What Is a Closing Protection Letter from Title Company

More than ever, almost no lender will hire a securities agent as a closing agent without their insurer issuing a closing protection letter. Three states have strict liability laws. Laws differ from each other. Illinois recently passed the most copied law of its kind, which the Insurance Department wrote and imposed on the industry without its input or comment. In 2014, TTIGA collected a special additional fee to reimburse policyholders when underwriter Southern Title Insurance Company went bankrupt due to theft by Texas securities agents. A surplus was realized for the South Title disaster, so the payment of fees was suspended in 2015. Ninety-year-old Southern Title Insurance Company closed in September 2011 after suffering significant LPL losses in Texas. Securities agents in Texas paid additional fees to cover these losses after the subscriber went bankrupt, as shown below. New Illinois Public Act 96-1454 (Act), which makes changes to the Title Insurance Act, requires the policyholder, not the title insurance agent, to issue all final letters of protection. In addition, it requires that PCLs be issued not only to lenders, but also to buyers, sellers and owners as part of a refinancing. CPLs must be issued when the title insurance agent or title insurer completes closing.

Therefore, if there is an ATG securities insurance obligation for a transaction and an ATG agent or a relative independent of ATG completes the closing, ATG must issue CPLs to all parties to the transaction. Both the bond and the financial statements must be ATGs in order for ATG to issue PLCs (see Authority to Conduct Non-ATG Financial Statements). The member`s office or independent ATG closer prints the CPLs for the buyer and seller and delivers them to these parties at closing. If there are multiple sellers or multiple buyers/borrowers, they are all named on a seller`s letter and/or on a lender/buyer/borrower`s letter. You can print additional copies if necessary to ensure that all sellers or buyers/borrowers have their own copy. Other ideas are a state-run guarantee fund or statutory body, a law that makes a title insurer strictly responsible for theft by a securities agent, and centralized loan financing by title insurers. Some title agents have proposed adopting a strict liability law instead of a final letter of protection law. Lenders don`t see this as alternative solutions.

They are still calling for the closure of protection letters in the three states with strict liability laws. One reason for this is that a closure protection letter covers matters other than the theft of money by the closing officer. In the Florida FDIC decision discussed above, the closing agent did not steal any money, but the FDIC collected the full amount of the loan from the title insurer under the closing protection letter. The introduction of a Texas system for closures would require the adoption of a much broader set of rules than the mere creation of a guarantee fund. Currently, Michigan does not regulate escrow accounts, the closing process, or license closing agents. The Texas TTIGA system is part of Texas` regulation of title insurance and business closures. These regulations are the most comprehensive and stringent in the United States. They are very different from Michigan`s regulations, which do not even cover the issue of closures and settlement services.

No. The title insurer pays the parties protected under the closing protection letter. Excluded from this list are sellers, refinancing borrowers, real estate agents or other service providers who should have been paid from the final money. However, the laws that make the fee mandatory do not require such an explanation from the nearest one. The accusation of the latest protection letter appears on the HUD-1 (soon renamed Closing Disclosure Statement). The nearest one merely declares that the letter is required by law and offers protection against certain definitive acts. It`s best to have a team when it comes to real estate. Linda has her team on site. You need to have a competent fiduciary so that simple and difficult transactions can be concluded.

CPL is just another layer of protection. Thank you for sharing this important information with the public. The intent of this act is to ensure that all parties to the financial statements have recourse against a financially solvent company for the loss of funds or terminal documents as set out in the letter. It covers the actions of ATG agents as well as those of your employees and covers not only fraud, but also negligence in case your office is unknowingly involved in the fraud of others. Since the coverage applies to the actions of title insurance agents, the law prohibits the conflict of interest that would result from the issuance of the CPA or the collection of a premium for it by the agent. But what about sellers? Were they simply hanging to dry unprotected? We`ll cover this in a future article, so keep an eye on our blog, subscribe to our newsletter below! Yes. Have several. The National Association of Insurance Commissioners is so concerned about the ability of title insurers to pay for future claims that it has formed a task force to investigate the matter. He published the white paper Title Escrow Theft and Title Insurance Fraud.

The “failure” and “dishonesty” of the transfer of ownership undoubtedly involved at least a “minimal causal link” with the “actual loss” of the former bank. Due to Property Transfer`s “failure” to follow the old bank`s closing instructions, i.e. as a result of Property Transfer`s “failure” and “dishonesty”, the former bank financed two loans to an unqualified “straw buyer” who had no financial investment in the units and significantly exaggerated his income in his loan applications. Although the Old Bank received a first-rate privilege over each unit, the Old Bank did not have the negotiated advantage of an honest and hard-working closing agent and borrower who both invested in the units and was motivated to repay the loans. Although the Old Bank was able to seize each unit and could have chosen to make default judgments against Ray, an optional alternative remedy serves to influence at most the extent of the damage, not to prove the absence of a minimal causal link between a corrupt transaction and the resulting loss of a lender. .

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