- November 03, 2011
- All Alabama Issuing Offices
- Closing Protection Letters
During the 2011 Regular Session of the Alabama Legislature, HB 267 was enacted. This legislation amended Alabama's monoline statute (AL Code Section 27-3-6) to specifically authorize title insurers to issue closing protection letters (CPL) and to collect a fee for the coverage. This legislation eliminates blanket CPL's. This new Act requires insurers to file the form of closing protection and establishes the minimum fees for the coverage. The form of closing protection coverage and the fees associated with the coverage are subject to review and approval by the Alabama Department of Insurance. HB 267 also requires the parties to a transaction to be provided with notice that the closing protection coverage is available under certain conditions.
II. AVAILABILITY OF CLOSING PROTECTION COVERAGE
A closing protection letter generated by or on behalf of Stewart Title Guaranty Company may only be issued to a party to a transaction in which a Stewart Title Guaranty Company policy of title insurance will also be issued.
III. NEW CPL FORMS
Commencing with transactions that close on November 1, 2011, there will be two forms of single transaction CPL's available on https://www.stewarticl.com - one that is appropriate for the lender as well as the borrower, purchaser, or lessee ( CPL1 - LENDER OR BUYER/BORROWER), and a second that is appropriate for issuance to the seller or a lessor ( CPL2 - SELLER). Specimens of both are attached for your review.
The new CPL's are designed to be issued for specific transactions and are not "blanket" CPL's. A separate CPL must be issued on each file or transaction in which the coverage is requested.
CPL1 is appropriate for issuance to the requesting lender. If the coverage is requested by the borrower, purchaser or lessee, CPL1 is the appropriate form to use to extend the coverage to the borrower, purchaser, or lessee.
CPL2 is only appropriate for issuance to the seller or lessor when the coverage has been requested by the seller or lessor.
In a purchase money transaction that does not involve financing, the purchaser and seller may separately or severally request CPL coverage. CPL1 is appropriate for issuance to the purchaser and CPL2 is appropriate for issuance to the seller.
In a purchase money transaction that is seller financed, CPL1 is appropriate for the purchaser and CPL2 is appropriate for the seller, unless the seller is an institutional lender in which case CPL1 would also be issued to the seller which is also the mortgagee.
IV. NEW CPL FEES
Commencing with transactions that close on November 1, 2011, the charge for the CPL coverage must be collected and remitted to Stewart Title Guaranty.
The fee for the CPL is applied to each party to a transaction receiving the benefit of closing protection coverage. For CPL coverage extended to a lender, the fee is $25.00. For a borrower, purchaser or lessee, the fee is $25.00. If the seller requests coverage, the fee is $50.00.
V. REPORTING/REMITTING CPL FEES
Please contact your Agency Services Manager to discuss the manner in which you should report and remit CPL fees.
VI. CPL's IN TRANSACTIONS IN WHICH YOU ARE THE ISSUING AGENT ONLY
In transactions in which you are the Issuing Agent only, and another Stewart Issuing Agent or an approved closing attorney of Stewart is actually closing the transaction, you should forward the CPL request to the ICL Administrator in Houston - Regina Jones (email@example.com). We have put this in place in an effort to remove the burden of invoicing, collecting and remitting CPL fees for closings that you do not conduct.
VII. MODIFICATIONS TO THE CPL
Please contact Stewart Legal Services, ICL Administrator on requests made to (1) modify the CPL, (2) issue a different CPL, (3) issue a CPL to another party that is not the lender, borrower/purchaser/lessee, or seller/lessor, or (4) reflect a different amount for a transaction that exceeds $5 million.
VIII. NOTICE OF AVAILABILITY
The Act requires that, in certain cases, the parties to a transaction must be provided with notice of availability of closing protection coverage in the case of the transfer of an ownership or possessory interest. The recommended form of the Notice of Availability is provided herewith.
Generally speaking, the Notice of Availability is required when title insurance is being provided to one or more parties AND the lender has not requested closing protection prior to the closing.
While the Alabama Department of Insurance has taken the position that the notice of availability is not required in transactions involving a refinance or other transaction limited to just an owner and a lender, you should nonetheless obtain the written election of coverage for both parties with the Notice of Availability if the lender does not request closing protection coverage prior to closing or within the closing instructions.
B. CASH TRANSACTIONS
The Notice of Availability is always required in transactions not involving a lender and in which one or more policies of title insurance will be issued. Therefore, the notice of availability of the closing protection coverage will always be required in cash sales if a Stewart owner's policy will be issued to the purchaser.
C. TRANSACTIONS INVOLVING THE SALE OF PROPERTY THAT IS FINANCED BY AN INSTITUTIONAL LENDER
If a lender does not request a CPL in advance of closing or as part of the closing instructions, the notice of availability must be provided to all of the parties to the transaction, including the lender. The parties must execute the Notice of Availability and elect whether or not each desires closing protection coverage.
D. OWNER-FINANCED SALES
In transactions in which the seller is not an institutional lender, but is financing the sale of the real estate to the purchaser, the Notice of Availability of closing protection coverage would be required.
E. CURE FOR THE FAILURE TO GIVE THE REQUIRED NOTICE
If the Notice of Availability is required in a transaction and, through error or inadvertence, it is not provided prior to or at closing, the omission can be cured by sending the notice to the party entitled to receive it at that party's last known address by certified mail, return receipt requested.
IX. CPL FEES, THE GFE AND THE HUD SETTLEMENT STATEMENT
These fees will affect Good Faith Estimate calculations. I recommend that you begin contacting your lender clients now and begin making those adjustments.
The CPL fee will appear as a separate line item on the settlement statement. Please contact your software provider to update your system with these new fees.
Issuing Agents using AIM for Windows should contact Property Info Customer Care to get the CPL fees implemented in their AIM system.
We have tried to anticipate questions and address them herein. Please do not hesitate to call on us if you encounter a problem requiring a solution or if you have a question. We are always happy to assist.
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.