Rd instruction 1927-b table of Contents




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4

(Revision 2)


RD Instruction 1927-B

§ 1927.52 (Con.)



Special warranty deed. A deed containing a covenant whereby the grantor agrees to protect the grantee against any claims arising during the grantor's period of ownership.
State Office. For FSA, this term refers to the FSA State Office. For RHS, this term refers to the Rural Development State Director.

(Revised 01-23-03, SPECIAL PN.)


Title clearance. Examination of a title and its exceptions to assure the agency that the loan is legally secured and has the required priority.
Title company. A company that may abstract title, act as an issuing agent of title insurance for a title insurance company, act as a loan closing agent, and perform other duties associated with real estate title clearance and loan closing.
Title defects. Any exception or legal claim of ownership (through deed, lien, judgment, or other recorded document), on behalf of a third party, which would prevent the seller from conveying a marketable title to the entire property.
Trust deed. A three party security instrument conveying title to land as security for the performance of an obligation, such as the repayment of a loan. For the purpose of this regulation a trust deed is covered by the term “mortgage.” A trust deed is the same as a deed of trust.
Voluntary conveyance. A method of liquidation by which title to agency security is transferred by a borrower to the agency by deed in lieu of foreclosure.
Warranty deed. A deed in which the grantor warrants that he or she has the right to convey the property, the title is free from encumbrances, and the grantor shall take further action necessary to perfect or defend the title.
§ 1927.53 Costs of title clearance and closing of transactions.
The borrower or the seller, or both, in compliance with the terms of the sales contract or option will be responsible for payment of all costs of title clearance and closing of the transaction and will arrange for payment before the transaction is closed. In voluntary conveyance cases to the agency, these costs will be paid as provided in 7 CFR part 3550, subpart E.

5


(Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§ 1927.53 (Con.)

In a case involving the purchase or sale of real estate, the option or sales contract must state who will pay the title clearance and closing costs. These costs will include any costs of abstracts of title, land surveys, attorney's fees, owner's and lender's policies of title insurance, obtaining curative material, notary fees, documentary stamps, recording costs, tax monitoring service, and other expenses necessary to complete the transaction. (Revised 01-23-03, SPECIAL PN.)
§ 1927.54 Requirements for closing agents.
(a) Form of title certification. State Offices are directed to require title insurance for all loan closings unless the agency determines that the use of title insurance is not available or is economically not feasible for the type of loan involved or the area of the state where the loan will be closed. If title insurance is used, State Offices are authorized to require a closing protection letter issued by an approved title insurance company to cover the closing agent, if available. A closing protection letter need not be furnished when the closing is conducted by the title insurance company. When a closing protection letter is provided, Form RD 1927-20, “Certification of Title Insurance Company,” is not required. The State Office's determination to require the use of title insurance will be based on the commercial and residential loan closing practices of the State and the economic and legal feasibility of obtaining title insurance. The State Office may also determine if a title insurance policy survey coverage is an acceptable substitute for a survey.
(b) Approval of closing agent. An attorney or title company may act as a closing agent and close agency real estate loans, provide necessary title clearance, and perform such other duties as required in this subpart. A closing agent will be responsible for closing agency loans and disbursing both agency loan funds and funds provided by the borrower in connection with the agency loan so as to obtain title and security position as required by the agency. The closing agent must be covered by a fidelity bond which will protect the agency unless a closing protection letter is provided to the agency. The borrower will select the approved closing agent. Agency employees will not recommend the use of any particular closing agent or title insurance company, although as provided in paragraph (a) of this section the borrower may be required by a State Supplement to provide title clearance with either a title insurance policy or an attorney's opinion. If title clearance is by an attorney's opinion, the approval official will approve the attorney who will perform the closing in accordance with paragraph (c) of this section. The attorney will be approved after submitting Form
RD 1927-19, "Certification of Attorney." If title certification is by


6

(Revision 1)


RD Instruction 1927-B

§1927.53 (Con.)

this chapter. In a case involving the purchase or sale of real estate, the option or sales contract must state who will pay the title clearance and closing costs. These costs will include any costs of abstracts of title, land surveys, attorney's fees, owner's and lender's policies of title insurance, obtaining curative material, notary fees, documentary stamps, recording costs, tax monitoring service, and other expenses necessary to complete the transaction.
§1927.54 Requirements for closing agents.
(a) Form of title certification. State Offices are directed to require title insurance for all loan closings unless the agency determines that the use of title insurance is not available or is economically not feasible for the type of loan involved or the area of the state where the loan will be closed. If title insurance is used, State Offices are authorized to require a closing protection letter issued by an approved title insurance company to cover the closing agent, if available. A closing protection letter need not be furnished when the closing is conducted by the title insurance company. When a closing protection letter is provided, Form RD 1927-20, “Certification of Title Insurance Company,” is not required. The State Office's determination to require the use of title insurance will be based on the commercial and residential loan closing practices of the State and the economic and legal feasibility of obtaining title insurance. The State Office may also determine if a title insurance policy survey coverage is an acceptable substitute for a survey.
(b) Approval of closing agent. An attorney or title company may act as a closing agent and close agency real estate loans, provide necessary title clearance, and perform such other duties as required in this subpart. A closing agent will be responsible for closing agency loans and disbursing both agency loan funds and funds provided by the borrower in connection with the agency loan so as to obtain title and security position as required by the agency. The closing agent must be covered by a fidelity bond which will protect the agency unless a closing protection letter is provided to the agency. The borrower will select the approved closing agent. Agency employees will not recommend the use of any particular closing agent or title insurance company, although as provided in paragraph (a) of this section the borrower may be required by a State Supplement to provide title clearance with either a title insurance policy or an attorney's opinion. If title clearance is by an attorney's opinion, the approval official will approve the attorney who will perform the closing in accordance with paragraph (c) of this section. The attorney will be approved after submitting Form
RD 1927-19, "Certification of Attorney." If title certification is by

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