Closing Protection Letter

Closing Protection Letter (CPL)

A document issued by title insurance underwriters that indemnifies a third party, generally a lender, as to one of its policy-issuing agent’s escrow practices. In other words, title companies insure title but this letter also extends certain assurances as to an agent’s behavior in closing real estate transactions.

Who Requires One? Some national and local mortgage lenders.

When is it Required? The lender requires the CPL before they will wire loan funds to Escrow. In some cases the lender will only know that the CPL is required in the final underwriting stage which is quite often disclosed on or near the closing date.

Why Do They Want It? Most large national lenders work with only title companies or attorneys throughout the United States. Washington State is the only state that allows Limited Practice Officers (LPO) to prepare a limited selection of legal documents, and the LPO does not have to work for a title company or attorney. Since some lenders may not feel comfortable wiring loan funds to LPO’s who work for independent escrow companies, they often require this added protection and will only wire their funds to the title company that is issuing the title insurance.

Do All Lenders Require a CPL? No.

Because of regulatory issues, Title Insurance Companies can only issue a CPL as to one of their own policy-issuing agents, and only when they are issuing the title insurance. They are unable to issue a CPL for independent escrow companies or title companies that are not their agents. If a transaction is being closed by an independent escrow or a non-agent, and if a CPL is required by the lender, a SUB ESCROW must be opened with the issuing title insurance company’s agent to accept lender loan funds and to payoff all liens against the property, including all loans, liens, judgments and taxes as disclosed on the preliminary title commitment.

After all liens and title-related fees have been paid, including title premiums, recording and sub-escrow fees, the balance of the funds held by the agent title company are wired to the independent escrow or non-agent escrow to disburse the remaining funds as proceeds, credit card payments, brokers fees, real estate commissions, hazard insurance, etc.

Additional fees: Sub-Escrows Fees can range from $150 to $250 depending upon the title company.

Please note: Some title companies offer a lower base fee for Sub Escrows, however they generally charge additional fees for mailing payoffs, processing wires and “rush” fees.

For more information please contact our Escrow Department.