What is a CPL?

Whether you are a buyer or a seller in a transaction, you are probably aware of title insurance and the fact that, as a part of the purchase of a new property, you will receive a title commitment and finally a title policy once the property is closed.  Title insurance, as previously explained in this section, is protection against loss arising from problems concerning the title of your property.  Title searches are completed on the property that provide a full history of the land.  It will assist the examiner, or closing agent, to determine if there are fraudulent conveyances, unpaid taxes, unreleased liens against the property or problems with the legal description being conveyed.  Title insurance covers the insured party for any claims and legal fees that arise from such problems.

One term you may or may not have heard is a CPL.  CPL stands for closing protection letter and for some time it has been available only to the lender in a transaction.  Recently, however, CPLs have been made available to the buyer and/or the seller for a small fee.

A closing protection letter (sometimes "insured closing letter" or CPL) forms a contract between a title insurance underwriter and a lender, in which the underwriter agrees to indemnify the lender for actual losses caused by certain kinds of misconduct by the closing agent. 

With the increased amount of wire fraud in real estate transactions, CPL claims are on the rise.  The CPL serves an important function in providing lenders (and buyers or sellers) with assurance that title agents will properly handle their funds and documents. 

The typical CPL promises to reimburse the holder for loss associated with defects in the validity, enforceability, and priority of the title or lien at issue arising from a settlement agent's theft, fraud, negligence, or failure to comply with closing instructions.

The unfortunate and increased presence of fraud and theft are the primary reason for you to trust your Realtor in their selection of a title insurance company to handle your transaction.  Your Realtor is well aware of the pitfalls and has thoroughly researched the title field to assure their clients are protected.