocked on a one time occurrence. Just document the file that you found the error/technical violation and be ready for a hand slap if it's pulled for an exam.

Will do, thank you all!

Agree