Effective July 1, 2013 New Indiana Law Requires Closing Protection Letters for All Parties

Senate Bill 370 (P.L. 80-2013), enacted in the most recent legislative session, mandates that Closing Protection Letters (CPL) be provided to all lenders, buyers (or borrowers) and sellers in every transaction closed by a licensed title insurance agent or title insurance underwriter branch office. The effective date of implementation is July 1, 2013.

The legislation also mandated that a fee (premium) be collected for each such letter. The entire fee is paid to the title insurance underwriter issuing the CPL. Title insurance underwriters must have their fee and CPL form approved by the Indiana Department of Insurance (DOI) prior to June 24, 2013. The DOI will only approve the fee if they determine that it is reasonable in light of the risk being assumed by the title insurance underwriter.

I’m sure that many will have questions. I’ve posted a series of questions and answers on our website. You may link to it here. CPL Questions.

As more information becomes available, we will update you.

The legislation also mandated that a fee (premium) be collected for each such letter. The entire fee is paid to the title insurance underwriter issuing the CPL.  Title insurance underwriters must have their fee and CPL form approved by the Indiana Department of Insurance (DOI) prior to June 24, 2013. The DOI will only approve the fee if they determine that it is reasonable in light of the risk being assumed by the title insurance underwriter.

Here’s more specifically what you need to know about this new law. This is what we know now. Details may change prior to implementation of the new law.

What is a Closing Protection Letter (CPL)?

A CPL is an indemnification from a title insurance underwriter to the parties (lender, buyer or borrower and seller) in the transaction regarding acts of the closing agent. It indemnifies the parties against certain damages and title losses as a result of the closing agent failing to follow the instructions of the parties. The most important indemnification is against loss resulting from the closing agent misappropriating the party’s funds.

Lenders have always required CPL’s, haven’t they?

Yes, lenders have always required CPL’s. Currently though, the indemnification only runs in favor of Lenders and Buyers or Borrowers in transactions where there is a mortgage. (Some agents, John Bethell Title included, also secured CPL’s for Buyers in cash transactions.) The new requirement extends CPL indemnification to sellers as well. The DOI has advocated for this change for several years.

Why does the law mandate a fee?

The fee, which is actually an insurance premium, is required because the new law creates obligations on the title insurance company outside of the title insurance policy that is issued. Title insurance underwriters were willing to support this law only if they were allowed to charge for the additional risk being assumed.

What will the fee be?

Until the DOI approves the fee, we will not know. Illinois has had a similar law for several years. The fee there is as much as $100 and is customarily split between buyer and seller. It is unlikely that the fee will exceed $100. And it may be less. As soon as we know what the fees will be, we will update this post. It is likely that we will not know for certain until after June 24th.

Why is the fee mandatory? Can the CPL coverage be declined?

The CPL coverage cannot be declined. The DOI wants all parties to a transaction indemnified under a CPL. Over the last few years there have been occassional incidents of dishonest title insurance agents or their employees misappropriating monies from the agent’s escrow account. It doesn’t happen very often, but when it does, many parties are affected―some without any recourse to recover their losses.

Does the closing agent get a portion of the fee?

No, the entire fee is paid to the title insurance underwriter. For closings that John Bethell Title conducts, that would be First American Title Insurance Company, Arsenal Insurance Corporation and Old Republic National Title Insurance Company.

How will the CPL fee be collected?

The fee will be shown on the HUD-1 and collected at closing. It will be remitted to the title insurance underwriter at the same time that the policy premium is remitted. The fee will be itemized in the 1100 section on page 2. Since the fee is premium, it will be shown seperately and not roll up into line 1100 on purchases but will roll up on refinances.

As more details become available, John Bethell Title will post updated information here. Check back periodically.

We are pleased to announce our new Online Ordering Tool to help make the purchase of title insurance paperless and easy for our customers. Instead of going through the hassle of filling out a form and getting it to us, we automatically get these orders as soon as you hit submit. This allows your purchase to go through as soon as possible, streamlining the process for you and us. Save time and hassle by ordering online today.

Kara Oltman promoted to Executive Vice President John Bethell Title Company, Inc.

Kara Oltman of Ellettsville has been promoted to Executive Vice President of John Bethell Title Company, Inc. according to John Bethell, President and Owner. Oltman is now responsible for the company’s Settlement Services and Client Services teams. She joined the company in 2005 as a closing processor and after several promotions has most recently served as Vice President – Settlement Services.

Bethell said, “Kara is an important and successful leader in our company. Under Kara’s direction our Settlement and Client Services teams have set the standard for providing Premier Service to our real estate, lender, and consumer clients. As key member of our Leadership Team, Kara has helped us successfully manage the significant growth we’ve enjoyed the last few years.”

John Bethell Title Company, Inc. is the leading provider of title and settlement services in Monroe, Brown, Owen, Lawrence, and Greene counties. The company and its twenty employees operate from its downtown Bloomington location.

February 9, 2013

January, 2013

There is both good and not so news in 2012’s final mortgage recordings and sales transaction numbers.

I’m most excited by the fact that for the first time since I started tracking recorded deeds in 2003, the annual number of deeds that represent a transaction actually increased over the previous year―1868 in 2012 versus 1736 in 2011. (chart page 7) In other words, an eight percent improvement! That improvement reverses a seven year trend of being in a declining or flat sale market! The leading indicators we follow in our business are currently very bullish compared to recent years. I’m quite excited about the prospects for at least the next six to nine months.

Mortgage volume, due to record low interest rates yet again, also showed its best results in three years. (chart page 7) Even home equity loans are making a modest come back overall―even though the fourth quarter comparison to 2011 is negative. (chart page 12)

The not so good news is that new foreclosures and sheriff’s deeds showed a dramatic increase in the second half of 2012. (chart pages 19 & 20) I would expect that this is a result of the ending of various moratoriums of the previous few years (robosigners, etc) and waiting periods as opposed to a new wave of defaults. Even so, new mortgage foreclosures in Monroe County are still somewhat less than in 2006 and 2007 when the subprime crisis began.

Though Federal fiscal policy and Consumer Financial Protection Bureau regulatory changes will undoubtedly have an effect on interest rates and the market generally, I’m encouraged that things are improving. More so, if you just pick a number in the middle between the peak sale transaction volume in 2004 and the bottom in 2010-2011, there is still plenty of opportunity for improvement.

Best wishes for a terrific 2013!

John Bethell

Friends,

Thank you for allowing us the privilege to serve you in 2012. We appreciate this opportunity every day! We take this responsibility seriously and work hard to earn your trust.

Thank you for the support and encouragement that we receive from you. The way you gently coach us to be better is a gift of enduring value. We will always be grateful.

As is our established holiday tradition, we will make a donation in your name and the names of all our friends and associates to the Boys and Girls Clubs of Bloomington and Ellettsville.

We appreciate the opportunity to contribute to your success. We eagerly look forward to helping you achieve your goals in 2013.
Have a wonderful holiday season and a glorious New Year!

~ John Bethell Title Company, Inc.

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