We disclosed the cost of village taxes on the LE but forgot to list these taxes on the CD. Borrower also was not charged for the village taxes. I'm trying to figure out exactly what "transfer taxes" are under 1027.37(g)(1)-1, -2, and -3 to determine tolerances and whether we can charge the borrower the village taxes. The error was noticed within 30 days after consummation.

It appears, based on what 1027.37(g)(1)-1, -2, and -3 says that we cannot charge the borrower this village tax even though it was on the LE but not on the CD but since this is going to be quite a bit of money, I would feel better if someone could confirm what I'm reading or set me straight if I'm not reading correctly.

Thanks in advance!!

The village tax, I assume, is not the type of tax that gets listed in section E. Instead (again, assuming) it's like other property taxes, assessed and paid periodically (like town or county real estate taxes). If you need to collect some of that village tax at closing (as a prepaid) along with a town or country RE tax, you can add it to the prepaid amounts in section F.

Omitting it from the first CloD is a technical violation, but it's not a good faith tolerance problem since, as you said, it was on the LE.

Yes John, this village tax is assessed and paid periodically, and we had to collect some of it at closing. So, we should issue a revised CD? And we ARE able to collect the tax that should have appeared on the CD and should have been collected at closing? Correct?

Well, if you haven't collected it from your borrower and the closing has taken place, it's still an obligation of your borrower to pay those taxes to the village. The only reason you would have collected it at closing is to ensure that it was paid (the bill would have been due shortly after closing). At this point, you can attempt to collect it and pay it to the village for the borrower, or just tell the borrower that the tax bill is there to be paid, and that you need documentation that the borrower has paid it.

Thank you John!

"collect some of it at closing"? Are you talking about collecting to pay the bill or to set up an escrow?

These "village" taxes appear to be real estate taxes. They could be collected at closing for escrow or as a prepaid, depending on the individual circumstances of the loan transaction. But if the lender forgot to collect the village taxes (but remembered to disclose and collect the town or county taxes, those village taxes are still going to have to be paid by the borrower, now or later. My point was that it can be taken care of after the fact outside of the closing and need not trigger a revised closing disclosure or whatever the OP was worrying about. Just tell the borrower that tax did not get paid via the settlement, and he or she needs to pay it because it's a lien on the property.

Not meaning to take this too off topic but wouldn't it be different if an escrow for taxes was required on the loan and only part of the tax money was collected to fund that account? Investors would not purchase a loan that is short on escrow money.