Title Insurance: Closing Protection Letter

The closing protection letter is a letter the title insurance company sends to your lender that indemnifies the lender against issues that may come up as a result of actions of the closing agent. Learn more about the closing protection letter in our blog.

closing-protection-letter

The closing protection letter is an important part of the title insurance process.

Title Insurance: Closing Protection Letter

What is the closing protection letter for?

The CPL is sent from the title insurance company to the lender when the title company agrees to insure the loan with title insurance. Title insurance protects the lender from third-party claims on the home’s title during the time in which the loan is being repaid to the lender. Coverage ends when the loan is either paid off, refinanced, or foreclosed on.

What does the CPL say?

The CPL says that the lender is indemnified against issues that could arise as a result of actions of the closing agent. These include, errors, negligence, or fraud. For example, let’s say the closing agent incorrectly distributes loan funds. The CPL holds that the title insurance company will make financial remediation.

It’s important to note that one thing the CPL does not cover is the use of documents that are not in compliance with federal or state laws/regulations.

What is lender’s title insurance?

Lender’s title insurance is the title insurance policy that covers the lender against third-party claims on a home’s title. Because the lender has a legal interest in a home until the loan is paid off, refinanced, or foreclosed on, they require protection against any claims that challenge the ownership of the home.

Lender’s title insurance is separate from owner’s title insurance. While they both cover the same thing, owner’s title insurance continues to provide coverage even after the loan is paid off.

The owner pays for both title insurance policies during the real estate closing transaction. The owner will also pay for a new policy for the lender if the owner refinances the loan.

Title insurance may be one of the most important protections you can get for your home. To learn more about how to protect your home with title insurance, and how to get assistance with settlement and closing, talk to Colony Title Associates today!

Real Estate Settlement Services from Colony Title Associates

Colony Title has been in business since 1995 and handles more than 2,000 real estate closings per year. If you have any questions or would like to speak to a representative about closing, please give us a call at 410-884-1160 or visit our website for more information.

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