The New Closing Protection Resets the Understanding Between Lenders and Title Insurers and Corrects Unhealthy Nationwide Trends in the Caselaw

A new closing protection letter (CPL) has been approved in Florida, and similar changes will soon appear in other states. The new CPL aims to make the language clearer and prevent misunderstandings between parties involved in real estate transactions. The CPL is a form that assures lenders that they can trust the attorneys and closing agents handling their settlement funds. The changes to the CPL are meant to align it with industry standards and prevent problems that arose from legal cases related to the mortgage foreclosure crisis. Lenders and the FDIC (who takes over failed lenders) used the CPL to try to get back money they lost from bad mortgages. They stretched the CPL to cover more things than it was meant to, and courts went along with it. The title insurance industry changed the CPL form to make it clearer and more fair for everyone involved. The CPL form is a document that protects lenders and others involved in real estate transactions. In the past, there were issues with the CPL being split from the title policy and mortgage, leading to legal disputes. The revised CPL now has provisions to prevent this from happening. It also clarifies that only the current owner of the mortgage can make a claim under the CPL. Additionally, the CPL only offers coverage to certain people, like lenders and purchasers, not refinancing borrowers. The old CPL form had some loopholes that allowed lenders to be left unprotected if title insurance from the underwriter was not validly bound. Some courts held that CPL coverage was void because of this. When the foreclosure crisis hit, some law firms sent confusing CPL claim letters and refused to cooperate with the title insurer’s investigation. The new CPL form now addresses these issues with helpful new provisions. It requires lenders to provide assistance and give the title insurer access to relevant records and information when requested. The old CPL form also had unclear coverage, but the new form provides more specific coverage for different situations, making it easier for lenders to make claims. Some courts limited coverage for title agents in a way that meets expectations, while others stretched coverage to include almost any document or defect in a loan transaction. This goes beyond what the insurance policy actually covers. Lenders used to argue that title agents were responsible for any fraud or mishandling of funds in a real estate transaction, even if the lender was partly at fault. The new CPL form now limits the insurance coverage for title agents to situations where they are solely responsible for the loss. It also includes a requirement for prompt notice of any claim, and sets a two-year time limit for making a claim. These changes aim to clarify and limit the liability of title agents in real estate transactions. If you need to make a claim under this letter, you must let the company know in writing right away at their main office. If you don’t tell them promptly and they suffer because of it, they might not have to pay you as much. These rules will make it easier for the title insurance companies to plan for claims and for the government to set fair prices by limiting how long claims can linger. The new CPL form for title insurance makes it clearer when an insurance company will pay for losses from fraud or mistakes in a real estate deal. It also limits how much the company has to pay. The form also says that the title insurance company is only responsible for issuing policies, not for other parts of the real estate deal. This new form should help prevent confusion and make sure that the title insurance company only has to pay for what they are responsible for. If you need information on land title insurance, check the American Land Title Association website. There have been some court cases involving banks and title insurance companies, so it’s important to make sure you have the right insurance when buying a house. These are court cases about disputes involving title insurance companies and banks. They are from different states and some are about the same issues. These cases involve disputes between banks and title insurance companies. The banks are claiming that the title insurance companies should cover losses related to property transactions. The cases have been heard in different courts, and the outcomes vary. Marty Solomon, a lawyer at a law firm in Tampa, has represented title insurance companies in similar cases. This column is written by the Real Property, Probate and Trust Law Section. It’s all about following the rules, serving the public, and making sure justice is done. It also aims to improve the way the law works and to advance the study of law.

Source: https://www.floridabar.org/the-florida-bar-journal/the-new-closing-protection-resets-the-understanding-between-lenders-and-title-insurers-and-corrects-unhealthy-nationwide-trends-in-the-caselaw/