RD Instruction 1927-B
means of a policy of title insurance, the title company which will issue the policy must have been approved in accordance with paragraph (d) of this section. A closing agent’s delay in providing services without justification, in connection with agency loans, may be a basis for not approving the closing agent in future cases.
(c) Approval of attorneys. Any attorney selected by an applicant, who will be providing title clearance where the certificate of title will be an attorney's opinion, must submit a completed Form RD 1927-19 certifying to professional liability insurance coverage. If the attorney is also the closing agent, fidelity coverage for the attorney and any employee having access to the funds must be provided. The State Office will determine the appropriate level of such insurance. Required insurance will, as a minimum, cover the amount of the loan to be closed. The State Office will approve the form stipulating the bond coverage. The approval official will approve any attorney who is duly licensed to practice law in the state where the real estate security is located and who complies with the bonding and insurance requirements in this section. If the certification of title will be by means of title insurance, any attorney or closing agent designated as an approved attorney or closing agent by the approved title insurance company which will issue the policy of title insurance will be acceptable, and when covered by a closing protection letter, will not be required to obtain professional liability insurance or a fidelity bond, if the closing protection letter is the ALTA form closing protection letter or provides at least equivalent protection to the agency. Each approved title insurance company may provide a master list of their approved attorneys that are covered by its closing protection letters to the State Office and, in such cases the attorneys are approved for closings for that insurance company. Delay in providing closing services without justification may be a basis for not approving the attorney in future cases.
(d) Approval of title companies. A title company acting as a closing agent, or as an issuing agent for a title insurance company, must be covered by a title insurance company closing protection letter or submit Form RD 1927-20, “Certification of Title Company,” certifying to fidelity coverage to cover all employees having access to the loan funds. The State Office will determine the appropriate level of such coverage and will approve the form stipulating the bond coverage. Delay in providing closing services without justification may be a basis for not approving the company in future cases. Each approved title insurance company may provide a master list of their approved title companies that are covered by its closing protection letter to the State Office and, in such cases, the title companies on the list are approved for closings for that title insurance company.
(04-22-96) SPECIAL PN
RD Instruction 1927-B
(e) Approval of title insurance companies. State Offices are encouraged to solicit discounts on title insurance premiums from title insurance companies due to the high volume of agency loan transactions. The agency will approve any title insurance company which issues policies of title insurance in the State where the security property is located if:
(1) The form of the owner's and lender's policies of title insurance (including required endorsements) to be used in closing agency loans are acceptable to the State Office, and will contain only standard types of exceptions and exclusions approved in advance by the approval official with the advice of OGC;
(2) The title insurance company is licensed to do business in the State (if a license is required), and
(3) The title insurance company is regulated by a State Insurance Commission, or similar regulator, or if not, the title insurance company submits copies of audited financial statements, or other approved financial statements satisfactory to the State Office, which show that the company has the financial ability to cover losses arising out of its activities as a title insurance company and under any closing protection letters issued by the title insurance company. The financial statements must also demonstrate that the title insurance company has sufficient resources to reimburse the agency for any losses caused by fraud or dishonesty by the company and its authorized agents, or failure of the company or its authorized agents to follow or comply with agency's written closing instructions.
(4) Delay in providing services without justification may be a basis for not approving the company.
(5) A title insurance company is not regulated by the State, the above listed approval process will be repeated at least every 5 years, or more often if adverse information becomes available, to insure continued compliance by the title insurance company.
(f) Responsibility of approval official. In addition to approving closing agents, the approval official will inform all closing agents used in connection with agency closing of their duties and responsibilities under this subpart, applicable State Supplements, and any changes or additional requirements which may be imposed. A package containing a copy of this subpart, applicable forms, State Supplements, and other pertinent material will be provided to the closing agent as needed.
RD Instruction 1927-B
(g) Conflict of interest. A closing agent who has, or whose spouse, children, or business associates have, a financial interest in the real estate which will secure the agency debt shall not be involved in the title clearance or loan closing process. Financial interest includes having either an equity, creditor, or debtor interest in any corporation, trust, or partnership with a financial interest in the real estate which will secure the agency debt.
(h) Debarment or suspension. No attorney, title company, title insurance company, or closing agent, currently debarred or suspended from participating in Federal programs, may participate in any aspect of the agency loan closing and title clearance process, in accordance with RD Instruction 1940-M.
(i) Special provisions. Closing agents are responsible for having current knowledge of the requirements of State laws in connection with loan closing and title clearance and should advise the State Office of any changes in State law which necessitate changes in the agency’s State mortgage forms and State Supplements.
(j) Rejecting closing agents or title insurance companies. If the approval official (or the State Office for title insurance companies) cannot approve the closing agent selected by the applicant in accordance with paragraphs (c) or (d) of this section, the following actions will be taken:
(1) The attorney or closing agent will be notified within 5 business days of the specific reasons for rejection.
(2) The applicant will be notified within 5 business days of the rejection. It is the applicant's responsibility to decide whether to continue with the rejected closing agent or attorney, if the reasons for rejection can be removed before any legal costs are incurred, or if another closing agent or attorney will be selected.
(3) If a title insurance company has requested approval, the title insurance company will be notified within 30 days after all relevant information requested by the State Office in connection with the approval decision has been received. If the title insurance company is rejected, it will be notified at that time of the specific reasons for rejection.