BIFURCATED TRANSACTIONS

There are times when a lender will not approve an ATG policy or when a buyer has a special relationship with another title company and either of these two parties will not accept ATG as the title underwriter. However, the selling attorney is a member of ATG and wishes to use ATG as the title company. The parties may compromise by having ATG prepare one policy and having another title company prepare the other. This is called a bifurcated transaction.

In order to comply with ATG's underwriting procedures, the parties must first decide which title company will be handling the agency closing, holding any escrows, and recording the documents. If they choose ATG, then you may proceed as you would for a typical transaction. However, if another title company provides those functions, then you must observe the following guidelines:

 

  1. Do not waive or mark up the title commitment at the closing. This includes the taxes, mortgage, special and standard exceptions.

     

  2. Do not issue your final policies until all of the documents are recorded, tax payments are current and the mortgage release deed (if any) has been received and recorded. Note that this means you should allow ample time for the other title company to record the documents. After such time, order a later date search to verify the payment of taxes and the recordation of documents. Then issue the final policies.

     

  3. If you receive any pressure from a lender or opposing counsel to issue a policy even though the above has not been complied with, contact an ATG underwriter or staff attorney for assistance and further instructions.

A disadvantage of bifurcated transactions is the cost involved to the insureds because they will not receive a discounted rate for concurrent policies. Instead, the insureds must pay two title companies for two separate policies. That is, normal premium rates would apply to each single policy. Please contact an ATG underwriter if you need any assistance in calculating rates.

Because of the hassle and the increased amount of work involved, you may choose not to involve yourself in a bifurcated closing and either discharge yourself from the transaction or ask that all parties use ATG for both policies. Note that lenders may dictate a choice in title companies for commercial transactions only. If you encounter a lender who refuses to accept ATG as the title company on residential property, please call ATG immediately. The lender may be violating the Consumer Fraud and Deceptive Business Practices Act. In the event that a conflict arises between two ATG members for issuance of policies, ATG Administrative Regulations will control.

© ATG UB1000vol5no5

 

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