Closing Protection Letters for Title Insurance: Key Provisions, Common Issues, Recent ALTA Revisions

Description

Despite the real estate boom of recent years, the FDIC and lenders continue litigation against parties tied to alleged mortgage fraud. CPLs are often in the forefront of that litigation.

In CPLs, underwriters agree to indemnify the lender for actual losses caused by certain kinds of misconduct by the closing agent. Title underwriters often authorize closing agents to issue these letters to lenders when the closing agent anticipates issuing the underwriter's title insurance policies in the transaction. Typical CPL provisions cover the failure to follow written closing instructions, require the closing agent to obtain, but not to vouch for the validity or effectiveness of a specific document, or relate to the collection of funds due to the lender. Other standard clauses address fraud or dishonesty in handling the lender's funds or documents.

And the body of case law interpreting CPLs remains remarkably small. The CPL serves an essential function in providing lenders with assurance that title agents will properly handle their funds and documents. Understanding the CPL and its function is essential for any real estate counsel and litigators, lenders and property owners.

Listen as our authoritative panel practically guides real estate counsel in structuring enforceable CPLs for title insurance, particularly after the recent ALTA revisions.