Are title agents acting as settlement agents required to provide a closing protection letter to buyers and sellers upon request?

Title agents acting as settlement agents are not universally required to provide closing protection letters to buyers and sellers; rather, they are typically required to provide them primarily to lenders as a standard practice. The closing protection letter serves to protect lenders from potential losses due to fraud or misappropriation of funds by the title agent. This reflects the need for heightened due diligence around lender interests during real estate transactions.

The requirement can vary by state regulations and may depend on the policies of the title company, but the intention is to mitigate risk for financial institutions involved in the transaction. While buyers or sellers may request such letters, it is not a requirement for the title agents to automatically provide them to these parties unless a lender is involved. Hence, the focus on lenders signifies a layered approach to protections in real estate transactions, emphasizing the financial aspects that these entities prioritize.