A borrower paid cash to purchase a property and is now seeking financing to reimburse himself. The property is in an area where a flood disaster occurred a couple of years ago. The appraiser indicates that (based on the location of the property) a hydrology report may be required. But we won't know that until the appraiser inspects the property. These reports are expensive and vary in cost.
1) Since a hydrology report MAY be required, should we disclose a fee for it in our Loan Estimate? ("Should have known"?)
2) We cannot get an estimate of what this would cost. We can base it on one we did many years ago but chances are it is off. Would we have any "valid changed circumstance" that we could rely on to justify increasing the cost if a report is deemed to be required and the cost is higher than the estimate we gave? Or would we be locked into this estimate?
Thank you!

Hydrology report? What does that have to do with either the appraisal or a loan? I have never heard of this being a requirement on private property. Can you further explain? But if one is needed, yes it needs to go on the LE and no, you cannot revise the cost estimate without a changed circumstance. Not knowing the cost is not a changed circumstance.

My understanding is that the property was damaged during a mud flow. We expect to get a Certificate of Occupancy soon as the borrower says he lives there but we are uncertain as to the extent of the damage. Borrower is making repairs but the underwriter is concerned about the building being habitable. There is a lot to be worked out on this property before we can make the loan but we need to get our LE out today. The hydrology report is to assess future water flow due to the property being in this disaster area.

Sounds like all of this is already known by you then and whatever services you are going to require to make the loan are going to have to be on the initial Loan Estimate.

Thanks. Now the MLO wants to decline the loan because we cannot get a fee for the report - and the bank doesn't want to absorb it (too expensive). Also, busy appraisers are reluctant to do a hydrology report - so he says that will be another challenge. Is that a reason for decline?

OP states that hydrology report MAY be required but won't be known until property is inspected.
Isn't that akin to not know if a completion cert will be required until the newly built property is appraised?
If so, couldn't that be added later when you actually KNOW that it's required and not just think it might?

Just thinking out loud here so if I'm wrong, Randy, go easy.

TR - no that might be a valid point, but as you know, a changed circumstance is very fact specific. I guess I am not sure how an inspection by a property appraiser determines whether or not a hydrology report is required by the underwriter. An appraiser is not an engineer. But again, I am not familiar hydrology reports being produced for consumer owned residential property, and the determining factors as to what might or might not require one.