Listing Taxes on RESPA Forms

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Question:

Our compliance officer has indicated taxes and insurance should be listed as a POC on the HUD and Good Faith Estimate. Since property taxes in our area are paid in arrears and verification is obtained that taxes for previous periods have been paid prior to closing, why then list as a POC? If this is the case, why wouldn't we list taxes for all previous years since they are also required to be paid as a condition of the loan?

Answer:

To the best of my knowledge, because of the property assessment timing, all real estate taxes are paid in arrears, or at least all the states I have dealt with are. Your loan and/or security agreement requires the current year's taxes that are payable be paid as a condition of the loan and as you said generally those are already paid and since they are not paid in the closing then they will be shown as POC.

Any prior year's taxes that are unpaid will be paid one of two ways. You will either pay them at the closing from the loan proceeds and list them on the settlement statement, or you will require they be paid current before the closing and in that case you are going to list them on the settlement statement as POC.

First published on BankersOnline.com 8/11/08