(04-22-96) SPECIAL PN
RD Instruction 1927-B
§1927.55 Title clearance services.
(a) Responsibilities of closing agents. Services to be provided to the agency and the borrower by a closing agent in connection with the transaction vary depending on whether a title insurance policy or title opinion is being furnished. The closing agent is expected to perform these services without unnecessary delay.
(b) Initial responsibility of approval official. The approval official will furnish the closing agent with Form RD 1927-4, "Transmittal of Title Information," all the information and documents called for therein (including waivers, easements, and agency forms), and any information not contained in this subpart regarding agency policies and procedures applicable to the type of transaction involved.
(c) Ordering title services. The approval official will notify the borrower and seller, if applicable, that an attorney or title company must be employed to examine the title and perform other services in connection with the closing of the transaction. Application for title examination or insurance will be made by the borrower to a title company or attorney. The lender policy will be for at least the amount of the loan. The United States of America will be named as the insured lender. RD Guide Letter 1927-B-1 (available in any agency office), may be used to request attorney title examination, loan closing and related legal services.
(d) Use of title opinion. If a title opinion will be issued, a title examination will include searches of all relevant land title and other records, so as to express an opinion as to the title of the property and the steps necessary to obtain the appropriate title and security position to issue a title opinion as required by this subpart. A Form RD 1927-9, "Preliminary Title Opinion," Form RD 1927-10, "Final Title Opinion," or a certificate of title will be issued to the approval official. If either form is not legally sufficient in a particular State, an OGC approved State form will be used. The closing agent or approved attorney will determine:
(1) The legal description and all owners of the real property;
(2) Whether there are any exceptions affecting the property and advise the approval official and borrower of the nature and effect of outstanding interests or exceptions, prior sales of part of the property, judgments, or interests to assist in determining which exceptions must be corrected in order for the borrowers to obtain good and marketable title of record in accordance with prevailing title examination standards, and for the agency to obtain a valid lien of the required priority;
RD Instruction 1927-B
(3) Whether there are outstanding Federal, State, or local tax claims (including taxes which under State law may become a lien superior to a previously attaching mortgage lien) or homeowner’s association assessment liens;
(4) Whether outstanding judgments of record, bankruptcy, insolvency, divorce, or probate proceedings involving any part of the property, whether already owned by the borrower, or to be acquired by assumption or with loan funds, or involving the borrower or the seller exist;
(5) If a water right is to be included in the security for the loan, and if so, the full legal description of the water right;
(6) In addition to paragraph(d)(2) of this section, if wetlands easements or other conservation easements have been placed on the property;
(7) What measures are required for preparing, obtaining, or approving curative material, conveyances, and security instruments, and
(8) That sufficient copies of these interests and exceptions are provided as requested by the approval official.
(e) Use of title insurance. When title insurance is to be obtained, the approval official will be furnished with a title insurance binder disclosing any defects in, exceptions to, and encumbrances against, the title, the conditions to be met to make the title insurable and in the condition required by the agency, and the curative or other actions to be taken before closing of the transaction. The binder must include a commitment to issue a lender policy in an amount at least equal the amount of the loan, except in instances where there may be an outstanding owner's policy in favor of the borrower. Not withstanding the provisions of this section, the instances of an assumption without a subsequent loan, the existing policy may be continued if the coverage meets or exceeds the assumption balance and the title company agrees in writing to extend coverage in full force and effect.
(04-22-96) SPECIAL PN
RD Instruction 1927-B
(f) Approval official's responsibilities after receipt of preliminary title opinion or title insurance binder. Upon receipt of the
preliminary title opinion or title insurance binder, the approval official will:
(1) Check the opinion or binder carefully. If any required information is omitted, or if the standard form of opinion or binder is amended, return it for completion or correction. If the closing agent is unable or unwilling to comply, the approval official will send the opinion or binder with a full explanation to OGC through the State Office for advice.
(2) Check the legal description of the land, water rights, rights-of-way, easements, and other security involved, to determine that the description covers all of the property rights intended to be taken as security.
(3) Review all exceptions to title shown in the preliminary title opinion or title insurance binder. The approval official will determine which exceptions must be modified, eliminated, or waived, or whether an agreement with prior lienholders is necessary or advisable to protect the agency's interests. If prior encumbrance(s) will remain, the approval official should obtain and review a copy of each to insure that its terms are acceptable to the agency. If an option or sales contract which lists acceptable exceptions is involved, the approval official will determine whether the exceptions in the preliminary title opinion or title insurance binder are the same as those in the option or sales contract and inform the applicant of discrepancies. If the approval official has any doubt as to the acceptability or effect of any exception, the applicant will be requested to obtain a clarification. The approval official will consult with the closing agent and/or the State Office when necessary to determine the acceptability of any exception. If the approval official determines that any defects cannot be corrected, or the effect of certain exceptions on the title, suitability, security value, or successful operation of the property is not clear, and they cannot be corrected or eliminated without undue expense, the approval official will forward the preliminary title opinion or title insurance binder to the State Office together with comments regarding the objectionable features and copies of the exceptions when needed.