Based on a conversation we had with a CFPB attorney, we believe that a creditor is not required to disclose property taxes and homeowner’s insurance premiums in this situation.

Regulation Z requires the Loan Estimate and Closing Disclosure to itemize “amounts to be paid by the consumer in advance of the first scheduled payment” as “Prepaids.” The amounts to be itemized include “homeowner’s insurance premiums [that] are to be paid by the consumer at consummation” and “the number of months for which property taxes are to be paid by the consumer at consummation and the total dollar amount to be paid by the consumer at consummation for such taxes.”

In practice, these requirements are ambiguous — on the one hand, the property taxes and homeowner’s insurance premiums are required to be paid “in advance” of the first loan payment, which suggests that they should be disclosed; if they remained unpaid, your institution would be unlikely to close the loan. But these amounts are not paid “at consummation” (except in rare cases where the refinancing occurs on or very close to the property tax due date), which suggests that they need not be disclosed.

Due to this ambiguity, we submitted this inquiry to the CFPB and were contacted by a CFPB attorney, who provided his informal guidance. He interpreted Regulation Z as not requiring disclosure of homeowner’s insurance premiums or property taxes in this situation because they will not be paid “at consummation.”

The CFPB attorney pointed out other fact situations that would require disclosure in a refinancing — for example, if property taxes or insurance premiums are delinquent as of the consummation date, or if the creditor is requiring a year’s worth of property taxes to be prepaid. But in this situation, where the property taxes and homeowner’s insurance premiums are current, and their due dates do not line up with the loan consummation date, then they do not need to be disclosed on the Loan Estimate or Closing Disclosure.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.37(g)(2), Loan Estimate (“Prepaids. Under the subheading ‘Prepaids,’ an itemization of the amounts to be paid by the consumer in advance of the first scheduled payment, and the subtotal of all such amounts, as follows: (i) On the first line, the number of months for which homeowner’s insurance premiums are to be paid by the consumer at consummation and the total dollar amount to be paid by the consumer at consummation for such premiums, labeled ‘Homeowner’s Insurance Premium ( __ months).’. . . (iv) On the fourth line, the number of months for which property taxes are to be paid by the consumer at consummation and the total dollar amount to be paid by the consumer at consummation for such taxes, labeled ‘Property Taxes ( __ months).’ . . .”)

• Official Interpretations, Regulation Z, 12 CFR 1026, Paragraph 37(g)(3), Comment 1 (“Examples of periodic charges that are disclosed pursuant to § 1026.37(g)(2) include: (i) Real estate property taxes due within 60 days after consummation of the transaction; (ii) Past-due real estate property taxes; (iii) Mortgage insurance premiums; (iv) Flood insurance premiums; and (v) Homeowner’s insurance premiums.”)