How to Disclose Flood Insurance on TRID Documents

Industry Trends, Title Insurance

On April 12, The CFPB (Consumer Financial Protection Bureau) conducted a webinar to provide answers to FAQs for the TILA-RESPA Integrated Disclosures rule, often referred to as the TRID rule. One of the key topics covered was “what is the proper way to record flood insurance premiums on a Loan Estimate and Closing Disclosure?”

According to CFPB, the TRID rule includes flood insurance under homeowner’s insurance. More specifically, the rule says homeowner’s insurance “includes premiums for insurance against losses or damage to property” written in relation to the credit transaction. As far as the rule is concerned, flood insurance and homeowner’s insurance fall under the category “other casualty insurance.”

To disclose a flood insurance premium, the CFPB team said the applicant should record the information on the Homeowner’s Insurance line of the form located within the Estimated Taxes, Insurance, and Assessments section of the Projected Payments table. Mark the Homeowner’s Insurance box with a check and indicate whether or not it is escrowed by circling either “Yes” or “No”. If flood insurance is escrowed, record the amount in the Project Payments table.

Prepaid and Escrow

If any amount of flood insurance has been prepaid, it should be disclosed in Section F, along with all prepaid homeowner’s insurance premiums, on the Homeowner’s Insurance line of the form. Line G (Homeowner’s Insurance) of Escrow section of Other Costs should reflect the amount of flood insurance premiums in escrow.

The CFPB noted that Escrow tables found on page 4 of the Closing Disclosure should reflect flood insurance payments, but they did not specify whether the payments should be labeled as homeowner’s insurance, or, more specifically, flood insurance.
Unanswered Questions
The webinar session did not address the issue of how to properly disclose flood insurance term and payee information in the Prepaids section. The CFPB also failed to cover how to record the number of months collected, on the Escrows section when the flood insurance figure differs from the corresponding figure for hazard insurance.

 

Vanguard Title protects customers from real property title defects and forgeries by providing accurate real estate data, quality escrow services, and insurance against losses. Contact us today at either of our locations – Auburn Hills (248) 751-1000, or Brighton (810) 225-8461.