Communicating with a title insurance underwriter can be a daunting process, especially for new lawyers. Familiarizing yourself with the underwriter’s expectations (and with what you might encounter) will help ensure that your transaction proceeds as smoothly and expeditiously as possible.
The points that follow are intended for those who are first foraying into the world of title insurance but can also be a useful refresher for more experienced practitioners.
1. Use the associated title/file number in any and all correspondence. The nature of the transaction, the parties involved, the type of property, and other details are all meaningful and helpful in understanding the transaction as a whole, but lengthy explanations do not allow for the title company to promptly answer specific questions about a title report/commitment. Title companies and the underwriters identify files by title or file numbers, so asking for an update on “the Smith deal” will likely delay the underwriter’s response.
2. Marking-up a title report/commitment to “demand” that something be omitted is an ill-advised way to begin your communications. There is nothing wrong with marking-up a title report/commitment, but title companies issue reports/commitments based on the record. That your client will be paying off a mortgage of record is not proper justification for omitting the mortgage in the title report/commitment (although it is sufficient to cause that mortgage to not appear in the specimen title insurance policy that will be issued in advance of closing). Instead, present your responses to the title report/commitment and request a pro forma specimen policy.
3. “My client already paid that” is a phrase that is often uttered and rarely supported. More often than not, the owner of the property under examination will have paid taxes, water and sewer charges, or other charges/liens just before or after the issuance of a title report/commitment. Title insurance companies rely on the record and, until the record supports that the payment was made, it is as if the payment was not made. And if you are going to make the statement, at least try to support it with a copy of the check or electronic payment and associated invoice, bill, or payoff letter. Note that payments can be misapplied by the payee (especially municipalities), so proof of payment will still likely lead to the title company holding the sum in escrow until the matter is cleared on record, but proof of payment may allow for the base amount to be held without the usual escrow cushion.
4. Request the title affidavit early in the communication process. While title affidavits are fairly standard, they do often need to be tailored to the specifics of a given transaction. Most often, the existence of tenants and/or parties in possession is addressed by the title affidavit, so requesting (and approving) it in advance of a closing will help the title company prepare a more accurate affidavit and specimen title insurance policy.
5. Know your title insurance endorsements (or at least request the underwriter’s guidance in selecting the ones most applicable to your transaction). Not all endorsements are available for both loan and owner’s policies, so requesting them blindly will be of limited assistance. Endorsements are state-specific, so don’t use the list of endorsements from your recent transaction in Texas for your new transaction in Illinois.
6. General (and unsupported) refusals to comply with the requirements presented in the title report/commitment will undoubtedly raise a red flag for your insurer. While some of the requirements can be stilted or seemingly inapplicable, refusing to provide the information (without first determining whether it applies) can cause the underwriter to suspect that something untoward is occurring, which could lead to a more difficult and less timely closing process. It can also cause the underwriter to add or expand title exceptions and requirements, so be cautious.
Working with your title insurance company will result in a smoother process for everyone. After all, we all have the same goal in mind: making sure your client is properly insured.