A closing protection letter (also known as a “insured closure letter” or “CPL”) is a contract between a title insurance underwriter and a lender in which the underwriter commits to compensate the lender for actual damages incurred as a result of the closing agent’s misbehavior.
What is a CPL fee?
The three title insurance underwriters represented by John Bethell Title have set fees for Closing Protection Letters (CPL). First American Title Insurance Company, Arsenal Insurance Corporation, and Old Republic National Title Insurance Company are the companies in question. For each underwriter, the fees are the same.
The charge for each party protected by a Closing Protection Letter is $25. more particularly,
- When there is a mortgage in either a purchase or refinance transaction, a Lender CPL is $25.
Beginning Monday, July 1, 2013, John Bethell Title will begin collecting the CPL fee on all closings as follows:
- Purchase transactions including a new mortgage: $50 from the buyer (for Buyer and Lender CPLs) and $25 from the seller (for a Seller CPL.)
When the buyer/borrower obtains a second mortgage from a different lender, the buyer/borrower will be charged an additional $25 for the second lender’s CPL.
The buyer/CPL borrower’s coverage fees will appear outside the columns on the HUD-1 and will roll up into the title services block on line 1101. The seller’s CPL coverage fees will be shown on line 1109 in the seller’s column.
According to Senate Bill 370 (P.L. 80-2013), enacted in the most recent legislative session, CPLs are now required by Indiana law for purchasers, sellers, lenders, and refinance borrowers in residential transactions. A CPL protects the parties from losses resulting from misappropriation of closing funds and other issues. More information about the law may be found in a previous post, which you can find here.
What is CPL in US mortgage?
Protective Letter at the End (CPL). What is it, and why are they interested in getting one? A Closing Protection Letter provides additional protection for the Insured Party (typically the lender/buyer) against actual financial losses caused during a transaction as a result of the closing agent’s misbehavior. The CPL specifies the qualifications for coverage, the conditions that must be met, and the scenarios that are not covered. Traditionally, the closing agent was responsible for the safety of the cash, but if a title company went out of business or became corrupt, the parties to the transaction desired additional protection. They were looking for the same kind of financial security that a title policy gives. As a result, the Closing Protection Letter was born. With the Dodd-Frank Act’s numerous changes to the law, the lender may now be held directly accountable for the actions of a closing agent (see 12 U.S.C. 5514). As a result, CPLs are required in almost all transactions involving a lender. Although the conditions of each Underwriter may differ significantly, on a typical CPL, the Underwriter promises to reimburse the Insured Party…
- The closing agent does not adhere to the parties’ documented closing instructions.
- The closing agent fails to disburse the transaction monies in the manner specified by the parties in their written agreement.
- A CPL’s coverage is normally contingent on the issuance of a title insurance policy.
Should I get closing or settlement protection?
A CPL is a contract that protects your money and should always be considered. However, the letter will only cover those who are specifically mentioned in the document. If a lender requests a closing protection letter, keep in mind that, unless otherwise stated, it will solely protect the lender in the transaction. Although a title underwriter may offer a closing protection letter that protects both the buyer and the lender, this is unusual. To be protected, each party will almost always need to obtain their own CPL.
Do all states require a closing protection letter?
No, if the legislation is correctly designed. Most states, including Illinois, require title insurers to issue Closing Protection Letters on all transactions, regardless of whether they are concluded by their own branches or by agents. The customer does not pay an additional charge to close with a title agent.
What is a title commitment document?
A title commitment is a document in which a title insurer exposes any liens, defects, liabilities, and obligations that impact the subject property to all parties involved in a real estate transaction. It lays out all of the standards that must be met before a title firm may insure a title as being in good standing “a loan that is “marketable,” or a loan that is “prioritized.”
A marketable title is one that is free of reasonable doubt or defect and may be sold or mortgaged quickly. It’s a title that guarantees a buyer’s satisfaction “Despite the fact that marketable title may have certain encumbrances that a reasonable purchaser would be willing to accept, quiet and tranquil enjoyment” of the property is not guaranteed.
This assurance of a title commitment from a title business allows buyers and lenders to finalize transactions without having to wait for title policies to be issued.
It is critical for all parties to review the commitment upon receipt while preparing for a real estate deal closing. The sections of the title commitment that should be checked in order to prepare for a smooth closing are listed below.
Schedule A: This section of the commitment lays out the fundamental facts of the transaction, such as the certification date (effective date), the proposed insureds (purchaser and lender), the types and liability amounts of the policies to be issued, the estate being insured, how the title to the state is currently vested (current owner or owners and how they hold title), the legal description and address of the subject property, and the estimated title insurance charge.
- Check that all information, including the spelling of the buyer’s names, the purchase price, the sellers’ details, the property address, and the legal description, is right and fits the contract.
Schedule B-1: This section outlines the conditions that must be completed before a title policy may be granted, including releases of deeds of trust, releases of tax liens, entity or estate documentation, releases of judgments, rectification deeds, warranty deeds, and deeds of trust, among others.
- If any parties are using a Power of Attorney, make sure to obtain a copy of the POA to your closing attorney well ahead of time so they can review it.
- If the seller or buyer is a corporate entity, such as a limited liability company or a partnership, verification of signing authorization may be required.
- Multiple Deeds of Trust: A title commitment may indicate two deeds of trust on a property, even though the seller only has one loan. If this is the case, notify your closer right away so that you can get a Release of Deed of Trust from the previous lender or a Letter of Indemnity from the previous title company.
- A death certificate must be filed in lieu of the other party signing the Warranty Deed if one of the parties has passed away but the title has not cleared. For further information on how to manage a death in a real estate transaction, contact a legal practitioner.
- Owner’s Insurance on Vacant Land: An ALTA or other sort of survey may be required for this type of policy. The vendor is usually responsible for this.
Schedule B-2: This section contains the appropriate title exceptions. Seven typical exclusions, taxes, and additional burdens like as covenants, conditions, and restrictions (CC&R’s); easements, and/or mineral reservations are among the items not insured by the title firm.
Every title promise includes the seven basic exclusions, which may be eliminated or altered on the policy. Buyers should consult a real estate attorney if they have any queries about specific exceptions.
If a pledge has been altered numerous times, a dash-2 or dash-3 will be found at the conclusion of it. In any following commitments, Land Title will highlight the information that has changed to make it easy to recognize the information that has been modified.
Land Title’s Linked Commitment Distribution (LCD) system allows for the electronic delivery of a commitment. The following are some of the advantages of LCD:
- The email’s body contains a summary of the promise; a pdf of the full pledge is attached to the email.
- All commitment documents, including requirements, exceptions, plat maps, and tax certificates, have embedded links.
Do closing protection letters expire?
A closing protection letter is an agreement between a lender and a title insurance underwriter. In this agreement, the underwriter agrees to compensate the lender for genuine damages incurred as a result of the closing agent’s misbehavior. In other words, the insurance company agrees to bear the ultimate risk and back up the coverage. If the title business utilized for the closing commits fraud or handles the money or papers dishonestly, the insurance underwriter will honor this agreement and reimburse as needed.
Any title and closing agent will not cooperate with a title underwriter. There is a process of meticulous vetting to ensure that these agencies have a reputation for upholding their fiduciary obligations, thereby offering their “seal of approval” that the lender can do business with them.
The CPL is a submitted form that the Maine Bureau of Insurance has authorized and cannot be changed. From the date of the letter, it is valid for one year. However, transaction-specific data such as the loan amount, participants’ names, and so on can be changed or updated if necessary.
What is the scope of a CPL? The CPL covers loss caused solely by the following events, subject to the precise exceptions and restrictions indicated below.
(a) any failure of the Settlement Agent or the Approved Attorney to follow Your written closing instructions in the following areas:
(i)(A) the disbursement of funds required to establish the status of the land title; or (ii)(B) the disbursement of funds required to establish the status of the land title; or (ii)(C) the disbursement
(B)the Insured Mortgage’s lien’s validity, enforceability, or priority; or
(ii) procuring any document that is specifically required of You, but only to the extent that failure to do so has a negative impact on the status of the Title to the Land or the validity, enforceability, or priority of the Insured Mortgage’s lien on the Title to the Land; or
(b) the Settlement Agent’s or Approved Attorney’s fraud, theft, dishonesty, or misappropriation of your funds or documents in connection with the closing, but only to the extent that the fraud, theft, dishonesty, or misappropriation has an adverse effect on the status of the Title to the Land or the validity, enforceability, or priority of the Insured Mortgage lien on the Title to the Land.
The cost of a Closing Protection letter is $25, with the entire price going to the underwriter, and coverage is limited to closings taking place in Maine only. It’s also worth noting that a CPL can only be provided if the underwriter is simultaneously writing a title policy for the transaction. To put it another way, if a title policy is not obtained for a transaction, no CPL may or will be given.
There are various situations when the closing and title issuing are done by separate approved agents/attorneys. Only if the closing agent/attorney and the policy issuing agent/attorney both write on the same underwriter can a CPL be issued.
Of course, it should go without saying that each transaction is limited to one CPL. The buyer, the borrower, and the lender all profit from a single CPL.
* Special thanks to Ann and Tiffany from Chicago Title for their help in compiling this piece.
What is a closing service letter?
A Closing Protection Letter, or CPL (or ICL in some states), is an agreement from a title insurance company designed to safeguard the lender against concerns that may come from non-compliance with the lender’s written closing instructions, fraud, or negligence on the side of the lender.
Is a closing protection letter a finance charge?
Answer: Because the CPL indemnifies the lender for the title company’s agent’s failure to carry out the lender’s instructions for the loan closing, it would be a finance fee, as I don’t believe it comes under any of the 226.4 categories (c).
What is a closing letter?
A letter’s close is a statement or phrase used before the signature to say goodbye. This expression expresses admiration and respect for the recipient.
When you’re ready to wrap up your letter, select a complementing closure that is acceptable, respectful, and professional in order to attract the reader’s attention to your letter’s message. You can also use a close to connect the letter’s ending to the letter’s content.
When should I pay closing costs?
Closing costs are the fees associated with obtaining a loan and completing the transaction, according to Ailion.
“Attorney fees, title fees, survey fees, transfer fees, and transfer taxes are among them. Loan origination fees, appraisal fees, document preparation fees, and title insurance are also included,” he explains.
Closing expenses might be anything from 2% to 5% of the purchase price. “A buyer can bargain with the seller to have some or all of these costs paid for by the seller,” says Ailion.
When you sign your final loan documents, you must pay the closing charges. The funds will most likely be wired to escrow that day, or you will provide a cashier’s check. Personal checks will almost certainly be refused.