QUESTION: I have just finished signing a contract to purchase my first home. I have met with a lender and have also had the house inspected. The agent has now suggested that I arrange for a title company to handle settlement. Please explain to me the various responsibilities of the title company, as well as what I can expect to occur in the next few weeks prior to settlement.
ANSWER: The agent is correct in suggesting that you select a title company as soon as possible. There are many important matters which must be tended to prior to settlement. You have the right to select any title company of your choice. Once you have made your selection, you should advise the agent of your choice, as the contract will then be forwarded to Village Settlements, Inc.
The first step Village Settlements, Inc., will undertake is to order a title report or title abstract. This report will show the title attorney with Village Settlements, Inc., a sixty (60) year history of the property. The abstract will also reveal whether any outstanding lawsuits, judgments, or liens exist and will state whether any easements, rights-of-way, covenants, or restrictions affect the property. If you would like to review any of the documents filed in the Land Records, please contact one of our attorneys. For a nominal charge, we can obtain full copies of all easements, rights of way, etc., and deliver those to you prior to settlement. Unlike many companies, at Village Settlements, Inc., one of our attorneys will review and sign off on the title abstract and the survey.
Village Settlements, Inc., will also order a house location survey. This survey will reveal whether any fences encroach upon the neighbor’s property or vice versa, and whether the house and other structures are within the property lines. The survey will also reveal if any portion of the house or other structures have been built over any building restriction lines. Unless you specifically request, in writing, the surveyor will not place iron stakes in the corners. The surveyor will identify, in most cases, when an existing stake has been found. If you wish to obtain a survey where the iron pipes are placed in each corner, you will have to pay an additional fee for this service. In either case, under Maryland regulations, you will be required to sign a form electing either a house location survey or a stake survey. The surveyor cannot commence work on either type of survey until you sign this form. At Village Settlements, Inc., we will contact you as soon as we receive your contract/title order and will make arrangements to get the survey request form to you.
Next, Village Settlements, Inc., will also prepare the title insurance binder and title insurance policy. The protection afforded under a title insurance policy is discussed later on this website. The policy is designed to protect both you (if you elect to purchase a policy) and the lender, who will require you to purchase a policy on its behalf, against any outstanding title defects which are not otherwise excepted from the policy. The title insurance premium which you pay at closing is a one-time charge and will protect you for as long as you own the property.
After reviewing the title report and survey and preparing the title insurance binder, Village Settlements, Inc., will forward this information to your lender in advance of settlement. Your lender will then review the entire package as part of the overall loan approval process. As the settlement date nears, Village Settlements, Inc., and the lender will be in close contact, making arrangements to deliver your loan papers to our office. These papers will be carefully reviewed by the attorney with Village Settlements, Inc., in order to determine that they are in proper form.
In October of 2015, the real estate settlement industry saw a major change in the loan disclosure laws and the settlement documents to be signed. Under the prior Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), lenders were required to deliver to the borrower a Truth in Lending document which presumably helped the borrower to understand the true cost of their loan. Also, settlement attorneys prepared a HUD-1 Settlement Statement which outlined all of the costs and expenses of the settlement. Under the new law, the Consumer Financial Protection Bureau was directed to integrate the mortgage loan disclosures under TILA and RESPA. And thus, TILA-RESPA Integrated Disclosure (TRID) was born. Commonly known as the “Know Before You Owe” initiative, extensive information can be found here: http://www.consumerfinance.gov/know-before-you-owe
Many of the terms that the Lender will use have changed with the new TRID laws. The key terms that have change are as follows:
- Lender = Creditor
- Borrower = Consumer
- Settlement Date = Date of Consummation, which is the date when you become liable on the loan
- Truth in Lending and Good Faith Estimate = Loan Estimate
- HUD-1 Settlement Statement and Final Truth in Lending = Closing Disclosure
You should expect that these old and new terms will be used interchangeably.
The two major changes that will affect your transaction are the Lender requirements for the new Loan Estimate (LE) and the preparation of the Closing Disclosure. The Loan Estimate is prepared by your Lender and the Lender must provide the LE to you within three business days of the receipt of your loan application.
The Closing Disclosure (CD) is now the first significant settlement document that you will see before settlement. The CD sets forth all of the costs and expenses of settlement as well as the adjustments between the buyers and sellers. Under TRID, the Lender is required to deliver the CD to you three business days before settlement. The timing and method of the delivery by your Lender is critical. In most cases, the Lender will hand deliver the CD to you. However, you may also receive the CD via e-mail or regular United States mail. Depending upon how the CD is delivered to you, you will receive the CD anywhere from three to seven days in advance of settlement.
At settlement, we will review the CD and all of the loan documents. The Seller will also sign the Deed, which will transfer legal title to you. In addition, settlement is often a time for final discussions regarding the operation of various items in the house, as well as the delivery of the keys.
Throughout the settlement process, Village Settlements, Inc., will be available to answer any questions you may have regarding your loan documents, the contract, and any addenda which you must sign, as well as any other matters regarding your settlement. In fact, at Village Settlements, Inc., one of our attorneys will be available, free of charge, to review and discuss all settlement documents which you must sign.
After settlement, it is the responsibility of Village Settlements, Inc., to disburse all of the funds to the various parties. The Seller’s loan will be paid off, and the Seller will receive the proceeds check. Several weeks after settlement, the Seller will receive a refund of any funds being held in escrow by the current lender.
Village Settlements, Inc., will also be responsible for recording the Deed and your loan documents at the courthouse. Approximately four to eight weeks after settlement, you will receive the Deed and, if purchased, your owner’s title insurance policy. Although you may not receive the Deed for many weeks, you will be the owner of the property.
In preparing for settlement, you should discuss with the real estate agent and loan officer certain items which will be necessary for settlement. For example, your lender will require you to deliver evidence that you have purchased a hazard insurance policy on the house and have paid the first year’s premium in advance. Additionally, it may be necessary to provide the lender with a copy of the termite inspection report and well and/or septic reports. Your lender may also need some final documentation in order to complete your loan package. You should stay in constant contact with your loan officer in order to ensure that all documentation is provided to the lender in a timely manner.
Also, you will want to contact the various utility companies involved to transfer the accounts into your name. At settlement, Village Settlements, Inc., will hold a small portion of the Seller’s proceeds in escrow to pay the final water bill. However, all other final utility bills must be paid by the Seller.
Finally, you should be prepared to bring a picture identification, such as a driver’s license. Also, you should wire your closing funds to Village Settlements, Inc. or bring a certified or cashier’s check, payable to Village Settlements, Inc., to closing. The amount that you will need to bring will be set forth on the Closing Disclosure in the box labeled “Cash to Close.” The most important thing for you to remember is that you are working with a real estate agent, loan officer, and title attorney who have handled many transactions. Therefore, if you have any questions regarding any phase of the process, you should not hesitate to contact any of us.