Introducing the New Illinois CPL Fee

If you have had any closings with Abstracts & Titles since the 1st of this year, you may have noticed a strange new fee appearing on the HUD settlement statement. This form is known as the ‘Closing Protection Letter’ a/k/a CPL or Insured Closing Letter.

A CPL indemnifies parties for losses due to certain failures to follow closing instructions, obtain documents and improper disbursement of escrow funds. Basically it is another form of protection for all parties involved (buyer, seller and lender) in case there is a problem encountered with the collection and distribution of funds from closing. Before the new fee came into play, a CPL was usually only issued upon request from the lender or the parties involved in the transaction. Now, in an effort to provide more protection to the consumer, it is required for any residential or commercial transaction less than $2,000,000.00...basically a large majority of the transactions in Southern Illinois.

Now, the Illinois Title Insurance Act (ITIA) section 16 states:

(f) A title insurance agent shall not act as an escrow agent in a [residential and nonresidential] real property transaction where the amount of settlement funds on deposit with the escrow agent is less than $2,000,000 or in a residential real property transaction unless the title insurance agent, title insurance company, or another authorized title insurance agent has committed for the issuance of title insurance in that transaction and the title insurance agent is authorized to act as an escrow agent on behalf of the title insurance company for which the commitment for title insurance has been issued. The authorization under the preceding sentence shall be given either ... (2) by a closing protection letter in compliance with the requirements set forth in Section 16.1 of this Act, issued by the title insurance company to the seller, buyer, borrower, and lender.

To see the full statue visit:
Illinois General Assembly Website: Title Insurance Act.
All title companies in the State of Illinois are required to collect a fee for the issuance of this CPL letter. Title agents such as Abstracts & Titles, Inc. are not allowed to receive any compensation whatsoever for the creating and distribution of the CPL letter, so there is no additional ‘padding’ to the charge that the customer will incur. The fee is simply a flat fee we must collect and disburse to our underwriter after closing.

Some important facts about the new CPL law:

1) Any lender or bank that is closing their own loan for a refinance and executing the disbursements is not required to issue or collect the CPL fee. Even if said bank has title work completed by a title insurance agent

2) Other states that have a CPL fee include Ohio, Missouri, Nebraska. Legislative efforts are being made in other states such as Minnesota and Indiana, to require CPL issuance.

3) Normally there is a set fee for the buyer, seller and possibly the lender as well.

4) If the borrower has two mortgages from two different lenders, two lender CPL fees must be collected (one to insure and protect each lender). This is required even if the second mortgage does not require the issuance of a mortgage policy.