H O T    T O P I C S !

New Closing Protection Letters and Procedures for Illinois in 2011

As of January 1, 2011, ATG staff must issue all closing protection letters for closings on Illinois property. A Closing Protection Letter (CPL) is a form of insurance issued by title insurance companies, insuring the actions of a particular attorney, agent, and/or closer in conducting a closing. This insurance has been offered primarily to lenders in the past. The CPL coverage is separate from the coverage of the title insurance policy.

New Illinois Public Act 96-1454 (Act), which makes changes to the Title Insurance Act, requires that the underwriter, and not the title insurance agent, issue all closing protection letters. Further, it requires that CPLs be issued not just to lenders, but also to buyers, sellers, and owners in a refinance. CPLs must be issued when either the title insurance agent or the title underwriter conducts the closing. Thus, whenever there is an ATG title insurance commitment on a transaction and an ATG agent, or ATG independent closer conducts the closing, ATG must issue CPLs to all parties to the transaction. Both the commitment and the closing must be ATG's for ATG to issue CPLs (see Authority to Conduct Non-ATG Closings).

ATG will be considering extending this change to Wisconsin and Indiana CPL issuance later in 2011.

The intent of this Act is to make sure all parties to closings have a remedy against a financially-solvent entity for loss of the closing funds or documents, as specified in the letter. It covers ATG agents' actions as well as those of your staff, and covers not just fraud but also negligence, should your office unwittingly get caught up in others' fraud. Because the coverage is for the title insurance agents' actions, the Act prohibits the conflict of interest that would result from the agent issuing the CPL, or receiving a premium for it.

Because ATG has hired staff, updated software, and taken on new liability on many more closings, we now charge as follows for the coverage provided in the closing protection letter for Illinois transactions, consistent with safe harbor regulations under consideration by the state:

  • For those parties to a transaction who are obtaining a policy of title insurance, the charge is $25 for the closing protection letter.
  • For those parties to a transaction who are not obtaining a policy of title insurance, the charge is $50 for the closing protection letter.

Thus on a buy/sell transaction with financing where Owner and Loan Policies will issue, the seller will pay $50, the lender $25 and the buyer $25. The Act requires agents to collect and remit the premium to the underwriter promptly.

ATG Closing Protection Letter Charges for Common Scenarios
applies to Illinois CPLs Only
Transaction Type Seller CPL Buyer CPL Lender CPL Borrower CPL
Buy/Sell $50 $25 $25* NA
Refinance NA NA $25 $50
Cash $50 $25 NA NA
*If Lender does not require a title policy, then the Lender's CPL will be $50.

To aid in this transition, ATG has updated its REsource and Paperless Closer software to allow members to order CPLs. Because CPLs must be issued to all parties on all closings conducted either by the member or by ATG, when you find out that you or ATG will be conducting the closing, then you know that closing protection letter charges must be placed on the Invoice for Title Charges. It is important for the CPL fees to appear on the invoice so that the charges will be included in the lender's GFE. We have updated REsource to include a CPL order screen to allow you to order your CPLs using the data from the REsource file (see REsource Instructions, above). For those not using REsource, a CPL order form is on ATG's website. Then, when the CPLs are ready ATG will attach the CPLs to your REsource file, and you or your closer can find them in the File Attachment Utility. 

The member's office or ATG independent closer will print the CPLs for the buyer and seller and deliver them to those parties at closing. If there are multiple sellers or multiple buyers/borrowers, they will all be named on one seller letter and/or on one lender/buyer/borrower letter. You can print extra copies if necessary to make sure all sellers or all buyers/borrowers have their own copy. 

For downstate transactions and member closers, the member's office will print the CPLs to buyer and seller and deliver them to those parties at closing. For Chicago-area closings conducted by ATG's independent closers, the closer will print and deliver the CPLs at closing. The CPLs will be saved to the REsource file as an attached file.

ATG members and agents who currently issue their own CPLs using REsource were able to do so through December 31, 2010. After that date, the CPL function for members' use in REsource was disabled. The new CPLs may be ordered for January closings starting in mid-December.

Bifurcated Transactions: For more information on CPL's for bifurcated transactions, where not all policies are written by one title agent, read here.

Blanket Closing Protection Letters:In a separate but related change, ATG no longer issues any blanket CPLs for Illinois property. A blanket CPL is one that does not identify the specific closing, but rather covers all closings conducted by a particular closer or closers.

Please contact the ATG Underwriting Department, legal@atgf.com, 217.403.0020, or 312.752.1990, with any questions about this new procedure. Watch your e-mail and www.atgf.com for further information. Thank you.

[Originally posted 11-23-10; Last update: 6-18-13; 3-22-13; 3-29-11]