ALTA BEST PRACTICES FOR TITLE INSURANCE AND SETTLEMENT SERVICE COMPANIES
Responding to the financial meltdown of 2008, attempts to make mortgage lenders more financially responsible for their third party vendors resulted in CFPB (Consumer Financial Protection Bureau) Bulletin 2012-03, dated April 13, 2012, the American Land Title Association issued a “Best Practices Framework” in January 2013 and updated July 2013. The purpose of the “Best Practices” is to assist lenders in satisfying their responsibility to manage third party vendors and “to guide its membership on best practices to protect consumers, promote quality service, provide for ongoing employee training, and meet legal and market requirements.”
The implementation of these “Best Practices” is the “highest priority” for the ALTA in 2013.
The eight page guideline which is available at www.alta.org includes seven sections.
The seven sections are as follows:
- Establish and maintain current License(s) as required to conduct the business of title insurance and settlement services.
Although Massachusetts does not require licensing of its title insurance agents, attorneys should be certain to keep their BBO registration and malpractice insurance to date.
- Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation.
The purpose of this Best Practice provision is to “help title and settlement companies meet client and legal requirements for the safeguarding of client funds.” Procedures include requiring that escrow funds and operating accounts are separately maintained, escrow accounts are prepared with Trial Balances and on at least a monthly basis, Escrow Trust Accounts are prepared with Trial Balances (“Three-Way Reconciliation”), listing all open escrow balances.
- Adopt and maintain a written privacy and information security program to protect Non-public Personal Information as required by local, state and federal law.
Federal and state laws (including the Gramm-Leach-Bliley Act) require title companies to develop a written information security program that describes the procedures they employ to protect Non-public Personal Information. Depending on the size of your office, and the sensitivity of the customer information, these procedures may vary. As in the case of the maintenance of escrow trust accounts, I suggest a complete review of these “Best Practices”.
- Adopt standard real estate settlement procedures and policies that help ensure compliance with Federal and State Consumer Financial Laws as applicable to the Settlement process.
This includes procedures to record in a timely fashion, to track shipment of documents for recording and to maintain written procedures to ensure that customers are charged the correct title insurance premium and other rates for services provided by the Company.
- Adopt and maintain written procedures related to title policy productions, delivery, reporting and premium remittance.
Procedures to be incorporated to meet this guideline include the timely delivery of title insurance policies and timely premium reporting and remittance.
- Maintain appropriate professional liability insurance and fidelity coverage.
- Adopt and maintain written procedures for resolving consumer complaints.
The guideline suggests standard procedures for logging and resolving consumer complaints and the development of a standard consumer complaint form.
I would expect that these “Best Practices” will be adopted by each of the title insurance agents and will become a part of the agent audit. Hopefully, lenders will understand the importance of these “Best Practices” and will no longer be guided towards the need for vetting by independent third party companies.