Closing (Property) Definition
Closing involves the transfer of the property title from the seller to the buyer. It is the last phase of mortgage loan processing.
A Little More on What is Closing
This process is overseen by a closing agent, who is often an attorney or an official from a mortgage company, and is carried out at the title company or escrow office. The process is different in various states, and it’s called a closing since it involves the closing of the escrow account used in the completion of the property buying process. When closing, the participants conduct a review and authorize as well as date a variety of legal documents.
The closing disclosure is obligated under federal law to outline all the costs related purchasing such as the loan fees and other expenses. The loan amount, rate of interest, payment schedule, and the duration are presented on the promissory note. This note also provides the all the penalties that the lender can inflict on the borrower should he fail to make regular mortgage payments.
A deed of trust is a type of security asset, also known as a mortgage in some states, which is used to pledge a property as security for a loan. A certificate of occupancy is required to determine whether a new property has fulfilled the local building code and laws. Every borrower under the transaction is allowed three business days to cancel a new mortgage loan by the notice of right to cancel. After the closing documents are signed, the borrower’s right to cancel ceases to exist.
A contract drafted between a title insurance underwriter and a lender is known as a closing protection letter. The underwriter accepts to reimburse the lender for any losses resulting from particular misconducts by the closing agent. Closing agents are usually authorized by title underwriters to issue these closing protection letters to lenders if the closing agents expect that they will issue the insurance policies of the title underwriters in the transaction.
Majority of the letters make a third-party beneficiary from the borrower in a purchase transaction. Standard closing protection letters cover inability to adhere to clearly stated closing instructions if the said instructions do affect the validity, priority or the enforceability of the mortgage lien or if they necessitate the closing agent in obtaining, but not providing assurance for the effectiveness, of a particular document, or relate to the collection of the funds owed to the lender.
These letters also covers fraud resulting from the improper management of documents or funds belonging to the lender.
References for Closing
Academic Research for Closing
- The information content of plant closing announcements: Evidence from financial profiles and the stock price reaction, Gombola, M. J., & Tsetsekos, G. P. (1992). Financial management, 31-40. This study depicts that a plant closing announcement provides information for the plant being closed and also for other operations and the whole firm.
- Closing international real business cycle models with restricted financial markets, Boileau, M., & Normandin, M. (2008). Journal of International Money and Finance, 27(5), 733-756. This paper presents a conclusion based on the analysis of the near steady state dynamics which states argue that international real business cycle models with incomplete financial markets provide an excellent explanation of the ranking of cross-country correlations.
- Closing small open economy models, Schmitt-Grohé, S., & Uribe, M. (2003). Journal of international Economics, 61(1), 163-185. This study shows a quantitative comparison of some modifications to the standard mode which have been proposed to induce stationarity and considers five specifications.
- Closing development gaps: challenges and policy options, Brooks, D., Hasan, R., Lee, J. W., & Son, H. H. (2010). This article argues that to close development gaps around the world will require increased and sustainable economic growth in areas with low income as well as policies that will directly close the non-income development gaps.
- Opening and closing price efficiency: Do financial markets need the call auction?, Ibikunle, G. (2015). Journal of International Financial Markets, Institutions and Money, 34, 208-227. This paper models over 73 million trades in the London Stock Exchange to show that the exchange’s high failure rate at the first auction is only related to low volume stocks.
- From methods to ideologies: Closing the assurance expectations gap in social and ethical accounting, auditing and reporting, Swift, T., & Dando, N. (2002). The Journal of Corporate Citizenship, 81-91. This paper presents an examination of the development of the AA 1000 standard and the current assurance guiding principles and uses the assurance expectations gap as an analysis framework.
- A closing call’s impact on market quality at Euronext Paris, Pagano, M. S., & Schwartz, R. A. (2003). Journal of Financial Economics, 68(3), 439-484. This study analyzes the effects of the innovation on market quality using an empirical analysis of price behavior for two samples and two different dates to show that the introduction of closing calls has led to the reduction of execution costs for individual participants and honed the price discovery for the broad market.
- Measuring closing price manipulation, Comerton-Forde, C., & Putniņš, T. J. (2011). Journal of Financial Intermediation, 20(2), 135-158. This paper the impacts of closing manipulation of trading characteristics and stock price accuracy through the use of a sample of prosecuted manipulation cases and then develop an index of the probability and intensity of closing price manipulation based on these findings.
- Closing the accounting talent gap, Thomson, J. C. (2009). The CPA journal, 79(12), 13. This paper details how numerous CFOs in various companies around the globe desire to shift their finance teams from being compliance cops and into business partners and from supporting heavy transactions to supporting big decisions.
- Balance sheets, the transfer problem, and financial crises, Krugman, P. (1999). In International finance and financial crises (pp. 31-55). Springer, Dordrecht. This article drafts a third-generation crisis model that emphasizes two facts which are the role played by company’s balance sheets when determining the ability to invest and the role of capital flows in affecting the real exchange rate.