When a person applies for a loan to refinance real estate, the bank may require the help of a title company to assist with the refinancing process.
The title company conducts a background check on the title of the property. The title company will then scrutinize all the documents associated with the property to assure the bank that the applicant is the legitimate owner. The title company will also establish whether the property has any title problems. Some of the problems may include outstanding mortgages, liens, unpaid taxes and judgments. The title company will also advise the bank if there have been changes on the title since the time of purchase.
When a borrower would like to receive “cash out” from a refinance, the lender liaises with the title company to disburse the money. In this case, the lender will deliver the funds to the title company and the title company will then handle the disbursement and any other additional procedure that might be necessary. The title company will deduct its fee before delivering the money to the borrower and any other parties entitled to payment. After disbursement, the title company will give the bank a title insurance policy to assure the lender that the property is free and clear of all prior liens and encumbrances.
A title company acts as a communication platform for all the parties involved in the refinancing process. An employee from the title company will contact third parties to establish the exact amount used to pay off any liens or encumbrances recorded against the property. The title company keeps in touch with the owner of the property and lender who are connected to the refinance. The title company also gathers and organizes all loan and title documents needed for refinancing.
A title company can also facilitate the closing process. Closing occurs when the borrower signs the documents associated with the loan. The title company must work with the lender to prepare a closing disclosure and settlement statement that capture all the items to be paid from the proceeds of the loan. The closing disclosure and settlement statement also capture the amount that will be paid to the borrower as a disbursement if applicable. The title company then ensures that the borrower signs the closing disclosure, settlement statement and all the refinancing documents. In most occasions, the title company is the one tasked with delivering the Mortgage to the county records office. Once the closing adjourns, the title company makes arrangements to ensure that all funds are disbursed as agreed on the closing disclosure and settlement statement.