“WHY DO THE TITLE INSURANCE PREMIUMS ON THE CLOSING DISCLOSURE MY LENDER PROVIDED ME LOOK DIFFERENT FROM THE SETTLEMENT STATEMENT THAT MY TITLE COMPANY PROVIDED ME?”
Our Escrow Officers and their teams often have clients ask why the title insurance premiums always appear to be different on a Closing Disclosure vs. an ALTA Settlement Statement. We understand the confusion! You may be going through the two documents next to each other, and even though your bottom lines are the same, the title premiums look completely different – what’s the deal!?
The first thing to know is that, if you take the time to add the Owners and the Lenders Title Policy Premiums on the Closing Disclosure and do the same with the Settlement Statement, you’ll find that the Total Premium is exactly the same. Furthermore, you will also find that the portion of the total title insurance premium you are paying, whether you are the buyer or the seller, will be the same amount on either disclosure. So why do the numbers look different?
The premiums are different on the two forms because the Closing Disclosure from your lender is governed by federal law, while your title company will issue you the ALTA Settlement Statement using Texas guidelines. The ALTA is meant to more accurately disclose the cost of the title insurance notwithstanding how federal law requires it to be shown on the Closing Disclosure. The Owner’s policy and Loan policy premiums are set by the Texas Commissioner of Insurance – which explains why the total premiums must be identical on both documents. However, when a transaction involves issuing both an Owner’s policy (to the buyer) and a Loan policy (to the lender), there is a “simultaneous issue” rate on the Loan policy. The difference you see between the forms is based on where and how the discount is shown:
- ALTA SETTLEMENT STATEMENT: Texas law requires the discount to be shown in the loan policy premium – in other words, in most cases where the loan is purchase money and doesn’t exceed the sales price, you’ll see the full Owners Title Insurance premium listed and then you’ll see $100 for the Loan Policy. Endorsements will likely be itemized separately.
- CLOSING DISCLOSURE (CD): Federal Law requires the discount to be reflected in the Owner’s policy premium. So on the CD the Loan Policy will look higher and the Owner’s policy will look lower than on the ALTA. There may also be a debit/credit adjustment in favor of the Buyer from the Seller in many instances where the Seller is contractually responsible for the cost of the Owner’s policy.
Because of the potential for confusion, Texas requires the Texas Disclosure (Form T-64) to be signed at closing, which, in part, attempts to clarify this for buyers and sellers.
Your escrow team here at Heritage Title is always available to you to answer any questions you might have about this, or any other matter of concern pertaining to your transaction!