SPLIT CLOSINGS

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					SPLIT CLOSINGS
                      Presented by:
                   Douglas G. Smith
     V.P. & Associate Sr. Underwriter
   Many closings that take place in Michigan
    involve “split closings”.

   Split closings involve one title company
    closing and insuring the seller’s side (and
    issuing the owner’s policy) and a different
    title company closing and insuring the
    buyer’s side (and issuing the loan policy).




What is a split closing?
   Escrow and settlement practices are not
    covered under the agency agreement, and
    the Company does not direct such practices.

   Stewart Bulletin MI2012006 advises you of
    some recommended practices and
    procedures regarding the allocation of
    responsibilities in split closings, that may
    assist in avoiding potential problems and limit
    losses.


Stewart Bulletin: MI2012006
   The Settlement Agent is the title company for the buyer’s
    side and issues the loan policy. They undertake
    responsibility for:

    ◦ Complying with the lenders closing instructions

    ◦ Issuing a commitment for a loan policy and Closing Protection
      Letter (CPL) to the lender, and, typically a First Lien Letter.

    ◦ Executing a HUD-1 and disbursing the proceeds of the loan
      according to the lender’s closing instructions and the provisions of
      the HUD-1.
       [This includes the obligation to pay off the underlying mortgages/liens
        against the property, taxes, broker commissions, credit reports, appraisal
        fees, processing fees, flood cert’s, etc.]




Settlement Agent
   Additional responsibilities of the
    Settlement Agent include:

    ◦ Marking-up the commitment and issuing a loan
      policy to the lender.

    ◦ Causing the mortgage to be promptly recorded.

    ◦ Requiring a copy of the deed from the Seller’s
      Agent.




Settlement Agent
   The Seller’s Agent is the title company for the
    seller’s side and issues the owner’s policy. They
    undertake responsibility for:

    ◦ Issuing a commitment and owner’s policy to the buyer.

    ◦ Executing a HUD-1 that functionally mirrors the HUD-1
      of the Settlement Agent.

    ◦ Causing the vesting deed to be promptly recorded.

    ◦ Requiring a copy of the mortgage from Settlement
      Agent.
       [owner and borrower should read the same.]




Seller’s Agent
   If the Settlement Agent receives a request from the
    Seller’s Agent to disburse Seller’s proceeds and
    Seller’s Broker’s (Listing Agent’s) commission to the
    Seller’s Agent, it is good practice to secure:

    ◦ A written directive and hold harmless from Seller
      (Exhibit 1), and

    ◦ An indemnity from Seller’s Agent (Exhibit 2)
       (Unless they are a current Stewart Agent)

   Note: It is advisable to reflect that those payments
    are paid to the Seller’s Agent on the HUD-1 and not
    to the Seller or Broker directly.




Good Practices
   If you are acting as the Settlement Agent
    and you receive a request from the Seller’s
    Agent to disburse proceeds for underlying
    mortgages, monetary liens or property taxes
    to the Seller’s Agent, instead of paying them
    directly, please be advised that you are not
    authorized by Stewart to do so as it may
    create potential liability for the Company
    under Stewart’s Closing Protection Letter
    and/or title policy of insurance.



Good Practices
   It is likely that the Settlement Agent’s
    disbursement to the Seller’s Agent of the
    Seller’s Agent’s title fees, deed recording
    fees and transfer fees as line items on the
    HUD-1 in the normal course of business
    should not create an issue. However, you
    should not provide a copy of the CPL to
    the Seller’s Agent without Underwriter
    approval.



Good Practices
   If the Seller’s Agent receives a request from the Settlement Agent to deliver
    the vesting deed to the Settlement Agent for recording, it is good practice to
    secure:

    ◦ A written directive and hold harmless from the Buyer (Exhibit 3),

    ◦ An indemnity from the Settlement Agent (Exhibit 4)
        (Unless they are a current Stewart Agent)

    ◦ A duplicate original or copy of the deed in your file.

   Note: Do not mark up your commitment indicating that the deed has been
    recorded [or indicating that underlying mortgages/liens have been paid off].
    Do not delete the gap exception.

   Note: If you issue the owner’s policy before the deed is recorded, take
    exception for loss or damage resulting from failure to record the deed, all open
    mortgages (you must review title) and retain the gap exception.




Good Practices
   If you are acting as the Seller’s Agent, you
    should deny any request from the Settlement
    Agent to provide the Settlement Agent with a
    marked-up commitment, as a marked-up
    commitment may create potential liability under
    the Mutual Indemnity Agreement.

   As the title company issuing the owner’s policy,
    you should not be taking on liability for failure to
    record the deed, failure to pay off underlying
    mortgages, liens, and taxes, and providing gap
    coverage unless all of those matters are satisfied
    prior to issuance of the policy.



Good Practices
         Contact Information:

              Doug Smith
    V.P. & Associate Sr. Underwriter
         734-469-9461 (direct)
   800-221-8710 ext. 9461 (toll free)
       doug.smith@stewart.com




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posted:8/22/2012
language:English
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