Answer:
Here's how we address this issue in our HUD1 Manual:
Hazard Insurance and Taxes:
Any time a lender requires hazard insurance or real estate taxes to be paid, it must be disclosed on the settlement statement regardless of whether a loan is a purchase money transaction, home equity loan, home improvement loan or a refinance. If the fees are not collected at closing, they should be disclosed as P.O.C. In virtually every case, the bank will require real estate taxes and hazard insurance to be current in order to lend the borrower money. Because of this, every HUD1 or HUD1A should disclose the premium and term (usually 1 year) of hazard insurance and real estate taxes. If the amount is not collected at closing it should be listed as P.O.C.
1. Purchase Loans:
a) Taxes. Identify the proration of taxes on lines 211 and 511. If the bank is escrowing for the next year, show the reserves on line 1004 as well.
b) Hazard Insurance. Identify the hazard and flood insurance premiums required at closing as P.O.C. Also identify the term and to whom the premiums are paid on lines 903 and 904, respectively. If the bank is escrowing for the next year also show these reserves on lines 1001 and 1006, respectively.
2. NonPurchase Loans (refinance, home equity, home improvement):
a) Taxes.
i) If the bank is not escrowing for taxes, identify the fee and term on lines 808811 as P.O.C.
ii) If the bank is escrowing for taxes, identify the fees on line 1004.
b) Hazard Insurance.
i) If the bank is not escrowing for insurance, identify the premiums, term and to whom paid on line 903 and 904 (flood) as P.O.C.
ii) If the bank is escrowing for hazard insurance, identify the fees on line 1001 (hazard) and 1006 (flood).
First published on BankersOnline.com 11/11/02
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