I am trying to set up an LE for a refinance transaction.The consumer is not escrowing, and their homeowners insurance has already been paid. Do we still need to disclose the premium in Prepaids (for 12 months)? Our cash to close is off by the exact amount of the homeowners insurance premium. They have paid the premium earlier in the year through escrow on their loan they are about to pay off.

Thoughts?

If you aren't going to collect it and you know it's already paid, it shouldn't be on the LE.

This kind of goes along with an issue we had. If something is on the prepaid section and is paid prior to consummation, is it still added to cash to close calculation?

I think I am more confused...perhaps only because of how my FI has been disclosing...on a refi (on a GFE), if the loan was escrowed, then we did not disclose the HOI in Block 11. If it was not escrowed, then we would disclose in Block 11 because as some point, the premium was paid prior to consummation...
Was that thought process wrong?
If no, is it just different now under TRID and the LE?

Sorry for taking 3 steps back... :-/

What did you know and when did you know it? If you know the consumer has to pay at and that it hasn't been paid at the time the LE is issued, it goes on the LE. The fact that it is later prepaid doesn't affect anything, except that part of the "cash to close" is paid earlier than closing and perhaps not through you.

If you know it's already prepaid and you won't collect it at closing, you don't put it on the LE.

So, how would you disclose Home Owner's Insurance and taxes on a Construction loan? These will not be due prior to consummation so I don't believe it should be entered in the fees section of the Loan Estimate, but would it be disclosed under the Projected payments section for Estimated Taxes, Insurance, and Assessments section? If so, what do you disclose the amount as bareland.

Thanks for your help!

______________________
JenS

It must be included in the Estimated Taxes, etc portion of that table....and see 37(c)(5) for what you use to form your estimate.

Do you have a citation for the above, please ("If you know it's already prepaid and you won't collect it at closing, you don't put it on the LE".)? It was my understanding that HOI always been to be included on the LE, for both purchases and refinances. However, that does not match John's post above so I'd like some clarification, please.

Thank you.

It was my understanding that HOI always been to be included on the LE, for both purchases and refinances.

You are operating under the old RESPA rules. Typically on a refinance, they already have insurance and unless you know that they are going to have to buy insurance (unusual) as a condition of the loan there is nothing to put on the LE.

Even old RESPA rules allowed for leaving it off if already in force and you aren't requiring evidence at closing.

Thank you both.

Can you let me know, generally, how should this be managed in the LOB? Will some refinance LEs contain HOI while others exclude it? This seems difficult to track and manage.

Don't know what a LOB is, but you either have evidence of current insurance or you don't. Normally, if you are refi'ing an in-house loan, that is an easy thing to find...most other times, you will be quoting it unless the borrower provides a copy.

On a refinance initial LE, we only show insurance amounts in the escrow section for loans that will escrow. Most often that's a guestimate based on the information in the housing expense section of the 1003.
When we get the bill, if it's due within 60 days, we let the borrower know that it will have to be paid at closing and we put it on the CD.