I am trying to make sure that I grasp the Prepaid Section of the Loan Estimate. The following is how I plan on trying to explain it to the loan staff:

• [b]Loan Estimate – Section F Prepaids
Prepaid section covers items such as homeowners insurance, flood, and property taxes that will be due (or expected to be due) between the application date and the first payment due date.
 Homeowner’s Insurance Coverage:
1. A customer is purchasing a house. Because it is a purchase, the customer didn’t have insurance before the application date. And we know the customer has to go buy insurance at some point before the first payment is due because we require insurance coverage.
2. A customer applies for a loan using a house for collateral. If the customer does not have current insurance coverage, we will require them to get it. So this scenario would require the use of the prepaid section.
3. A customer applies for a loan using a house for collateral. The loan will not have escrow. The customer’s insurance on the house will be due to be paid at some point between the application date and the expected date of the first payment.
The time frame listed on the Loan Estimate is 12 months.
 Flood Insurance Coverage
 Property Taxes: If the expected loan closing date is between November 1st and December 31st, the property tax amount should be listed in the prepaid section. The time frame listed on the Loan Estimate is 12 months.

Is this an accurate description of the process?

I have the same question ... I'm wrestling with this right now with testing our system. I've read many different viewpoints on this.

We don't escrow, but still require that insurance is in place at closing and have to be sure that the taxes are up to date. I'm thinking that on a purchase transaction these are both required to be in place and up to date at closing, so it's a prepaid.

For anything other than a purchase, I'm thinking we'll exclude them (unless we know that the taxes or insurance have lapsed for some reason...).

Are others on this same page?

I'm having an issue with the testing, and how to advise the Processor's on what to enter on the initial loan estimate?