SPLIT CLOSINGS
Presented by:
Douglas G. Smith
V.P. & Associate Sr. Underwriter

Many closings that take place in Michigan
involve “split closings”.

Split closings involve one title company
closing and insuring the seller’s side (and
issuing the owner’s policy) and a different
title company closing and insuring the
buyer’s side (and issuing the loan policy).
What is a split closing?

Escrow and settlement practices are not
covered under the agency agreement, and
the Company does not direct such practices.

Stewart Bulletin MI2012006 advises you of
some recommended practices and
procedures regarding the allocation of
responsibilities in split closings, that may
assist in avoiding potential problems and limit
losses.
Stewart Bulletin: MI2012006

The Settlement Agent is the title company for the buyer’s
side and issues the loan policy. They undertake
responsibility for:
◦ Complying with the lenders closing instructions
◦ Issuing a commitment for a loan policy and Closing Protection
Letter (CPL) to the lender, and, typically a First Lien Letter.
◦ Executing a HUD-1 and disbursing the proceeds of the loan
according to the lender’s closing instructions and the provisions of
the HUD-1.
 [This includes the obligation to pay off the underlying mortgages/liens
against the property, taxes, broker commissions, credit reports, appraisal
fees, processing fees, flood cert’s, etc.]
Settlement Agent

Additional responsibilities of the
Settlement Agent include:
◦ Marking-up the commitment and issuing a loan
policy to the lender.
◦ Causing the mortgage to be promptly recorded.
◦ Requiring a copy of the deed from the Seller’s
Agent.
Settlement Agent

The Seller’s Agent is the title company for the
seller’s side and issues the owner’s policy. They
undertake responsibility for:
◦ Issuing a commitment and owner’s policy to the buyer.
◦ Executing a HUD-1 that functionally mirrors the HUD-1
of the Settlement Agent.
◦ Causing the vesting deed to be promptly recorded.
◦ Requiring a copy of the mortgage from Settlement
Agent.
 [owner and borrower should read the same.]
Seller’s Agent

If the Settlement Agent receives a request from the
Seller’s Agent to disburse Seller’s proceeds and
Seller’s Broker’s (Listing Agent’s) commission to the
Seller’s Agent, it is good practice to secure:
◦ A written directive and hold harmless from Seller
(Exhibit 1), and
◦ An indemnity from Seller’s Agent (Exhibit 2)
 (Unless they are a current Stewart Agent)

Note: It is advisable to reflect that those payments
are paid to the Seller’s Agent on the HUD-1 and not
to the Seller or Broker directly.
Good Practices

If you are acting as the Settlement Agent
and you receive a request from the Seller’s
Agent to disburse proceeds for underlying
mortgages, monetary liens or property taxes
to the Seller’s Agent, instead of paying them
directly, please be advised that you are not
authorized by Stewart to do so as it may
create potential liability for the Company
under Stewart’s Closing Protection Letter
and/or title policy of insurance.
Good Practices

It is likely that the Settlement Agent’s
disbursement to the Seller’s Agent of the
Seller’s Agent’s title fees, deed recording
fees and transfer fees as line items on the
HUD-1 in the normal course of business
should not create an issue. However, you
should not provide a copy of the CPL to
the Seller’s Agent without Underwriter
approval.
Good Practices

If the Seller’s Agent receives a request from the Settlement Agent to deliver
the vesting deed to the Settlement Agent for recording, it is good practice to
secure:
◦ A written directive and hold harmless from the Buyer (Exhibit 3),
◦ An indemnity from the Settlement Agent (Exhibit 4)
 (Unless they are a current Stewart Agent)
◦ A duplicate original or copy of the deed in your file.

Note: Do not mark up your commitment indicating that the deed has been
recorded [or indicating that underlying mortgages/liens have been paid off].
Do not delete the gap exception.

Note: If you issue the owner’s policy before the deed is recorded, take
exception for loss or damage resulting from failure to record the deed, all open
mortgages (you must review title) and retain the gap exception.
Good Practices

If you are acting as the Seller’s Agent, you
should deny any request from the Settlement
Agent to provide the Settlement Agent with a
marked-up commitment, as a marked-up
commitment may create potential liability under
the Mutual Indemnity Agreement.

As the title company issuing the owner’s policy,
you should not be taking on liability for failure to
record the deed, failure to pay off underlying
mortgages, liens, and taxes, and providing gap
coverage unless all of those matters are satisfied
prior to issuance of the policy.
Good Practices
Contact Information:
Doug Smith
V.P. & Associate Sr. Underwriter
734-469-9461 (direct)
800-221-8710 ext. 9461 (toll free)
[email protected]
Questions?