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#2018522 - 06/04/15 07:56 PM Affiliate Hazard Insurance
Carolina Blue Offline
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Carolina Blue
Joined: Jul 2005
Posts: 956
Lost in a regulatory fog
So we have an affiliate insurance company. If a borrower decides to use them for hazard insurance then the hazard insurance premium becomes 0% tolerance. Only solution I can think is to get our insurance company to quote hazard insurance on every application just incase the borrower wants to use them. That's going to be crazy. Am I missing something?

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#2018560 - 06/04/15 09:27 PM Re: Affiliate Hazard Insurance Carolina Blue
rlcarey Online
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rlcarey
Joined: Jul 2001
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Galveston, TX
If you require them to have hazard insurance - you are not missing a thing.
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#2018647 - 06/05/15 01:57 PM Re: Affiliate Hazard Insurance Carolina Blue
ComplianceRegs Offline
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I have wrestled with this one as well since all of the LE examples offered by the CFPB show Homeowner's Insurance as a prepaid under section F. Couple of questions:

1. Will it always be in the prepaid section or is this only if they have obtained the policy prior to the issuance of the Loan
Estimate? Even on a purchase transaction they will have obtained the policy prior to closing so it seems like it would always be in the prepaid section on the closing disclosure.


2. So what determines if it goes in prepaid or services borrower can shop for? Would it ever go into services borrower can shop for or would it always be shown on the LE as a prepaid?

3. I was thinking based on prior research that property insurance premiums (e.g., hazard) would always be unlimited tolerance unless it was paid to an affiliate which would then make it 0%. Is this correct?
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#2018970 - 06/08/15 02:57 PM Re: Affiliate Hazard Insurance Carolina Blue
time flies when you're having fun Offline
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Posts: 289
Here are my thoughts -- but I am just learning this too, so defer to other experts.

It looks to me like existing homeowner's, flood insurance, and taxes will always be listed in the prepaids section. I don't believe these would ever go into the f(3) borrower can shop section.

I think this has been debated some. I believe these are not subject to tolerance assuming the estimates were in good faith. I think there are others who believe they are subject to a zero tolerance (no change allowed).

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#2019030 - 06/08/15 05:03 PM Re: Affiliate Hazard Insurance Carolina Blue
Jerod Moyer Offline
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Jerod Moyer
Joined: Oct 2005
Posts: 667
Sioux Falls, SD
Heard that this was being discussed and thought I'd chime in with our research:

The rule provides that property insurance premiums are included in the category of settlement charges not subject to a tolerance, whether or not the insurance provider is a lender affiliate. [Federal Register 12/31/13 page 79829]

That said, I wish the regulation (rather then the section by section analysis) was more clear on this. We did contact the CFBP and they stated that while the reg may be somewhat confusing the required hazard insurance paid an affiliate would be an unlimited tolerance.
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#2019047 - 06/08/15 05:39 PM Re: Affiliate Hazard Insurance Carolina Blue
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,660
Galveston, TX
Jerod - OK - I have been looking at this since I responded, I am in agreement. I was a little hung up on this paragraph below in the commentary and also the fact that the items listed in 19(e)(3)(iii) are separated by an "and" and not an "or", but I have come around. I agree, it is somewhat confusing.

"If the creditor permits the consumer to shop consistent with § 1026.19(e)(1)(vi)(A) but fails to provide the list required by § 1026.19(e)(1)(vi)(C), good faith is determined pursuant to § 1026.19(e)(3)(ii) instead of § 1026.19(e)(3)(iii) regardless of the provider selected by the consumer, unless the provider is an affiliate of the creditor in which case good faith is determined pursuant to § 1026.19(e)(3)(i)."
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2019841 - 06/11/15 03:44 PM Re: Affiliate Hazard Insurance Carolina Blue
ComplianceRegs Offline
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Joined: Jan 2013
Posts: 169
So I understand that existing items like homeowner's insurance will always be listed in the prepaids section. I am still not sure where this is required to be disclosed on a purchase transaction on the Loan Estimate when they haven't yet obtained this insurance but it is required. In this instance would it go into the borrower can shop section or is it always in the prepaids section regardless?
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