Settlement Services

Closing and Settlement Services means ‘providing services for the benefit of all necessary parties in connection with the sale, leasing, encumbering, mortgaging, creating a secured interest in and to the real property, and the receipt and disbursement of money in connection with any sale, lease, encumbrance, mortgage, or deed of trust.’ [§10-11-102 (3.5), C.R.S.]

When it comes to real estate transactions, a closing and settlement service plays a crucial role in ensuring a smooth and legally compliant process. Here are some reasons why you might need a settlement service:

1. Title Transfer: During a real estate sale, the property’s title needs to be transferred from the seller to the buyer. A closing and settlement service ensures that this transfer is done accurately and legally.
2. Document Preparation: There are various legal documents involved in a real estate transaction, such as the deed, mortgage, and closing disclosure. A closing and settlement service helps prepare and review these documents to avoid errors.  In addition, the settlement company and the lender will work together to prepare the closing paperwork and schedule a closing date, which is also known as the settlement date or consummation date.
3. Escrow Services: Closing and settlement services often handle the escrow process. Escrow means they hold funds in a secure account until all conditions of the sale are met, ensuring a fair exchange between parties.
4. Closing Coordination: The closing and settlement service coordinates the closing meeting where the buyer, seller, and other parties sign the necessary documents. They ensure that all payments are made, including taxes, fees, and commissions.
5. Legal Compliance: Real estate transactions are subject to state and federal laws. Closing and settlement services ensure compliance with regulations, protecting both parties involved.
6. Title Insurance: Closing and settlement services provide title insurance, which protects the buyer and lender against any unforeseen title issues or claims.

In summary, a real estate closing and settlement service simplifies the complex process of buying or selling property, ensuring a successful and legally sound transaction.

Here are some terms and definitions you may run across during the loan process:

The Loan Estimate: A Loan Estimate is a three-page form created by the Consumer Financial Protection Bureau (CFPB).  It provides a borrower with important details about a loan the borrower has applied for, including an estimate of the interest rate, monthly payment amount, and estimated total closing costs.  The lender must provide you with a Loan Estimate within three business days of receiving your application.

The Closing Disclosure: A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected.  It includes the loan terms, your projected monthly payment, and how much you will pay in fees and other costs to get your mortgage (closing costs).  Mortgage lenders are required to furnish an ESTIMATED or FINAL Closing Disclosure at least three business days before the closing date, also known as the settlement date or consummation date.

Closings are now impacted by delivery rules of the Closing Disclosure.  The Consumer Financial Protection Bureau (CFPB) determined that borrowers would be better served by having a short time to review the Closing Disclosure form. This is prior to signing their loan documents. As a result, in its rule, CFPB mandated borrowers have three days after receipt of the Closing Disclosure to review the form and its contents prior to closing on the loan.

Note: The three-day review period starts upon the “receipt” of the form by the borrower. Unless some positive confirmation of the receipt of the form (i.e., hand delivery), the form is “deemed received” three days after the delivery process starts (i.e., mailing). As a result, the combination of the “delivery time period” and the “review time period” results in seven business days (excluding Sundays) from mailing to loan signing.

Title fees may need to be adjusted at closing and explained:

Both the new Loan Estimate and Closing Disclosure forms require any listing of settlement service involving title insurance or closing activities precede by the phrase “Title”. This will allow the borrower to clearly see all charges in the same area. The Closing Disclosure has 7 areas for fees:  1) Origination Charges  2) Services Borrower Did Not Shop For  3) Services Borrower Did Shop For  4) Taxes and Other Government Fees  5) Prepaids  6) Initial Escrow Payment at Closing  7) Other.  Individual charges within each of these major groupings are alphabetically listed. Columns provide separate charges of the buyer, seller and other (as well as columns for both payments before and at closing).

You will likely receive more than one Closing Disclosure:

The Buyer/Borrower will receive a Closing Disclosure several days before the closing. Also, likely a few days before a walkthrough on the property. Buyers/Borrowers will likely receive a new, adjusted Closing Disclosure at the closing showing any changes that occurred between the initial disclosure and the closing, including adjustments due to the timing of the closing, walk through adjustments and other matters.

Changes may not end there and CFPB mandates that changes in financial disclosure numbers (i.e., changes in a recording fee) in any amount must be re-disclosed, even post-closing.  If any fees are changed post-closing, you will be provided with a revised Closing Disclosure and any refund that you are due.