Hazard Insurance Costs on the GFE & HUD1

Question:

Are we required to include the cost of hazard insurance on GFE's and HUD1's? Does it matter that we do not require insurance payments? to be escrowed?

Answer:

To give you a short answer, "Yes". The Chicago Fed recently clarified the requirements under RESPA as follows:

Hazard Insurance Premiums
Look to the legal obligation (generally the note) to determine whether hazard insurance is required or truly optional.

If the note (or other legal obligation) is silent on hazard insurance and the insurance is truly optional, an annual premium would not be disclosed on the GFE or HUD1. If the note (or other legal obligation) includes terms that require hazard insurance or that allow the creditor to force place the hazard insurance, the annual premium must be disclosed on the GFE and HUD1.

If your bank escrows:
Disclose the annual premium (if the premium cannot be determined, it must be disclosed as an estimate) on line 903 of the GFE and Section L line 903 of the HUD1, and disclose the escrow reserves on line 1001 of the HUD1.

If your bank does not escrow:
Disclose the annual premium (if the premium cannot be determined, it must be disclosed as an estimate) on line 903 of the GFE and Section L line 903 of the HUD1. If no payment is required at closing, disclose the annual premium as "Paid Outside of Closing" (P.O.C.).

Property Taxes
Real estate taxes must be disclosed on the GFE and HUD1 in an annual amount. This is a separate entry from any prorated taxes that are required in the

If your bank escrows:

close the annual amount of the taxes (if the amount cannot be determined, it must be disclosed as an estimate) on lines 808811 (as needed) of the GFE and Section L lines 808811 (as needed) of the HUD1, and disclose the escrow reserves on Section L lines 1003 and 1004 (as appropriate) of the HUD1.

If your bank does not escrow:

Disclose the annual amount on lines 808811 (as needed) on the GFE and Section L lines808811 of the HUD1.

If no payment of taxes is required at closing, the annual tax liability would be disclosed as "Paid Outside of Closing" (P.O.C.). If the amount cannot be determined, it must be disclosed as an estimate.

If taxes are assessed on a period other than 12 months,

The creditor must estimate the annual amount, and the annual amount must be marked as an estimate.

Here's the link to the Chicago Fed bulletin.

First published on BankersOnline.com 5/07/01