Escrow & Title
What is 'closing protection letter' (CPL) in Hawaii title insurance and why is it important for lenders?
AA. A letter protecting the buyer from the closing agent stealing their funds
BB. A contractual commitment by the title insurance underwriter to indemnify the lender if the closing agent misappropriates funds or fails to follow closing instructions✓ Correct
CC. A letter from the title company confirming the property is free of all liens
DD. Insurance protecting the closing agent from client lawsuits
Explanation
A Closing Protection Letter (CPL) is issued by the title insurance underwriter (not just the agent) to the lender, promising to indemnify the lender if the closing/settlement agent misappropriates closing funds or fails to follow the lender's closing instructions. It protects lenders against agent theft or negligence, which is separate from what the title insurance policy covers.
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