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#2178343 - 05/16/18 12:21 PM Flood Insurance and Revised LE
Lea Scott, CRCM, CAMS Offline
Member

Registered: 12/02/15
Posts: 86
If I determine a loan is in a flood zone after issuance of the first LE, but issue a revised LE later during the process (due to rate lock for example), am I required to include the requirement for flood insurance on the revised LE? If so, citation, please.

Also, if so, what happens if I failed to do so? Insurance is not subject to tolerance, so do I just have a violation, but not a required reimbursement?

Thank you.

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TRID - TILA/RESPA Integrated Disclosures Rule
#2178356 - 05/16/18 01:30 PM Re: Flood Insurance and Revised LE [Re: Lea Scott, CRCM, CAMS]
rlcarey Online
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Registered: 07/16/01
Posts: 66452
Loc: Galveston, TX
All disclosures issued have to be in good faith and based on all current information.

19(e)(3)(iv) Revised estimates.

5. Best information reasonably available. Regardless of whether a creditor may use particular disclosures for purposes of determining good faith under § 1026.19(e)(3)(i) and (ii), except as otherwise provided in § 1026.19(e), any disclosures must be based on the best information reasonably available to the creditor at the time they are provided to the consumer. See § 1026.17(c)(2)(i) and comment 17(c)(2)(i)-1. For example, if the creditor issues revised disclosures reflecting a new rate lock extension fee for purposes of determining good faith under § 1026.19(e)(3)(i), other charges unrelated to the rate lock extension must be reflected on the revised disclosures based on the best information reasonably available to the creditor at the time the revised disclosures are provided. Nonetheless, any increases in those other charges unrelated to the rate lock extension may not be used for the purposes of determining good faith under § 1026.19(e)(3).

Disclosures not issued in good faith may create tolerance issues even if the fees are not normally subject to tolerances.

19(e)(3)(iii) Variations permitted for certain charges.
3. Good faith requirement for property taxes or non-required services chosen by the consumer. Differences between the amounts of estimated charges for property taxes or services not required by the creditor disclosed under § 1026.19(e)(1)(i) and the amounts of such charges paid by or imposed on the consumer do not constitute a lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. For example, if the consumer informs the creditor that the consumer will obtain a type of inspection not required by the creditor, the creditor must include the charge for that item in the disclosures provided under § 1026.19(e)(1)(i), but the actual amount of the inspection fee need not be compared to the original estimate for the inspection fee to perform the good faith analysis required by § 1026.19(e)(3)(iii). The original estimated charge, or lack of an estimated charge for a particular service, complies with § 1026.19(e)(3)(iii) if it is made based on the best information reasonably available to the creditor at the time that the estimate was provided. But, for example, if the subject property is located in a jurisdiction where consumers are customarily represented at closing by their own attorney, even though it is not a requirement, and the creditor fails to include a fee for the consumer's attorney, or includes an unreasonably low estimate for such fee, on the original estimates provided under § 1026.19(e)(1)(i), then the creditor's failure to disclose, or unreasonably low estimation, does not comply with § 1026.19(e)(3)(iii). Similarly, the amount disclosed for property taxes must be based on the best information reasonably available to the creditor at the time the disclosure was provided. For example, if the creditor fails to include a charge for property taxes, or includes an unreasonably low estimate for that charge, on the original estimates provided under § 1026.19(e)(1)(i), then the creditor's failure to disclose, or unreasonably low estimation, does not comply with § 1026.19(e)(3)(iii) and the charge for property tax would be subject to the good faith determination under § 1026.19(e)(3)(i).
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#2178390 - 05/16/18 03:15 PM Re: Flood Insurance and Revised LE [Re: Lea Scott, CRCM, CAMS]
JPC Offline
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Registered: 10/22/15
Posts: 965
So, that would potentially be a 0% tolerance standard for missing the property taxes, for example if you failed to estimate them at all? I wonder if any lender is abiding by that and how/if examiners are enforcing this.

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#2178392 - 05/16/18 03:21 PM Re: Flood Insurance and Revised LE [Re: Lea Scott, CRCM, CAMS]
RR Joker Online
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Registered: 11/15/02
Posts: 19730
Loc: The Swamp
In what respect? We typically know up front if taxes are owed and disclose them if we are going to or might require them to be paid at or before closing.

Pro-rations are typically a credit to the borrower. I do not disclose those as there are too many unknown variables. But then it's almost never a a cost "paid by or imposed on the consumer ".
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#2178393 - 05/16/18 03:25 PM Re: Flood Insurance and Revised LE [Re: Lea Scott, CRCM, CAMS]
JPC Offline
Platinum Poster

Registered: 10/22/15
Posts: 965
Yes, let's say a lender failed to include a property tax amount on the initial LE when they should have. It was just a total "miss." This seems to indicate the potential for a 0% tolerance standard. That's rough, especially when it's not even a fee that would normally ne held to a tolerance standard.

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#2178398 - 05/16/18 03:37 PM Re: Flood Insurance and Revised LE [Re: Lea Scott, CRCM, CAMS]
RR Joker Online
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Registered: 11/15/02
Posts: 19730
Loc: The Swamp
Well, in all truth...property tax disclosure requirements are spelled out quite clearly in the reg...all that 60 day stuff and all wink

If we are doing a refi or HE loan where a new DSD is required, we always check for outstanding overdue or coming due taxes. If it's an in-house refi, we do or don't, depending.
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