Fees for Closing Protection Letters (CPL) have been established by the three title insurance underwriters represented by John Bethell Title. Those companies are First American Title Insurance Company, Arsenal Insurance Corporation and Old Republic National Title Insurance Company. The fees are identical for each underwriter.
The Closing Protection Letter fee is $25 for each party protected. More specifically,
- $25 for a Lender CPL when there is a mortgage in either purchase or refinance transactions.
- $25 for a Buyer CPL in all purchase transactions.
- $25 for a Seller CPL in all purchase transactions.
- $25 for the Borrower/Owner CPL in refinance transactions.
John Bethell Title will begin collecting the CPL fee on all closings beginning Monday, July 1, 2013 as follows:
- Purchase transactions with a new mortgage: $50 from the buyer (for the Buyer & Lender CPL’s) and $25 from the seller (for a Seller CPL.)
- Cash purchase transactions: $25 from the buyer and $25 from the seller.
- Refinance transactions: $50 from the borrower/owner.
When the buyer/borrower is obtaining a second mortgage from a different lender, an additional $25 will be collected for the CPL for the second lender.
CPL coverage fees from the buyer/borrower will be shown outside the columns on the HUD-1 and roll up into the title services block on line 1101. CPL coverage fees for the seller will be shown inside the seller’s column on line 1109.
CPL’s are now required by Indiana Law for buyers, sellers, lenders and refinance borrowers in residential transactions pursuant to Senate Bill 370 (P.L. 80-2013), enacted in the most recent legislative session. A CPL indemnifies the parties against loss due to the misappropriation of closing funds and other matters. The law is described in more detail in a previous post that you can link to here.
Senate Bill 370 (P.L. 80-2013), enacted in the most recent legislative session, mandates that Closing Protection Letters (CPL) be provided to all lenders, buyers, borrowers in a refinance and sellers in every residential transaction closed by a licensed title insurance agent or title insurance underwriter branch office. The effective date of implementation is July 1, 2013.
The legislation also mandated that a fee (premium) be collected for each such letter. The entire fee is paid to the title insurance underwriter issuing the CPL. Title insurance underwriters must have their fee and CPL form approved by the Indiana Department of Insurance (DOI) prior to June 24, 2013. The DOI will only approve the fee if they determine that it is reasonable in light of the risk being assumed by the title insurance underwriter.
Here’s more specifically what you need to know about this new law. This is what we know now. Details may change prior to implementation of the new law.
What is a Closing Protection Letter (CPL)?
A CPL is an indemnification from a title insurance underwriter to the parties (lender, buyer or borrower and seller) in the transaction regarding acts of the closing agent. It indemnifies the parties against certain damages and title losses as a result of the closing agent failing to follow the instructions of the parties. The most important indemnification is against loss resulting from the closing agent misappropriating the party’s funds.
Lenders have always required CPL’s, haven’t they?
Yes, lenders have always required CPL’s. Currently though, the indemnification only runs in favor of Lenders and Buyers or Borrowers in transactions where there is a mortgage. (Some agents, John Bethell Title included, also secured CPL’s for Buyers in cash transactions.) The new requirement extends CPL indemnification to sellers as well. The DOI has advocated for this change for several years.
Why does the law mandate a fee?
which is actually an insurance premium, (see below) is required because the new law creates obligations on the title insurance company outside of the title insurance policy that is issued. Title insurance underwriters were willing to support this law only if they were allowed to charge for the additional risk being assumed.
What will the fee be?
Until the DOI approves the fee, we will not know. Illinois has had a similar law for several years. The fee there is as much as $100 and is customarily split between buyer and seller. It is unlikely that the fee will exceed $100. And it may be less. As soon as we know what the fees will be, we will update this post. It is likely that we will not know for certain until after June 24th.
Why is the fee mandatory? Can the CPL coverage be declined?
The CPL coverage cannot be declined. The DOI wants all parties to a transaction indemnified under a CPL. Over the last few years there have been occassional incidents of dishonest title insurance agents or their employees misappropriating monies from the agent’s escrow account. It doesn’t happen very often, but when it does, many parties are affected―some without any recourse to recover their losses.
Does the closing agent get a portion of the fee?
No, the entire fee is paid to the title insurance underwriter. For closings that John Bethell Title conducts, that would be First American Title Insurance Company, Arsenal Insurance Corporation and Old Republic National Title Insurance Company.
How will the CPL fee be collected?
The fee will be shown on the HUD-1 and collected at closing. It will be remitted to the title insurance underwriter at the same time that the policy premium is remitted. The fee will be itemized in the 1100 section on page 2.
Since the fee is premium, it will be shown seperately and not roll up into line 1100 on purchases but will roll up on refinances. The most recent information available is that the DOI does not consider the fee for the CPL to be premium but hasn’t yet come to a final decision. (JB 6/20/13)
As more details become available, John Bethell Title will post updated information here. Check back periodically.
Combining the RESPA based Good Faith Estimate with the TILA disclosure required by the Truth In Lending Act into one easy to understand form is one of the many mandates given the recently created federal Consumer Finance Protection Bureau. I wrote last week in my February Mortgage Market Share commentary about an American Land Title Association suggested version of such a combined form. (click archives button on right sidebar)
Others are also noticing that the current form of GFE falls short in providing consumers with all the information that they require to make intelligent decisions. Today’s New York Times contains an article about other problems with the form. It’s a good read and here’s the link.