As a bank, we are exempt from escrowing flood insurance (did not have a policy to escrow, etc. ). We usually sell loans on the secondary market and those investors require the escrow of flood insurance. Recently we have started retaining some mortgage loans that we would typically sell on the secondary market, so we have had to start escrowing for these, as they will later be sold. We recently closed one loan that is located in a flood zone, and missed disclosing flood insurance in escrow. Taxes and hazard insurance are currently escrowed. We need to add flood insurance to escrow, but are unsure how to handle.
Do we need to redisclose the closing disclosure and have the flood insurance show in escrow? Or can we just add the flood insurance without redisclosing?
If we can just add the flood, do we need to run a short year analysis to account for the extra money needed or do we run the analysis at the normal annual date?
You should redisclose the Closing Disclosure showing the correct numbers on page one in the projected payments section and on page two in the other costs section (initial deposit). You should also provide the initial escrow disclosure required by RESPA.