3.20 Closing Protection Letters

3.20.1

In General

Closing protection letters set forth the basis and extent of the responsibility the Company is willing to assume in regard to closings and escrow closings provided by its agents.

The following forms are the only Insured Closing Service letters that can be issued in the State of Texas.

3.20.2

Form Of Closing Protection Letter - Lender

STEWART TITLE GUARANTY COMPANY

Date:

Name and Address of Addressee:

Re: Closing Protection Letter

Issuing Agent:

Dear Madam or Sir:

In response to your request, Stewart Title Guaranty Company, a Texas Corporation with principal office in Texas at 1980 Post Oak Blvd., Houston, Texas 77056 (the “Company”), offers to you, provided that a mortgagee policy of title insurance issued by the Company has been specified and requested by you in connection with the particular closing, the following described protection with respect to the closing of your real estate loans by the Company's licensed Texas agent or licensed Texas direct operation during the effective term hereof.

The Company will replace your settlement funds that are lost after receipt of such funds by such licensed Texas agent as a direct, proximate result of the fraud or dishonesty of such licensed Texas agent or licensed Texas direct operation.

If you obtain a Commitment for Title Insurance from the Company or its licensed Texas agent or licensed Texas direct operation before your closing instructions and your settlement funds are received by such licensed Texas agent or licensed Texas direct operation, the Company will replace your settlement funds that are lost as a direct, proximate result of the failure of such licensed Texas agent or licensed Texas direct operation to comply with your written closing instructions received by it prior to closing to the extent only that such written closing instructions are not inconsistent with such Commitment for Title Insurance and to the extent only that such written closing instructions are not inconsistent with the documentation required in the closing of real estate loans. The Company does not assume any responsibility for the preparation of any of such documentation.

Notwithstanding your instructions to such licensed Texas agents or licensed Texas direct operations in regard to the disbursement of funds, nothing herein contained shall be construed as imposing liability on the Company for unfiled Mechanic's and Materialmen's Liens during the period of construction.

The Company will not be liable for loss or impairment of your settlement funds in the course of collection or on deposit with a bank for disbursement due to bank failure, insolvency or suspension, except such as shall be as the direct result of the failure of such licensed Texas agent or licensed Texas direct operation to comply with your written instructions to deposit the funds in a particularly named bank.

The Company shall not be liable hereunder for any loss or expense you sustain (1) arising in whole or in part as a result of the fraud, dishonesty or negligence of your employee, agent or attorney, (2) as a result of your settlement or release of any claim without the written consent of the Company, or (3) arising as a result of any matters created, suffered, assumed or agreed to by you or known to you.

The Company shall not be liable on account of any “usury”, “consumer credit protection”, “truth-in-lending”, or similar law or on account of the Flood Disaster Protection Act of 1973, as amended, or on account of the Real Estate Settlement Procedures Act of 1974, as amended, nor shall this letter be construed as authorizing the licensed Texas agent, licensed Texas direct operation or any other representative of the Company to exercise any discretion in your behalf, to undertake any responsibility in your behalf or to undertake your performance in whole or in part with respect to any of the laws referred to above.

The Company shall not be liable hereunder unless notice of claim in writing is received by the Company at its principal office within twelve (12) months after the date YOU DISCOVER OR SHOULD HAVE DISCOVERED THAT YOUR WRITTEN CLOSING INSTRUCTIONS WERE NOT COMPLIED WITH AND IN ANY EVENT WITHIN TWO YEARS FROM THE DATE of mailing of your written closing instructions.

Whenever the Company shall have settled a claim hereunder, the Company shall be subrogated to all your rights and remedies against any person or property with respect to such claim, all right of subrogation shall vest in the Company unaffected by any act by you or by the Company, and you shall permit the Company to use your name in any transaction or litigation involving such rights or remedies.

The protection offered will be effective as to matters arising after receipt of a copy of this letter at the said principal office of the Company bearing the signature of your duly authorized officer in the space provided below, will supersede all prior agreements, will extinguish all duties of the Company with respect to the loss of your settlement funds except as expressly set forth herein, and will be binding upon you and the Company until at the sole discretion of the Company notice of termination is mailed to you at your address as indicated above.

This form, promulgated by the Texas Department of Insurance in accordance with the Texas Title Insurance Act, as amended, is the only form permissible for Insured Closing in the State of Texas.

Sincerely yours,

Stewart Title Guaranty Company

By ______________________________

_________________________________
(Title)

ACCEPTED AND AGREED TO

this the ________ day of ___________________, 20 _____

 By:__________________________________

Form T-50 (STG Form-003/TXINSCL/003)

3.20.3

Form of Closing Protection Letter – Purchaser/Seller

STEWART TITLE GUARANTY COMPANY

Date:

Name and Address of Addressee:

Re: Closing Protection Letter

Issuing Agent:

Gentlemen:

In response to your request, Stewart Title Guaranty Company, a Texas corporation, with its principal office in Texas at 1980 Post Oak Blvd., Houston, Texas 77056, (the “Company”), offers to you, provided that an owner policy of title insurance issued by the Company has been specified and requested for the purchaser in connection with the particular closing, the following described protection with respect to the closing of your real estate transactions by the Company's above named Texas Agent during the effective term hereof. The term, “Texas Agent”, shall include a direct Operation of the Company if the name of the direct operation is set forth in the “RE” paragraph above.

The Company will replace your settlement funds that are lost after receipt of such funds by such Texas Agent as a direct, proximate result of the fraud or dishonesty of such Texas Agent, provided that a Commitment for Title Insurance from this Company or its Texas Agent is issued to the purchaser before closing by such Texas Agent.

Notwithstanding your instructions to such Texas Agent in regard to the disbursement of funds nothing herein contained shall be construed as imposing liability on the Company for unfiled Mechanic's and Materialmen's Liens.

The Company will not be liable for loss or impairment of your settlement funds in the course of collection or on deposit with a bank for disbursement due to bank failure, insolvency or suspension, except such as shall be as the direct result of the failure of such Texas Agent to comply with your written instructions to deposit the funds in a particular named bank.

The Company shall not be liable hereunder for any loss or expense you sustain (1) arising in whole or in part as a result of the fraud, dishonesty or negligence of you or your employee, agent or attorney, (2) as a result of your settlement or release of any claim without the written consent of the Company, or (3) arising as a result of any matters created, suffered, assumed or agreed to by you or known to you.

The Company shall not be liable on account of any laws excluded from owner policy coverage pursuant to the promulgated Conditions and Stipulations and Exclusions from Coverage of the Owner Policy of Title Insurance, or on account of the Real Estate Settlement Procedures Act of 1974, as amended, nor shall this letter be construed as authorizing the Texas Agent, or any other representative of the Company, to exercise any discretion in your behalf, to undertake any responsibility in your behalf, or to undertake your performance in whole or in part with respect to any of the laws referred to above.

The Company shall not be liable hereunder unless notice of claim in writing is received by the Company at its principal office in Texas within twelve (12) months after the date of Closing the Transaction.

Whenever the Company shall have settled a claim hereunder, the Company shall be subrogated to all your rights and remedies against any person or property with respect to such claim, all right of subrogation shall vest in the Company unaffected by any act by you or by the Company, and you shall permit the Company to use your name in any transaction or litigation involving such rights or remedies.

The protection offered will be effective as to matters arising after receipt of a copy of this letter at the said Texas principal office of the Company bearing the signature of you or your duly authorized officer in the space provided below; will supersede all prior agreements; will extinguish all duties of the Company with respect to the loss of your settlement funds except as expressly set forth herein; and will be binding upon you and the Company until, at the sole discretion of the Company, notice of termination is mailed to you at your address as indicated above. A rebuttable presumption of receipt by the Company, of a copy of this letter bearing the signature of you or your duly authorized officer, may be established by: (i) the signed green return receipt card evidencing proof of receipt of this letter by certified or registered mail; or, (ii) a receipt evidencing delivery of this letter by an independent express mail delivery service.

Pursuant to Article 9.49 of the Texas Insurance Code, only real property transactions in excess of $250,000.00 are eligible for insured closing service protection for the purchaser/seller. Therefore, this letter shall be null and void if the sales price of the real property (on any single real estate transaction intended by the recipient to be covered by this insured closing service letter) is $250,000.00 of loss to any claimant which constitutes a covered claim pursuant to Article 9.49 of the Code.

This form promulgated by the Texas Department of Insurance in accordance with the Texas Title Insurance Act, as amended, is the only purchaser/seller form permissible for Insured Closing in the State of Texas.

Yours very truly,

STEWART TITLE GUARANTY COMPANY

By_____________________________________
Printed Name:____________________________
Title:___________________________________

ACCEPTANCE BY PURCHASER/SELLER ADDRESSEE

ACCEPTED AND AGREED TO
this the ______ day of _____________, 20 _____

By______________________________________
Printed Name:_____________________________
Title:____________________________________

Form T-51 (STG Form 080/Purchaser/Seller ICL080)

 

3.20.4

Closing Instructions

The closing protection letter does not create an agency agreement between the underwriter and the issuing office or settlement agent with regard to closing or settlement. Consistent with our underwriting agreements with closing offices, the underwriter does not authorize the issuing office to act on its behalf in connection with escrow or closing functions.  The purpose of the closing protection letter, subject to its various terms, is to provide protection against loss of settlement funds by the issuing office because of dishonesty or failure to follow closing instructions.

The closing protection letter does not afford coverage as to various other matters (which you also should be wary of agreeing to verify), such as the following:

  • Whether the documents comply with all applicable laws. This may imply that the note is not usurious (which we do not insure), that the truth-in-lending disclosure complies with federal law, and that other applicable disclosures under state or federal law have been properly given.
  • Whether the transaction violates applicable law or regulation. This may extend to environmental laws or regulations, lender regulations and zoning requirements, none of which are insured by the title policy.
  • Facts regarding the closing, the property, or parties to the closing. You should only agree to collect or receive documents; you should not become a factfinder as to the validity or correctness of such documents or facts.

Procedural Rule P-35 prohibits a title insurance agent or title insurance company from certifying, assuring, or guarantying anything except that: the transaction has closed and funded, documents have been recorded, an insured closing letter has been issued, and documents are true copies of those recorded.