What is a CPL in lending terms

CPLs protect lenders from the unauthorized actions of settlement agents.

When you secure a mortgage to purchase a home or other piece of real estate, your lender will require that you purchase title insurance to protect the loan. This title insurance premium will be paid one time during the escrow/settlement period of the real estate transaction, and the coverage will last until the loan is settled — paid, refinanced or foreclosed. When the title insurance company agrees to insure the loan, they often send a closing protection letter, or CPL, to the lender.


A closing protection letter is essentially an agreement from a title insurance company to a lender that indemnifies the lender against any issues arising from a closing agent’s errors, fraud or negligence. For instance, if a closing agent misappropriates loan funds, the title insurance company agrees to make any necessary financial remediation.


Now title-industry approved forms, closing protection letters have been used widely in real estate transactions since the 1960s. Upon their inception, lenders requested CPLs because they were concerned about their lack of protection against the fraudulent action — or failure to comply with the lender’s closing instructions — of closing agents or attorneys contracted by the title insurance company. Now, CPLs are common in most real estate transactions.


Buying or Selling a House to/from a Family Member

We have all heard of don’t do business with family. That is not always true, there are situations and circumstances where it makes sense.  The key is by getting everything in writing, the terms, the purchase agreement, the start date as well as the schedule of payments.  For everyone’s sake, get an appraisal so that the sales price is verified or even the equity position is verified.  Use a Title company to help with paperwork or even the family attorney.

Determine what you are trying to accomplish with the purchase…to help out a family member?  To get out from under a loan?  To transfer wealth and equity at the lowest cost to recipient?  These questions will determine how to structure the loan.

Do you own the property outright?  Is there currently a mortgage on the property?  Will you be the bank, underwriting the loan?  Do they have a lender and will completely pay you off?  If you are purchasing the home, can you afford a loan?  Have you worked with a lender to get prequaled for a loan?

Selling the home:

  1. Get everything in writing, get an official purchase contract and work with a reputable title company to help with the details, also ensure that a title search is completed as well.
  2. Establish value of home with an appraisal
  3. Ensure that a home inspection is done so that everyone knows what is the situation and what needs to be fixed (Trust me, this will help with any hard feelings and consider this, these are all things that would have to be done anyway if you went a conventional lender/realtor route).
  4. Determine how the loan will be paid off
    1. Gifts
    2. Bank Loan
    3. Refinance
    4. Irrevocable Trust?
    5. Talk to a CPA/Attorney about setting up the sale correctly for your financial needs
      1. You can gift the borrower up to $13k a year without tax implications
      2. Pay for closing costs and other seller perks that are available.
      3. Be the “Bank” for the home loan and have payments made to you (ensuring the title of the home reverts to you if the borrower defaults)
      4. Add borrower name to Title via quitclaim.  They can refinance then and pay you off.
      5. Have borrower buy into the home with at least 50% of value.  Ensure you have everything in writing.
      6. Make sure that borrower will stay in home as primary residence for at 2 years before they turn around and sell it.  Otherwise they might be hit with capital gains tax implications.  Also, do not sell for too much of a discount as that will raise red flags for the IRS.

Buying a home:

  1. Make sure purchase contract is done and that title company is part of the process
  2. Insist on an Appraisal for your new purchase (it will be about $450 but it is worth it for you in the long run)
  3. Insist on an Home Inspection – You will know what is wrong or needs to be fixed before you purchase it.
  4. Determine how you will pay for the home
    1. Conventional loan with a lender
    2. Use family member as bank?  What is interest rate?  How calculated?
    3. Use gift funds?
    4. Buy into home?
    5. Talk to financial professional about tax implications for you
    6. Be open, honest and communicative


Remember, buying or selling a home is one of the most stressful things that happens in life.  Having to deal with the complications of having it be a family member makes it more so.  Keep talking about what you both need to get out of the transaction, be willing to add a professional to the equation for both parties sake, and don’t let a home come between family members.  Life is too short!  We at Capstone Can help you with your Loan Needs, Contact Us Now!



Why Does Paperwork Take So Long On a Refinance or Purchase?

You hand in all your paperwork, fill out all the documents, answer all questions as soon as they are asked of you and you are still waiting for a closing date.  Why does it take so much time to get the words “Cleared to Close”.

There are many factors to consider:

  1. The lender or broker has 3 days after you fill out an application to get to you’re the disclosures for you to sign.  Be prepared as these are the first of many documents that you will need to sign.  These disclosures will be the worksheet of charges, the Good Faith Estimate, the Truth in Lending form, the Patriot Act for and other disclosures as stated need by the lender.  These need to be signed and returned right away.  You will only get the disclosures if you have provided the Loan Originator 5 critical pieces of information, Your Name, Your Social Security Number, Birth Date, Address of property for loan and value.
  2. During this time your home inspection of 10 days is starting if you are purchasing a house.  In the disclosures is the authorization for an appraisal (Every lender will get an appraisal done for the property as it validates the risk on the property value.)  That process usually 5 to 7 business days from start to finish.  Title is also working on getting all the information on the property to ensure that there is a clear title.
  3. After you sign the disclosures and return them, they are submitted into underwriting where they will get a pre-approval for loan.  This is a Go or No Go from the lender to keep the process moving.  If you get a No Go, they might be asking for additional documentation or other borrower.  If you get a GO, it means that up to now, there are no red flags to stop the process.
  4. The appraisal gets ordered.  You, the borrower, usually has to pay for this upfront.  It is a cost to you.
  5. The underwriter requests Conditions to get the loan closed and this need to be submitted to underwriting.
  6. The underwriter works on loan profile using the 3 C’s, Credit, Capacity and Collateral to ensure the risk factor of the loan.
  7. After all the resubmits have been completed and all the information has compiled, the underwriter will give the cleared to close notice on the loan file.  This means that documents can be drawn up and sent to Title, where they create the HUD-1 (worksheet listing out all the payouts on the loan).  This takes several days.
  8. Title Company will make arrangements for borrower to come into office and sign documents.  They will also make arrangements for the seller as well to sign documents.
  9. If it is a refi then there is a 3 day right of rescission before the loan will fund, in case the borrower changes his/her mind.  If this is for a purchase, then it will usually fund the next day.


In all of this, we did not discuss the back and forth of how quickly documents get into the right hands, how fast answers are responded to, how much time was given to the escrow date.  Usually it can be done in 30 days, but Refi’s have been taking close to 45 days.  Be patient and work with your Realtors and Lenders for the due date.  Plan for wiggle room if needed, you never know what will happen.

When you want someone to hold your hand thru the mortgage processm call US!  We are here to help!





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The Importance of Being an Active Home Loan Borrower

So you are wanting to buy a home and want a home loan, you have waddled through all the paperwork needed and you have given them to your loan officer.  The list of documents needed was long but you made the copies and sent them in to complete all the requested documents.  You now think that all you have to do is wait.  But that is not true.  There are several places that might need some more information from you.  The underwriter might request other documentation from you.

Several Scenarios – Might be asked for a document about the tax preparers qualifications and want a written explanation of tax basis.

Another scenario – might have to deal with a flood certification issue and you will have to do some footwork on it.

Last Scenario – Home Owners Insurance.  You will need to make sure that you have Home Owners Insurance and that you have the correct mortgagee clause.

Do not get frustrated, this is part of the process.  It is never over until you have signed the documents.  There might be times when additional information is needed, there may be times when information is needed from a 3rd party source.  These all make the process drawn out as you wait for these companies to find/get/provide the information.  In some cases they usually run about 5 to 7 days to respond.

It is the easiest thing to blame your lender for the delays.  But consider this:  How fast were you to respond to the additional documents that were needed?  Did you write back and request why they needed these documents thus delaying the process or did you provide them rapidly, knowing that there are reasons why they asked?  Did it have to go out for third party validation?  How fast were they to respond?  Did you fight with your lender when they said that it might have a delay in escrow?  Or did you make it easier for them but getting an extension right away?

30 days is usually a good time frame to make a loan happen but there are circumstances that dictate that more time is needed.  It does not mean that the loan is delayed or won’t go thru, it just means that it is taking longer than usual.  Consider that if you are using a non conventional lender they have different documentation/Underwriting rules that need to be complied with.

Ask your lender how you can help them make the process as easiest as possible.  Respond when they request something and keep an open mind about extending.



Borrower Lender process

Home Loans and Your Loan Originator

Location, location, location!  We have all heard this refrain as it is referenced for property and home values in the real estate world.  It signifies what you should look for when you are in the market for a new home.  Proximity to urban areas, shopping, good schools, good zip codes, etc are good metrics.  In the mortgage world it is more like relationships, relationships, relationships.  Creating a relationship and developing an understanding one is based on communication and trust.  This process is steeped in frustrations so having someone who you can work thru the issues with is very important.  First thing to know is that your Loan Origination works for YOU!  They have an obligation to ensure that the transaction is fiduciarily feasible and sound for you.  Even though you might want a cash payout for your finances even if it raises your interest rates, it has to be in your favor or a lot of red flags are raised.

Remember that your loan officer is in the middle between you and the underwriter.  They can only set up your file with all the usual information (PayStubs, Bank Statements, Asset Statements, Home Insurance Declaration Page, 2 years Taxes Returns, etc) and then it gets put together in a form that the Underwriter wants to see.  Then they start looking at your financial history and background and they start asking for addition information (Prior to Close Conditions).  These need to be addressed and solved before the file moves forward.  Now is not the time to balk at getting the information, or ask why or even fight about why these items are needed.  If the underwriter asks for it, it is a good bet that the loan process will stop if they don’t have it!

Having your Realtor or the Seller’s Realtor call up the Loan Officer to discuss/yell about what is taking so long, does not speed up the process.  Being open and flexible to move the close date based on how the loan is going makes the process easier.  Being aware that there are things that affect the process every step of the way (like, not signing the disclosure documents in a timely manner or returning them, flood zone issues, title issues, getting mortgage payoff quotes is usually 5 to 7 day process).  As you can see, there are many places that can be road blocks to an easy loan closing.

The paperwork needed has changed as well per all the regulations.  Now there is Patriot Act documentation that has to be signed as well as all the disclosures.  That is all the new regulations from the Frank-Dodd act, the CFPB rules and the fall-out from the mortgage meltdown.  Remember, as frustrating as it is for you in getting through this maze of paperwork, it is that daunting for your Loan Officer as well.

In any relationship, it is easy to place the blame and to get antagonistic, which only exacerbates the problem or issue.  Talking things over, asking questions, or even just following directions will go far in getting through all the frustrations.  Remember, the Loan Originator has to do the best thing for you and your financial situation, even if that means telling you NO. You and the Loan Originator are a team, getting you into the home of your dreams.  It takes the both parties to make it happen.

If you are having a hard time getting information or responses from your Loan Officer and before you start screaming and yelling, ask if there is a Transaction Coordinator assigned to your Loan Originator.  Call and speak to them about what is happening.  They can help you, they know your file as well as the Loan Originator.  Before you jump to conclusions about non-performance, breathe and try to change contact methods as well.  If you have been calling them, try emailing or texting.  Try using non-antagonistic wording like “Just checking in for an update”, instead of “I need an answer and I need it now”.

Your Loan Originator handles hundreds of calls and emails daily and might be waiting for an answer from someone else.  That said, your Loan Originator should also keep you up to date on what is happening on your file even though it might be nothing, waiting on the underwriting.

Being willing to work through the process, communicate and choosing how to communicate will all go far in building a lasting relationship in this, your most important decision in buying a home.


Call Capstone Mortgage and start to “create” a lasting relationship with a Loan Originator.  Call Now.