Prepaid items may include flood and hazard insurance premiums, Mortgage Insurance Premiums (MIP), real estate taxes, and per diem interest. They must comply with the requirements of the Consumer Financial Protection Bureau (CFPB).
Prepaid items may be included in the mortgage for Simple Refinance, Rate and Term Refinance, and Cash-Out Refinance transactions. Closing costs, prepaid items and other fees may not be applied towards the borrower’s Minimum Required Investment (MRI).
For additional information see Handbook 4000.1 II.A.4.d.i; II.A.4.d.i.(B)(2)(c); II.A.5.c.i; II.A.5.c.i.(B)(2)(c); II.A.8.d. available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh