We have what is called a ZOMP program for our PMI. Nothing is collected up front or at closing. We also don't keep a cushion. What needs to be disclosed on the HUD?

Since nothing is collected up front or at closing and you don't keep a cushion, you don't have to disclose anything on the HUD-1.

Depending on your origination software, if it calculates the aggregate adjustment based on no cushion, you could try entering 1 month MI premium to see if the net effect (all escrow items less aggregate adj) is the same as not disclosing anything.

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ZOMP! is a registered trademark of MGIC. I've cut & pasted the basics of this MI plan below for those who are not familiar with it:

ZOMP = Zero-Option Monthly Premium Plan. The initial premium is not due until the month in which the borrower's first monthly mortgage payment is made (e.g. premiums are for January are billed in January).

MGIC sends you Premiums Due Statements around the 10th of each month.

On Feb. 26, the Chicago Fed published RU2001-23 - 'Additional clarification of RESPA'. It instructs state member banks to disclose the annual PMI premium on the HUD-1 or 1-A if mortgage insurance is required. Since you aren't collecting any of the premium at closing, this would be a 'POC' item.

That's good advice. You would not need to show the payments into the escrow account because there isn't one. However, you still need to show the annual cost of all insurance, including PMI. And, if you later establish an escrow account, you would need to send an initial escrow statement within 45 days of setting up the account.

I have to disagree with B. & Lucy that the bank should disclose premiums covering the 1st year (even as a POC item) on the HUD. Unlike traditional PMI policies (or just about any kind of insurance policy for that matter), there is no annual premium due for ZOMP - only monthly.

Tradition MI policies bill in advance. The customer pre-pays the MI premium for the 1st year at closing and there is no premium due in the final year of coverage.

With ZOMP, the bank is not billed for the first monthly installment until the month it is due which is the 1st month a mortgage payment is due. (Coverage is effective as of the date of closing, however.)

Regulatory Update 2001-23 provides further clarification of the RESPA requirements for disclosing annual flood hazard premiums and *annual* mortgage insurance premiums. The ZOMP policy does not have an annual premium.

link to 2001-23: http://www.chicagofed.org/publications/regulatoryupdates/2001/feb262001.cfm#ru2001-23

[This message has been edited by SLC (edited 03-27-2001).]