When preparing a Loan Estimate, what is the best practice for disclosing the estimated property tax and escrow information for a purchase loan? Should we call the county for the most recent assessment, or is the most recent tax bill sufficient? In some instances, a multiplier has been added since the most recent tax bill was printed, resulting in increased taxes.

We recommend obtaining publicly available tax information directly from the county, when possible.

Regulation Z requires that estimated property taxes on a Loan Estimate must reflect the “taxable assessed value of the real property securing the transaction after consummation.” Property tax estimates are not subject to a tolerance — meaning they are treated as having been disclosed in good faith, even if the borrower’s actual property tax payments exceed the disclosed tax estimate. However, an estimate of property taxes still must be “consistent with the best information reasonably available to the consumer at the time it is disclosed.”

The CFPB has discussed the obligation to use the best information reasonably available when estimating property taxes during a TRID webinar, as follows: “Often, property tax information is publicly available . . . . [A]n estimate that takes the publicly available information into account is likely required to meet the best information reasonably available standard.” (A transcript of the webinar is linked to below.) Accordingly, the best practice when estimating property taxes would be to check county records for publicly available information, rather than relying on a potentially out-of-date property tax bill.

For resources related to our guidance, please see:

Regulation Z, 12 CFR 1026.37(c)(5) (“[E]stimated property taxes and homeowner’s insurance shall reflect: (i) The taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property, if known, whether or not such construction will be financed from the proceeds of the transaction, for property taxes; . . .”)

Regulation Z, 12 CFR 1026.19(e)(3)(iii)(E) (“An estimate of the following charges is in good faith if it is consistent with the best information reasonably available to the consumer at the time it is disclosed, regardless of whether the amount paid by the consumer exceeds the amount disclosed under paragraph (e)(1)(i) of this section: . . . (E) Charges paid for third-party services not required by the creditor. . . .”)

Official Interpretations, Regulation Z, 12 CFR 1026, Paragraph 19(e)(3)(iii), Comment 3 (“Differences between the amounts of estimated charges for property taxes or services not required by the creditor disclosed under § 1026.19(e)(1)(i) and the amounts of such charges paid by or imposed on the consumer do not constitute a lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. . . .”)

Buckley Sandler Transcript, CFPB TRID Webinar (April 12, 2016), page 36 (“Whether the amount of property taxes disclosed on the Loan Estimate reflects the best information reasonably available at the time the disclosure is provided to the consumer is a factual question. However, it would be unlikely that an estimate of zero or a rough guess would ever meet that standard. Often, property tax information is publicly available. While it may not be possible for a creditor to ascertain the consumer-specific property tax obligation that will be due on a future date, an estimate that takes the publicly available information into account is likely required to meet the best information reasonably available standard.”)