A title search is a standard part of any real estate transaction that is conducted to uncover issues that could prevent future rights to the property. Your title agent reviews public records to see if there are problems or defects that could cause legal issues.

Title insurance is a policy that protects your investment and property rights. There are two different types of title insurance: owner’s policy and lender’s policy.

• An owner’s policy protects the new owner’s property rights for as long as they or their heirs own the home.
• A lender’s policy is usually required by the lender and protects only the lender’s financial interests. The buyer typically pays for this policy.

Owner’s title insurance is a smart decision because it’s the best way to protect a property from future legal claims.

Owner’s title insurance is a one-time premium calculated based on the value of the property. Lender’s title insurance is also a one-time premium calculated on the loan amount. If these policies are issued together, they may qualify for a simultaneous issue premium that will greatly reduce the total premium collected vs. paying for each policy individually. In Tennessee, typically the buyer is responsible for payment of the owner’s title insurance and any lender-required loan policy, but this can be negotiated with the seller at the time the purchase contract is agreed by all parties. The owner’s policy lasts for as long as the owner or heirs own the property; the loan policy lasts as long as the mortgage lien is in effect.

When you refinance, lenders usually require a new title search and lender’s policy to protect their investment in the property. Typically, homeowners don’t need to purchase a new owner’s policy – the one you bought at closing is good for as long as you or your family own the property. However, you may want to contact an UTEI member to update your policy to reflect changes in your life.

You sign the legal documents and receive the keys to your home. Once you receive your title insurance and other important documents in the mail (typically a few weeks later) make sure to put them in a secure location.
For more information about owner’s title insurance, ask an UTEI Employee or visit homeclosing101.org.

What will my Closings Costs be?

Closing costs are best determined by your settlement agent or attorney.  They can give you an estimate as to the actual closing cost.  A loan estimate is also given to you by your lender.  These costs may be a reasonable estimate. They may vary depending on the costs from the service providers in your transaction.

How Can Title Insurance Protect Me?

Title Insurance policies insure titles to real property for owners and mortgage lenders. They provide the following protections:

a) Payment of loss arising from hidden defects. Defects not found during a title examination or recording.

b) Payment of legal expenses incurred to clear title defects. Which threaten the lender or owner with the loss.

c) Assurance that the marketability of the property remains unimpaired from title defects.

Policies issued based upon a search and review of the public land records. Also, other relevant documents.  A thorough examination is to determine title ownership. Also, any other matters affecting the property title and use of that property.  Items that may affect a title include easements, restrictions, rights of way and judgment liens.

The coverage provided by a title policy is long-lived.  The mortgage holder continues to protect upon foreclosure of the insured mortgage or deed of trust.  The owner of real estate insures for as long as he or she owns the property. Also, the holder of a purchase money mortgage or deed of trust secured by the property. Also, is liable under the warranties included in his or her deed to convey the property.

Does the Bank or Lending Institution Always Arrange for Title Insurance?

It usually does, but the lender only insists on a loan policy.  The lender does not arrange for an owner’s policy that insures an owner’s interest in the property.  You could lose your equity if you do not have the Owner’s Title Insurance.

If I don’t have Owner’s Title Insurance, How Will A Claim Against My Home or Real Property Affect Me?

It could be very serious.  It would mean you would have to pay all expenses involved with the legal defense of your rights. It could even result in complete loss of your equity if your defense is unsuccessful.

What is a Title Defect?

It is any one of a number of things that could jeopardize your interest. It could be an unsatisfied mortgage, lien, judgment, or other recorded claim against the property. A defect could also take the form of a claim by a third party such as an unknown heir or prior owner whose title transfered by forgery or fraud.

What to know before closing.

The Loan Estimate: Today, borrowers receive two separate forms from their lender at the beginning of the transaction. This includes the Good Faith Estimate (GFE). Also, the initial disclosure required under the Truth-in-Lending Act (TILA). What about loan applications taken on or after October 1, 2015? The creditor will now use a combined Loan Estimate. This is now intended to replace the two previous forms. You must provide the new three-page Loan Estimate form to borrowers on a timetable similar to the current receipt of the GFE.

The Closing Disclosure: The combination of forms continues at the end of the transaction as well. This is with the HUD-1 Settlement Statement. Also, the final TILA forms now combined into a single Closing Disclosure form. This new five-page form is not only to disclose many terms and provisions of the loan. Also, the financial transaction of the closing of the sale.

Closings are now impacted by delivery rules of the new forms:

There is a part of the final rule creating these two new combined forms. The CFPB determined that borrowers would be better served by having a short time to review the new 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.

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 disclosure of fees will adjusted and explained on page 3 to reflect the following:

The new forms have 7 areas for fees:

The line numbering on the HUD-1 familiar to most is gone. Instead, the fees and charges placed on the Closing Disclosure in one of seven areas:

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).

Your clients 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.