PART 1927—TITLE CLEARANCE AND LOAN CLOSING Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480. Source: 61 FR 11711, Mar. 22, 1996, unless otherwise noted. Subpart A [Reserved] Subpart B—Real Estate Title Clearance and Loan Closing § 1927.51 General. (a) Types of loans covered by this subpart. (b) Programs not covered by this subpart. (c) [Reserved] (d) Copies of all agency forms referenced in this regulation and the agency's internal administrative procedures for title clearance and loan closing are available upon request from the agency's State Office. Forms and title clearance and loan closing requirements which are specific for any individual state must be obtained from the agency State Office for that state. [61 FR 11711, Mar. 22, 1996, as amended at 72 FR 64122, Nov. 15, 2007] § 1927.52 Definitions. Agency. Approval official. Approved attorney. Approved title insurance company. Borrower. Certificate of title. Closed loan. Closing agent. Closing protection letter. Cosigner. Credit sale. Deed of trust. Exceptions. Fee simple. General warranty deed. Indemnification agreement. Issuing agent. Land purchase contract (contract for deed). Mortgage. National Office. OGC. Program regulations. Quitclaim deed. RHS. Seller. Special warranty deed. State Office. Title clearance. Title company. Title defects. Trust deed. Voluntary conveyance. Warranty deed. [61 FR 11711, Mar. 22, 1996, as amended at 67 FR 78327, Dec. 24, 2002; 80 FR 9876, Feb. 24, 2015] § 1927.53 Costs of title clearance and closing of transactions. The borrower or the seller, or both, in compliance with the terms of the sales contract or option will be responsible for payment of all costs of title clearance and closing of the transaction and will arrange for payment before the transaction is closed. These costs will include any costs of abstracts of title, land surveys, attorney's fees, owner's and lender's policies of title insurance, obtaining curative material, notary fees, documentary stamps, recording costs, tax monitoring service, and other expenses necessary to complete the transaction. § 1927.54 Requirements for closing agents. (a) Form of title certification. (b) Approval of closing agent. (c) Approval of attorneys. (d) Approval of title companies. (e) Approval of title insurance companies. (1) The form of the owner's and lender's policies of title insurance (including required endorsements) to be used in closing agency loans are acceptable to the agency, and will contain only standard types of exceptions and exclusions approved in advance by the agency; (2) The title insurance company is licensed to do business in the state (if a license is required); and (3) The title insurance company is regulated by a State Insurance Commission, or similar regulator, or if not, the title insurance company submits copies of audited financial statements, or other approved financial statements satisfactory to the agency, which show that the company has the financial ability to cover losses arising out of its activities as a title insurance company and under any closing protection letters issued by the title insurance company. (4) Delay in providing services without justification may be a basis for not approving the company. (f) [Reserved] (g) Conflict of interest. (h) Debarment or suspension. (i) Special provisions. (j) [Reserved] § 1927.55 Title clearance services. (a) Responsibilities of closing agents. (b) [Reserved] (c) Ordering title services. (d) Use of title opinion. (1) The legal description and all owners of the real property; (2) Whether there are any exceptions affecting the property and advise the approval official and borrower of the nature and effect of outstanding interests or exceptions, prior sales of part of the property, judgments, or interests to assist in determining which exceptions must be corrected in order for the borrowers to obtain good and marketable title of record in accordance with prevailing title examination standards, and for the agency to obtain a valid lien of the required priority; (3) Whether there are outstanding Federal, State, or local tax claims (including taxes which under State law may become a lien superior to a previously attaching mortgage lien) or homeowner's association assessment liens; (4) Whether outstanding judgments of record, bankruptcy, insolvency, divorce, or probate proceedings involving any part of the property, whether already owned by the borrower, or to be acquired by assumption or with loan funds, or involving the borrower or the seller exist; (5) If a water right is to be included in the security for the loan, and if so, the full legal description of the water right; (6) In addition to paragraph (d)(2) of this section, if wetlands easements or other conservation easements have been placed on the property; (7) What measures are required for preparing, obtaining, or approving curative material, conveyances, and security instruments, and (8) That sufficient copies of these interests and exceptions are provided as requested by the approval official. (e) Use of title insurance. (f) [Reserved] § 1927.56 Scheduling loan closing. The agency, in coordination with the closing agent, will arrange a loan closing and send loan closing instructions, on an agency form to the closing agent when the agency determines that the exceptions shown on the preliminary title opinion or title insurance binder will not adversely affect the suitability, security value, or successful operation of the property and all other agency conditions to closing have been satisfied. § 1927.57 Preparation of closing documents. (a) Preparation of deeds. (1)-(2) [Reserved] (b) Preparation of mortgages. (1)-(8) [Reserved] (9) Alteration of mortgage form. (10) [Reserved] (11) Mortgages on leasehold estates. (i) In the space provided on the mortgage for the description of the real property security, the leasehold estate and the land covered by the lease must be described. The following language must be used unless modified by a State Supplement: All of borrower's right, title, and interest in and to a leasehold estate for an original term of ____ years, commencing on ______, 19 ____, created and established by and between ______ as lessor and owner and ____ as lessee, including any extensions and renewals thereof, a copy of which lease was recorded or filed in book ____, page ____, as instrument number ____, in the Office of the (e.g., County Clerk), for the aforesaid county and State and covering the following real property: ______. (ii) Immediately preceding the covenant starting with the words “should default,” the following covenant will be added: ( ) Borrower covenants and agrees to pay when due all rents and any and all other charges required by said lease, to comply with all other requirements of said lease, and not to surrender or relinquish, without the Government's prior written consent, any of borrower's right, title, or interest in or to said leasehold estate or under said lease while this mortgage remains of record. (12) Mortgages on land purchase contract. (13) [Reserved] (c) [Reserved] (d) Preparation of protective instruments. (1) Prior lienholder's agreement. (i) The prior lienholder shall agree not to declare the lien in default or accelerate the indebtedness secured by the prior lien for a specific period of time after notice to the agency. The agreement must: (A) Provide that the specified period of time will not commence until the lienholder gives written notice of the borrower's default and the prior lienholder's intention to accelerate the indebtedness to the agency office servicing the loan, (B) Include the address of the agency servicing office, (C) Give the agency the option to cure any monetary default by paying the amount of the borrower's delinquent payments to the prior lienholder, or pay the obligation in full and have the lien assigned to the agency, and (D) Provide that the prior lienholder will not declare the lien in default for any nonmonetary reason if the agency commences liquidation proceedings against the property and thereafter acquires the property. (ii) When the prior lien secures future advances, including the lienholder's costs for borrower liquidation or bankruptcy, which under State law have priority over the mortgage being taken (or an agency mortgage already held), the prior lienholder shall agree not to make advances for purposes other than taxes, insurance or payments on other prior liens without written consent of the agency. (iii) The prior lienholder shall consent to the agency making (or transferring) the loan and taking (or retaining) the related mortgage if the prior lien instrument prohibits a loan or mortgage (or transfer) without the prior lienholder's consent. (iv) The prior lienholder shall consent to the agency transferring the property subject to the prior lien after the agency has obtained title to the property either by foreclosure or voluntary conveyance if the prior lien instrument prohibits such transfer without the prior lienholder's consent. (2)-(3) [Reserved] (4) Agreement by holder of seller's interest under land purchase contract. (i) The seller shall agree not to sell or voluntarily transfer the seller's interest under the land purchase contract without the prior written consent of the State Office. (ii) The seller shall agree not to encumber or cause any liens to be levied against the property. (iii) The seller shall agree not to commence or take any action to accelerate, forfeit, or foreclose the buyer's interest in the security property until a specified period of time after notifying the State Office of intent to do so. This period of time will be 90 days unless a State Supplement provides otherwise. The agreement shall give the agency the option to cure any monetary default by paying the amount of the buyer's delinquent payments to the seller, or paying the seller in full and having the contract assigned to the agency. (iv) The seller shall consent to the agency making the loan and taking a security interest in the borrower's interest under the land purchase contract as security for the agency loan. (v) The seller shall agree not to take any actions to foreclose or forfeit the interest of the buyer under the land purchase contract because the agency has acquired the buyer's interest under the land purchase contract by foreclosure or voluntary conveyance, or because the agency has subsequently sold or assigned the buyer's interest to a third party who will assume the buyer's obligations under the land purchase contract. (vi) When the agency acquires a buyer's interest under a land purchase contract by foreclosure or deed in lieu of foreclosure, the agency will not be deemed to have assumed any of the buyer's obligations under the contract, provided that the failure of the agency to perform any such obligations while it holds the buyer's interest is a ground to commence an action to terminate the land purchase contract. (5)-(6) [Reserved] (e) [Reserved] § 1927.58 Closing the transaction. The closing agent will cooperate with the approval official, borrower, seller, and other necessary parties to arrange the time and place of closing. The transaction may be closed when the agency determines that the agency requirements for the loan have been satisfied and the closing agent or approved attorney can issue or cause to be issued a policy of title insurance or final title opinion as of the date of closing showing title vested as required by the agency, the lien of the agency's mortgage in the priority required by the agency, and title to the mortgaged property subject only to those exceptions approved in writing by the agency. The loan will be considered closed when the mortgage is filed for record and the required lien is obtained. (a) Disbursement of loan funds. (b) Title examination and liens or claims against borrowers. (c) Taxes and assessments. (d) Affidavit regarding work of improvement Execution by borrower. (2) Execution by seller. (3) Legal insufficiency of affidavit form. (4) Recording. (5) Delay in closing. (e)-(f) [Reserved] (g) Return of loan documents to approval official after loan closing. (h) Final title opinion or title insurance policy. (1) Final title opinion. (2) Title insurance policy. (3) [Reserved] (i) Other services of the closing agent. (2) The closing agent will provide services for deeds in lieu of foreclosure as set forth in § 1927.62 of this subpart, and § 1955.10 of subpart A of part 1955 of this chapter. § 1927.59 Subsequent loans and transfers with assumptions. Title services and closing for subsequent loans to an existing borrower will be done in accordance with previous instructions in this subpart, except that: (a) Loans closed using title insurance or title opinions. (i) The cost of title services is excessive in relationship to the size of the loan, (ii) The agency currently has a first mortgage security interest, (iii) The applicant has sufficient income to service the additional loan, (iv) The borrower is current on the existing agency loan, and (v) The best mortgage obtainable adequately protects the agency security interests. (2) Title insurance or a final title opinion will not be obtained for a subsequent Section 504 loan where the previous Section 504 loan was unsecured or secured for less than $7,500 and the outstanding debt amount plus the new loan is less than $7,500. (3) Loans closed using a new lender title insurance policy: (i) Will cover the entire real property which is to secure the loan, including the real property already owned and any additional real property being acquired by the borrower with the loan proceeds. (ii) Will cover the entire amount of any subsequent loan plus the amount of any existing loan being refinanced (if the existing loan is not being refinanced, the new lender policy will insure only the amount of the subsequent loan). (b) Title services required in connection with assumptions. [61 FR 11711, Mar. 22, 1996, as amended at 67 FR 78327, Dec. 24, 2002] §§ 1927.60-1927.99 [Reserved] § 1927.100 OMB control number. The reporting requirements contained in this regulation have been approved by the Office of Management and Budget and have been assigned OMB control number 0575-0147. Public reporting burden for this collection of information is estimated to vary from 5 minutes to 1.5 hours per response, with an average of .38 hours per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, DC 20250; and to the Office of Management and Budget, Paperwork Reduction Project (OMB #0575-0147), Washington, DC 20503. You are not required to respond to the collection of information unless it displays a currently valid OMB control number.