Why Make Title Companies Sign Lender’s Closing Instructions?

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Title companies often refuse to sign the lender’s closing instructions, leading to a stressful closing and many lenders are left asking why the signature was necessary in the first place. In cases where the closing instructions are not prepared or explained properly, Title companies can get away with not signing the closing instructions by claiming state law prohibits title companies from signing closing instructions. However, if the closing instructions are prepared correctly, lenders should always have their closing instructions signed by title without much trouble.

Why do title companies refuse to sign instructions?

Title companies may refuse to sign instructions throughout the country, but title officers in Texas refuse with frequency. This is due to a procedural rule in Texas prohibiting title companies from making verbal or written guaranties regarding insurance coverage; however, the rule also allows for guaranties that a transaction has closed, issuance of an insured closing service letter, or certifying that copies of documents are true and exact copies of originals. This procedural rule only applies in Texas, but title companies in other states will use similar language in their refusal to sign lender’s closing instructions.

What should lender’s closing instructions contain?

Well-written closing instructions will require title to commit to following the instructions and provide something of a checklist for title to follow while going through the closing process. For example, Geraci lenders’ instructions require the title officer to sign their initials after key sections to insure title has reviewed—and complied—with the instructions throughout the closing process. A diligent review of the initial lines by the lender, or the lender’s closing agent, insures that the title officer reviewed the entire closing instructions. The title officer then provides a full signature at the end of the instructions to show that the lender’s closing instructions have been completed accordingly.

Getting title to commit to following the lender’s closing instructions and having title certify original copies of documents are key aspects to good lender’s closing instructions. It is generally a good plan to get title to commit to the following instructions:

  1. Make sure funding conditions are met.
  2. Review the property insurance.
  3. Schedule the loan closing.
  4. Review the liens on property so the lender’s lien position is secured.

Get a commitment from the title company

Lender’s closing instructions should be prepared in a way that gets title to commit to the instructions and looks out for the lender’s interests. The instructions themselves should require the title company to sign off on key instructions and provide a final signature at the end. While title companies may have state specific arguments against signing instructions, Geraci prepares lender’s closing instructions that make title companies commit to following the instructions.

The Banking and Finance team at Geraci is well-versed in creating actionable closing instructions for title companies. We are happy to help. Contact us today.

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