Is the Borrower required to pay impounds? Can impounds be changed?

A lender can choose to hold property insurance premiums in an impound account. There is an option in the documents to collect insurance premiums for impound.

Section D of the Loan Agreement deals with Borrower Covenants. 

Section D.2 (or thereabout) of the Loan Agreement will identify the type and acceptability of insurance, as required by the Lender, to be applied on the loan. GoDocs hazard insurance provision is found in section D.2 (a) of our Loan Agreement: these hazards include, fire, windstorm, and allied perils and at lenders request, various other types of hazard insurance may be required: earthquake insurance or flood insurance. In section D.2 (f) of the loan agreement (screenshot below) you will see that in the event of loss, the borrower must notify the lender immediately in writing.  In that situation Lender is appointed as attorney-in-fact to "collect and receive proceeds of the property damage insurance".  

Below is the "standard" GoDocs language regarding property insurance.

Section D.4 (or thereabouts) Deposits for Taxes, Insurance and Other Charges, specifically deals with impounds.

GoDocs language regarding impounds for taxes and insurance allows them to be identified as COLLECT, DEFERRED or otherwise changed.

Insurance premiums impound collected:

Insurance premiums impound not collected:

Section F.1(a) of the Loan Agreement states that "any failure by borrower to pay or deposit when due any amount required by the Note, the Mortgage, this Loan Agreement or any other Loan Document" is an Event of Default.
If the Borrower fails to pay the Imposition Deposits as required by section D.4(a) that is an Event of Default pursuant to F.1(a).

Our documents do not have a generic cure provision per se. Section F of the Loan Agreement, specifically section F.1(f), states that there is a 30-day period provided to Borrower to perform certain obligations under the Loan Agreement for which it is delinquent. This section F.1(f) is subject to carve-outs (e.g., sections F.1(a)-F.1(e), which include such exceptions as Borrower’s failure to pay any amount required under the Note and failure by Borrower to maintain the insurance coverage required by section D.2.) 

If the Lender desires to waive the otherwise collected impounds, the lender can do that at their discretion as an administrative/servicing matter.

If the impounds were initially waived (DEFERRED), the lender could impose them if an event of default occurs per section D.4(f) of the Loan Agreement.

GoDocs hazard insurance provision is found in section D.2 (a) of our Loan Agreement: these hazards include, fire, windstorm, and allied perils. Also, at lenders request, various other types of hazard insurance may be required such as earthquake insurance or flood insurance. In section D.2 (f) of the loan agreement (screenshot below) you will see that in the event of loss, the borrower must notify the lender immediately in writing.  In that situation Lender is appointed as attorney-in-fact to "collect and receive proceeds of the property damage insurance".  

 

Section G (or thereabout) of the Deed of Trust or Mortgage identifies that: "... Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including...(c) procurement of the insurance required by section D.2 of the Loan Agreement..." Further, "Any amounts disbursed by Lender ... shall be added to, and become part of, the principal component of the Indebtedness..."

Additionally, GoDocs loan orders with collateral property in California will include a separate Hazard Insurance Disclosure to comply with California Civil Code Section 2955.5.

Here is a video tutorial should your borrower want to impound property taxes and insurance:

How to Add Property Taxes & Insurance Impounds