When completing the estimated taxes and insurance on the CD for construction loan should the lender be calculating what he future taxes and insurance will cost when the construction is completed? Or should be listing the current cost before improvements are completed.

Taxes are easy:

The taxable assessed value of the real property or cooperative unit securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property

Insurance is more grey depending on how you interpret:

The replacement costs of the property during the initial year after the transaction

Most banks go with an estimate of what homeowner's insurance cost will be after the house is completed as the whole idea is to give the borrower an estimate cost of all on-going costs that it is going to take to maintain the property in the long run.

Thanks for the reply. That clears that up.

A similar scenario would be where we are doing a purchase loan for a new construction home. Since taxes are not assessed should we be calculating what they will be for the estimated taxes section? I would think so. However with escrow, should we only be collecting what is currently due and then do the rest with voluntary escrow?

Thanks!

That is one way to do it, or you can use this provision in Regulation X:

1024.17(c)(7) Servicer estimates of disbursement amounts. To conduct an escrow account analysis, the servicer shall estimate the amount of escrow account items to be disbursed. If the servicer knows the charge for an escrow item in the next computation year, then the servicer shall use that amount in estimating disbursement amounts. If the charge is unknown to the servicer, the servicer may base the estimate on the preceding year's charge, or the preceding year's charge as modified by an amount not exceeding the most recent year's change in the national Consumer Price Index for all urban consumers (CPI, all items). In cases of unassessed new construction, the servicer may base an estimate on the assessment of comparable residential property in the market area.