CLOSING PROTECTION LETTERS

When you become a closing attorney for a particular lender, they may ask you to provide a closing protection letter (or an insured closing letter) from Old Republic Title. This is a letter where we agree to indemnify the lender for loss occasioned by any errors or mistakes that you make with respect to compliance with the closing instructions. 

In order to provide this coverage, please send a written request to the local office by fax and we will send the appropriate documentation to the lender involved. You must provide the name and address of the lender. As a general rule, lenders require that these letters come directly from the underwriter and not from the agent (although we will forward you a copy of the closing protection letter). 

The terms and provisions of the closing protection letter have been promulgated by the ALTA. We do not generally make any alterations or changes to the letter since we wish to have a uniform product sent to all lenders.  This particular kind of coverage is certainly not typical of title insurance and is not available in many jurisdictions (e.g., New York). It evolved over many years based on specific requests from lenders. Since the coverage afforded does not relate to the insurance of record title, it is very difficult to justify the coverage as part of the title insurance transaction. Nevertheless, all underwriters routinely issue these closing protection letters.

Whether this practice will continue in the future remains to be seen.