My question is in regard to homeowners association (HOA) monthly dues and where they should be placed on the Loan Estimate and the Closing Disclosure. I have 2 scenarios - one where the buyer (our borrower) will pay the October dues with closing (assume the loan closes in early October so the dues are due). The other is where the seller has already paid the October dues and the buyer is reimbursing the seller.

1. If we know that HOA dues will be due (paid by buyer) at the time we prepare our Loan Estimate, it would be disclosed in Section H ("Other"). If we do not have that knowledge at the time we prepare the LE, we can leave the HOA dues off entirely. It is not a cost imposed by the bank for its loan. Correct?

2. On the CD, if the HOA Dues are to be paid by the buyer and will be collected at closing, do we disclose this in Section F for Prepaids and show one month being prepaid? or do we keep it in Section H for Other? Reg Z says, "Under the heading "Prepaids", an itemization of the amounts to be paid by the consumer in advance of the first scheduled payment." Section "F" is for obligations that are related to the ownership or use of the real property.

3. If there is a pro-rata reimbursement to the Seller for HOA dues that the Seller prepaid and that the buyer will now reimburse him for, this would be shown in Section "K" as an Adjustment Due from Borrower at Closing on the CD.

Do I have this right? Thank you!

1. HOA dues, unlike HOA transfer fees are not ever placed in Section H. The payment of HOA dues is normally a requirement by the lender to avoid any HOA liens against the property. Such dues that are paid at closing would be in Section F as a prepaid.

2. Same answer.

3. That is correct, the proration would be reflected as an adjustment in the Summaries of Transaction.

Thank you very much for answering my questions!

I apologize for bringing this topic up again, but I am again confused on the placement of HOA Dues. I agree with disclosing them in "Prepaids" as pointed out above. But the following section on "Other" is confusing me when it includes "homeowner's or condominium association charges paid at consummation" as an example? Are we still good with disclosing HOA Dues being collected at closing as a Prepaid (for one month)? What would we show in "Other"? You mention above that an HOA Transfer Fee would go in "Other". Thank you!

Section 1026.38(g)(4). Section H - Other.
Under the subheading “Other” and in the applicable column, the costs disclosed include all real estate brokerage fees, homeowner’s or condominium association charges paid at consummation, home warranties, inspection fees, and other fees that are part of the real estate closing but not required by the creditor or not disclosed elsewhere The table includes 3 columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others.

1026.37(g)(3)(v) and 1026.38(g)(2). Section F - Prepaids.
Prepaid items include certain periodic charges that are required by the creditor to be paid at consummation. Each item must be identified with a descriptive label and include the number of months collected at consummation and the total amount to be paid.

Well, any HOA dues to be paid, since they are a lender requirement, would go in Prepaids.

However, any transfer fee, since that is a fee that they would have to pay to the HOA whether they paid cash for the property or were granted a loan to buy the property, would go into Section H, as it is not a lender requirement.

Thanks. I appreciate the help.