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Bulletin No. 2004-05-CF
Mortgage Lenders use of Escrow Companies to perform mortgage closing and disbursement of proceeds
Issued and entered this 16th day
of August 2004
These escrow companies, however, perform services typically associated with mortgage loan closings performed by title insurance companies including the retaining of mortgage loan funds in escrow, the preparation of mortgage loan closing documents, conducting the closing of mortgage loans, and the disbursement of mortgage loan proceeds in accordance with a loan agreement.
There is no licensing requirement in Michigan for escrow companies that perform typical mortgage closing and loan proceeds disbursement functions. And there is no statutory requirement in Michigan for mortgage lenders to use licensed entities, such as title insurance companies, to close mortgage loans.
OFIS is aware of several recent instances in which escrow companies have failed to disburse mortgage loan proceeds in accordance with a mortgage loan agreement resulting in significant financial difficulties for both the consumer and the lender. Consumers can suffer severe and nearly immediate financial difficulties when mortgage loan proceeds are not disbursed in accordance with loan agreements including multiple loan commitments when one or more loans should have been paid with loan proceeds. Mortgage lenders can also suffer significant financial difficulties when loan closings are not completed but funds have been transferred to an escrow company.
Fail to make a mortgage loan in accordance with a written commitment to make a mortgage loan issued to, and accepted by, a person when the person has timely and completely satisfied all the conditions of the commitment before the expiration of the commitment.
Section 24(2)(h) of the SMLA, MCL 493.74, contains a substantively identical provision.
For these reasons and others, it is the position of OFIS that:
OFIS does not object to licensed or registered mortgage lenders contracting with escrow companies to provide typical mortgage loan closing services. However, to protect themselves and their customers, it is the position of OFIS that:
Any questions regarding this bulletin should be directed to:
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