Mortgage lenders are all too familiar with borrowers’ assertions that they did not receive two properly dated copies of the Truth-In-Lending Act (“TILA”) mandated Notice of Right to Cancel form (“NORTC”) at closing. Under TILA, the failure to provide two copies of the NORTC form allows a borrower to rescind the loan years after the closing. As a result, this claimhas become a standard borrower assertion in defense of a foreclosure action.
While frequently overlooked by mortgage lenders and their counsel, these types of claims are often covered by a little understood title insurance indemnity agreement commonly known as a closing protection letter or insured closing letter. The closing protection letter provides the lender with the ability to recover its losses from the issuer of the closing protection letter which is generally a title insurance underwriter such as Fidelity National Title and its many brand of companies (Chicago Title, Commonwealth Land, Alamo Title, Ticor Title), First American Title Insurance, Stewart Title, and Old Republic National Title. This article provides an overview of closing protection letters and their coverage of NORTC claims.
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