Who This Is For
Pre-funding QC managers, closing and post-closing leads, and Directors of Mortgage Ops who own the defects that turn up after the wire. Also secondary marketing, because these defects are the ones investors find in the post-purchase review.
Two Documents Everyone Assumes Someone Else Checked
The title commitment comes from the title agent. The insurance declaration comes from the borrower's insurance agent. Both arrive late, both are written by people outside the lender, and both get a quick look, because there is a sense that the title company and the insurer are responsible for their own paperwork. They are responsible for their paperwork. The lender is responsible for whether that paperwork matches the loan it is about to fund and sell, and the mismatches are where the defects come from.
Neither document is wrong on its own very often. What goes wrong is the relationship between them and the rest of the file: the borrowers in title against the borrowers on the note, the property on the declaration against the property on the appraisal, the premium on the declaration against the premium on the Closing Disclosure. Those are cross-document checks, and cross-document checks are exactly what a reviewer under time pressure skips, because each one means opening two or three files and comparing them line by line.
In the pre-close QC deployment at Better Mortgage, the agent reads more than twenty document types across Conventional, FHA, VA and HELOC files, and human review per loan file fell from 4 hours 50 minutes to 47 minutes. Title and insurance are two of those document types, and two of the ones where cross-checking pays most, because the rules are specific and the documents are long. This post walks through what the Pre-Close QC Agent checks on each and why.
The Title Commitment, Read Against Everything Else
Fannie Mae's B7-2-01 requires every loan it buys to have a title insurance policy or an acceptable attorney's opinion of title, and B7-2-03 sets the coverage, including the acceptable ALTA loan policy forms and the bar on the creditors' rights exclusion. At pre-close, what the lender has is the commitment, so the question is whether the policy that will issue from that commitment will meet those requirements and match the loan.
The agent checks the proposed insured first. It has to name the lender, followed by "its successors and/or assigns" or equivalent language, because a policy that insures only the originating lender is a problem the moment the loan is sold. Then the proposed policy amount, which has to be at least the loan amount, and on a loan where the amount changed late (a common event when an appraisal comes in low and the borrower brings more cash or the terms get restructured) the commitment often still shows the old figure.
Then vesting. The commitment's Schedule A shows who holds title now and who will hold it after closing. Those names have to agree with the borrowers on the note, the security instrument and the application, and the agent compares them as names, not as strings: a middle initial missing on one document is a note, while a person who appears on title but not on the loan, or a trust or LLC vesting on a loan underwritten to individuals, is a finding. A non-borrowing spouse in a community property state, or a vesting change on a refinance, is routed to a person with the rule cited, because those cases depend on state law and on the lender's own policy.
The legal description and property address are compared against the appraisal and the security instrument. A unit number dropped on a condo, or a parcel number that does not match the appraisal, is the kind of discrepancy that produces a recording problem months later.
Schedule B is two lists, and the agent treats them differently. The requirements (often labeled Schedule B-I) are what has to happen before the policy issues: payoffs of existing liens, releases, a recorded power of attorney, a death certificate. Each payoff requirement is matched to a payoff on the Closing Disclosure, so a second lien the commitment says must be paid off, which is not on the CD, is caught before closing instead of after recording. The exceptions (Schedule B-II) are what the policy will not cover. Fannie's B7-2-05 on title exceptions and impediments lists what is acceptable, such as customary easements and restrictions that do not affect the property's use or marketability, and treats others as impediments that need to be cleared or that require lender indemnification. The agent classifies every exception against that section. Standard exceptions clear with the citation. Anything outside the acceptable list, such as an open mechanic's lien, an unexpired redemption period, or an encroachment noted on the survey, goes to the closing team as a named exception with the exception text and the rule beside it.
Last, the commitment's effective date. A commitment that is several months old by the closing date has not checked for anything recorded since, and a recorded judgment against the borrower in that gap is exactly what a bring-down should catch.
The Insurance Declaration, Read Against the Investor Rules
Fannie Mae's property insurance rules in chapter B7-3 are specific, which makes them good candidates for automation and easy to get wrong by eye.
Coverage amount comes first. B7-3-02 requires coverage at least equal to the lesser of 100% of the replacement cost value of the improvements or the unpaid principal balance, provided that is not less than 80% of the replacement cost value. The agent needs a replacement cost figure to test that, which usually comes from the insurer's estimate or the appraisal's cost approach, and it records which one it used.
Then the deductible. The same section caps the deductible for required perils at 5% of the coverage amount, and where a policy carries a separate deductible for a peril such as windstorm, that deductible has to stay within the limit too. Coastal policies with a percentage-based hurricane deductible are where this fails most, because the all-perils deductible looks fine and the wind deductible is on page four.
Then the mortgagee clause. B7-3-08 requires the lender's name followed by "its successors and/or assigns" and a mailing address, and does not accept a loss payable clause in place of a mortgagee clause. The agent reads the clause on the declaration, compares the name to the lender on the note, and checks the loan number. A declaration that names a prior lender, which happens on refinances when the borrower forwards their existing policy, is a common miss.
Then named insured, property address and term. The named insureds should match the borrowers in title, the address should match the security instrument and appraisal, and the policy has to be in force on the disbursement date, not starting the week after.
Flood is a separate check: the flood zone on the Standard Flood Hazard Determination is compared with whether a flood policy is in the file, and if the property is in a special flood hazard area, the flood policy's coverage and deductible are tested against the flood sections of chapter B7-3 and the federal minimum. We covered the servicing side of flood insurance separately; at origination the job is simply to make sure the loan does not fund without it.
FHA and VA files run against their own rule sets in the Rulebook, and investor overlays sit on top. The agent applies whichever set the loan is being delivered under, with the version effective on the closing date.
Where Title and Insurance Meet TRID
Both documents also feed the Closing Disclosure. The homeowner's insurance premium in the prepaids section and the monthly escrow amount should agree with the declaration, so a premium that changed after the borrower switched carriers is caught before the CD goes out. Title charges sit in a tolerance bucket that depends on whether the borrower chose a provider from the lender's written list, so a title fee change has to be tested against 12 CFR 1026.19(e)(3) rather than assumed to be fine. That is where the pre-close check hands off to TRID & Cure Management, which watches the tolerance math and the timing; we wrote about fee tolerances and cures in detail.
Where They Meet Fraud
The insurance declaration is also one of the better occupancy signals in the file. A loan underwritten as a primary residence with a landlord or rental-dwelling policy form (a DP-3 instead of an HO-3, for example) is either a mistake by the insurance agent or an occupancy misrepresentation, and the Fraud Agent treats it as a finding to evidence, not a conclusion. The same goes for a title commitment that shows the seller acquired the property weeks ago at a far lower price, which is a flipping signal that belongs beside the appraisal. The pre-close agent does not decide either case. It puts the page in front of the person who does.
What the Agent Does Not Decide
The agent does not waive a title exception, accept an indemnification, or approve an insurance exception. Those are decisions with real risk attached, and they stay with the closing manager or the underwriter. What it does is read every page of both documents on every file, compare them to the rest of the Loan Graph, and route the mismatches as named exceptions with the rule cited. Each check passes through the independent verification in Triple Check before it clears, and the cleared ones carry a citation to the page and the guide section, so a post-purchase reviewer who asks how the mortgagee clause was verified gets an answer from the record.
If you want to see where your own pre-close review stands, take twenty recently funded files and check just the mortgagee clause and the wind deductible on each. It is a small test, and it tends to be a surprising one. Our pre-close QC guide covers the rest of the file in the same way.
Ramkumar Venkataraman
CTO & Co-Founder