How Split Closings can Benefit Lenders


April, 2022

Would you let your car dealer pick who you used for car insurance? Would you let your realtor pick who you used to insure your home? Probably not. Yet, every day lenders allow real estate agents, property owners, lawyers and developers pick the title company that, will not only insure their loan, but also who will close that loan. This of course makes it easier for the lender in the beginning, but who is looking out for the lender at closing and after closing? Wouldn’t it be better for the lender to have an intimate knowledge of who they are working with, know that the lender’s funds are being handled in a manner compliant with the lender’s standards and the ability to control reporting and turn times through an actual partnership? Enter the benefits of the split closing.

Google the term “Split Closing” and you will get several articles defining the term as: “when the buyer and seller use separate title companies for the same transaction.” For purposes of this blog, “Split Closing” will be defined as the use of separate title companies for the closing of the purchase and the closing of the loan. And this is where the benefits to a lender can be seen.

Efficient Closing Process


By teaming with a select number of vendors, lenders can control more aspects of a transaction and any post-closing issues. The lender is able to standardize its closing procedures and have confidence that its title and closing partner understands its requirements. The end result is a more efficient closing process. A recent STRATMOR survey showed significant efficiency gains for lenders who consistently work with the same, limited number of title and closing vendors. Allowing the lender to control the closing process also ensures that the lender’s customers have a positive closing experience, which ultimately reflects well on the lender.

For more information on the benefits of Centralized Title please see the CSS blog from January 8, 2021.

Closing on Lender’s Schedule


Delayed closings are one of the biggest frustrations to clients and can result in not getting repeat business or referrals. Often closings are delayed through no fault of the buyer or the lender, however, agents and title companies will frequently put the blame on the lenders. The Split Closing will allow the lender to work with their clients on scheduling a closing that is convenient to the parties making sure that, from the lenders and buyer perspective, the closing is ready to go on time thus eliminating the question of whether the loan is ready to close. This is where having a strong working relationship with a title company can be beneficial.

Improved Communication


By choosing their own title company, lenders can ensure they select a title partner who provides proactive status updates and responds quickly to any questions. Knowing who to call or contact with an issue becomes easier when there are established relationships with the title company. Lenders can have one point of contact at the title company who is able to quickly assist them with any ongoing transactions. Lenders are not guaranteed this type of cooperation and responsiveness from title agents that are selected by other parties in the transaction.

Similar Costs


The big question from every lender will be “won’t this cost more?”. The answer to that question, is no, or not that much. Title companies can still offer the buyer a simultaneous rate and closing costs should be the same or about equal to those charged by the title company closing the sale transaction. Even if there is a minimal increase in the costs at closing, the lender’s savings in time and money should far outpace such costs.

In Summary


While just accepting the title company that is handed to you when the transaction is commenced may seem like an easy way to select who handles a lenders transaction, it is not the most prudent way for a lender to handle the process. Having a working relationship with your title company guaranties that the lender knows what to expect in the transaction because the lender can set those expectations, not to mention the establishment of processes post-closing that can save a lender time and money. Remember, the lender is the insured so the lender should choose who provides that insurance.

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