Closing protection is needed for the period between the date of the last title update and the closing. We obtain what we call GAP coverage from the title company for refinances (only-not purchases) and for construction draws. This coverage is insurance from the title company for this period of time. Our theory has been if you won't provide this coverage, then we will not allow your policies. We sometimes have to demand, argue a bit in order to recieve it with agencies not in our area. (They obviously would like the fee.) Those that are in the area, quit arguing long ago. It does save our customer monies on closing fees. If we can perform the closing then the customer does not have to pay them a closing fee.
I'm not sure how FDIC would come in to play. You will not be covered for documents recorded in the time period above unless you obtain the GAP coverage. If title companies close it they offer a first lien letter (GAP coverage) for this period. I'm not sure how your bank would make extra money, unless you are paying these closing costs for the borrower. Now having said this, your bank's reputation for immediately recording files you close will come in to play. The title company will not likely want to provide GAP coverage if you dilly-dally after closing in getting the mortgage recorded.