by Michael H. Wasserman
I review title company charges and all other closing costs with the Buyers and Sellers i represent. Many (often rightfully) comment on the vast array of different fees that must be paid and the total cumulative effect these charges have on their closings. Akin to all the regulatory charges on a telephone or cable bill. Industry jargon and abbreviations provide an easy short hand to us practitioners but does not make the numbers any clearer to consumers.
One such charge / classification is the CPL (Closing Protection Fee). This state mandated collection obligates a title insurance company's underwriter to cover any losses suffered to a buyer, seller, and lender in the event that the closing agent either does not follow closing instructions or misappropriates funds from the closing. In Illinois, Sellers pay $50.00 per transaction. Buyers pay $25.00 ($50 if there is a mortgage loan).
This is a relatively new charge, so many buyers and sellers who do not remember it from past transactions comment.
Then, every once in a while we see news like this and it becomes clear why this money well spent.
The owner of a southwestern Illinois title company faces up to a quarter century in prison after admitting in court that she defrauded clients to support her gambling habit. [the owner] pleaded guilty Friday in East St. Louis to charges of wire fraud and structuring financial transactions to avoid currency-reporting requirements. Authorities say the owner of Metro East Title Co. in Belleville was obligated to hold escrow, settlement and closing funds in a trust account. But investigators say she instead pilfered those funds for gambling. The company was accused in a federal lawsuit last October of failing to deliver $385,000 in proceeds from a land sale to [the seller].
I fully expect that the title insurer must cover this loss for the Seller, and that they will (eventually) recoup those missing dollars. Having never worked with this title agency before, I do not know if there were any warning signs to warn the buyer or seller of a problem before the funds went missing. I do make a deliberate effort to only work with reputable title insurers and agencies when I purchase title insurance and escrow services for my clients. Sometime however, we have no say in the title insurance selection process and have to trust other parties to the transaction do the same.
Closing protection however takes much of the risk out of closing with lesser or unknown title agencies. We hope not to ever have need to make a claim for closing protection, but am glad that we can.