Which document protects a lender from misuse of funds by a title company?

The Insured Closing Letter is critical in the mortgage process as it provides assurance to the lender regarding the handling of funds by the title company. This document serves as a confirmation that the closing agent is insured and is following proper protocols during the closing process. It assures the lender that funds will be appropriately disbursed and used only for their intended purpose related to the real estate transaction.

This is particularly important in mitigating risks associated with potential mishandling of funds, ensuring that the lender's interests are safeguarded. By having an Insured Closing Letter in place, the lender can have confidence that there is a financial safety net that would cover any errors or misappropriations that could occur during the closing process.

Other related documents like Title Insurance and the Escrow Agreement serve different functions in real estate transactions. Title Insurance protects against defects or issues with the title of the property, while an Escrow Agreement outlines the terms under which funds are held until the transaction is finalized. The Promissory Note, on the other hand, is a document that represents the borrower's promise to repay the loan, which does not directly address the protection of funds during the closing process.