What is an insured closing letter and why am I paying for it?

An insured closing letter, also called a closing protection letter, is issued on behalf of a title agent (i.e., title/settlement company) by the title insurance underwriter for the benefit of your mortgage lender...

In short, this letter is a form of insurance to protect your lender against certain acts (i.e., non-compliance with lender’s instructions, theft, etc.) committed by the title company.

As the lender must make sure that the title agent has authority to issue lender’s title insurance, this letter must be issued to the lender prior to the delivery of the lender’s closing package and instructions

Once the letter is issued and the loan is ready to be closed, the lender provides instructions to the title agent along with the documents for the borrower to sign. This letter provides assurances that the lender may be compensated for losses resulting from certain claims arising from the title agent’s negligent acts.

The fee for the letter is a pass-through cost to the borrower like the lender’s title insurance policy.

For further information, feel free to This email address is being protected from spambots. You need JavaScript enabled to view it.  Catherine Schmitt.

 

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Comments (1)

  • Peter Berk

    Peter Berk

    18 February 2015 at 09:25 | #

    Can an individual homebuyer request a CPL if they are depositing in escrow a substantial down payment with the title company prior to the closing? Thanks

    reply

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