Life of an Escrow, What is an Escrow?
Escrow Process, TRID Timelines.
THE TITLE INDUSTRY IN BRIEF: Prior to the development of the title
industry in the late 1800’s, a homebuyer received a grantor’s warranty,
attorney’s title opinion, or abstractor’s certificate as assurance of home
ownership. The buyer relied on the financial integrity of the grantor,
attorney, or abstractor for protection. Today, title insurance companies
are regulated by state statute. They are required to post financial
guarantees to ensure that any claims will be paid in a timely fashion.
They also must maintain their own “title plants” which house duplicates
of recorded deeds, mortgages, plats, and other pertinent county
WHAT IS TITLE INSURANCE? Title insurance provides
coverage for certain losses due to defects in the title that
occurred prior to your ownership. The seller can give only
those rights that previously have been received with
“good title.” Title insurance protects against defects such
as prior fraud or forgery that might go undetected until
after closing and possibly jeopardize your ownership
WHY TITLE INSURANCE IS NEEDED. Title insurance assures
the new buyers that they are acquiring marketable title from the
seller. It is designed to eliminate risk or loss caused by defects
in title from the past. Title insurance protects the interest of the
mortgage lender as well as the equity of the buyer for as long as
they or their heirs have any interest in the property.
WHEN IS THE PREMIUM DUE? It is a one-time premium which
is paid at the close of escrow. There is no specific rule as to who
pays for the owner’s title insurance policy; it depends on the
local custom and negotiations between buyer and seller. If there
is a new loan, the buyer usually pays for the lender’s policy. The
policy has a perpetual term and provides coverage for as long
as you are in a position to suffer a loss, up to the amount of the
In 2015, the Consumer Financial Protection Bureau (CFPB) will implement the new TILA/RESPA Integrated Disclosure Rule (TRID) forms – the Loan Estimate and the Closing Disclosure. These two forms will replace the traditional Good Faith Estimate, Truth in Lending disclosure and the HUD-1 Settlement Statement in most residential real estate transactions. TRID also includes new requirements for the proper timing and delivery of the new forms.
TABLE OF CONTENTS
APPRAISAL An estimate of value of property resulting from
analysis of facts about the property; an opinion of value.
ANNUAL PERCENTAGE RATE (APR) The borrower’s
costs of the loan term expressed as a rate. This is not their interest
BENEFICIARY The recipient of benefits, often from a deed of
trust; usually the lender.
CLOSING DISCLOSURE (CD) Closing Disclosure form
designed to provide disclosures that will be helpful to borrowers
in understanding all of the costs of the transaction. This form will
be given to the consumer three (3) business days before closing.
CLOSE OF ESCROW Generally the date the buyer
becomes the legal owner and title insurance becomes effective.
COMPARABLE SALES Sales that have similar
characteristics as the subject real property, used for analysis in the
appraisal. Commonly called “comps.”
CONSUMMATION Occurs when the borrower becomes
contractually obligated to the creditor on the loan, not, for
example, when the borrower becomes contractually obligated
to a seller on a real estate transaction. The point in time when a
borrower becomes contractually obligated to the creditor on the
loan depends on applicable State law. Consummation is not the
same as close of escrow or settlement.
DEED OF TRUST An instrument used in many states in
place of a mortgage.
DEED RESTRICTIONS Limitations in the deed to a parcel
of real property that dictate certain uses that may or may not be
made of the real property.
The date the amounts are to be disbursed to a buyer and seller
in a purchase transaction or the date funds are to be paid to the
borrower or a third party in a transaction that is not a purchase
EARNEST MONEY DEPOSIT
Down payment made by a purchaser of real property as evidence