19.4.7.5 Title Policy Issuance and Escrow Services

A. Title Agent Letter of Authority. Where the Title Policy is issued by a title agent (i.e., not directly by the issuing title company), HUD requires a letter of authority (aka agency verification letter). The agency verification letter must: be on the letterhead of the Title Company issuing the Title Policy, be addressed to HUD and the Lender; include Borrower’s name, Project name and number, policy amount, and title agent’s name, and state that the title agent is in good standing with the title company issuing the Title Policy. Additionally, the agency verification letter must state that the title agent has the authority to issue the Title Policy on behalf of the title company for the project identified in the letter and must be valid as of the date of closing. Lender’s Counsel is responsible for obtaining any necessary updates to the agency verification letter to ensure compliance with these requirements.

B. Escrow Services and Closing Protection. HUD generally permits a local title company branch, title agent, or approved attorney to provide additional escrow services along with issuance of the Title Policy. The local branch, title agent, or authorized attorney will close the transaction by ensuring that the documents are recorded, disbursing the funds to the proper parties, and issuing the Title Policy.

1. HUD requires a closing protection letter (e.g . , ALTA Closing Protection Letter (ALTA CPL – Single Transactions R-12-01-2015), or an equivalent form letter authorized by the state regulatory body in the Project jurisdiction) for all closings where a title agent, approved attorney, or other individual not directly employed by the issuing title company will perform escrow services and/or manage original documents required for closing.

2. The title company issuing the Title Policy must issue the CPL to Lender and HUD, as their interest may appear. Any liability limitation stated in the CPL must be equal to or greater than the amount of the FHA-insured Loan.

3. The CPL ensures that the title agent, approved attorney, or other third party escrow agent is authorized to perform the escrow services on behalf of the title company, and to indemnify the Lender for actual losses caused by certain misconduct of the closing agent (subject to specific exceptions and

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exclusions therein). The CPL must state that the protection afforded by the CPL is valid as of the date of closing. Lender’s Counsel is responsible for obtaining any necessary updates to the CPL to ensure compliance with these requirements.

4. HUD will only accept third-party escrow services and related CPLs when such services and coverage are permitted by state law of the Project jurisdiction.