Where would we disclose Builders Risk Insurance for a construction loan closing today but the borrower is paying after closing in 6 weeks when the construction begins? On an addendum? It was disclosed under prepaids on the LE because the officer thought it would be paid before closing. Construction got pushed back due to appraisal issues and the borrower does not want to pay for the insurance until construction begins. Management made the decision to allow the borrower to close without the insurance in place.

Depends on who the insurance insures. In most States, it insures the builder and is a requirement of the bank for the builder to carry adequate builder's risk insurance as part of an acceptable construction contract. If the borrower makes an agreement to pay for the contractor's insurance, then that is not a specific requirement of the loan and it normally would be a Section H charge.

But it would not appear in Section H unless it's been paid or is to be paid from closing funds, right, Randy? In this case, it's a post-consummation payment by the consumer.

Correct.

The Bureau added the requirement for an addendum for post-consummation construction loan inspection fees. But it has not addressed post-consummation payment of builder's risk premiums. Therefore, since it's not a finance charge and it's not paid at or before closing, I don't think it gets disclosed. I am certainly open to opposing views.

Thank you!