With amendments to Regulation X (the Real Estate Settlement Procedures Act) that became effective in January 2014, there is increased regulatory pressure on banks and mortgage lenders to protect their customers’ nonpublic, personal information especially in the context of banks’ relationships with third-party vendors. Consumer Financial Protection Bureau (CFPB) Bulletin 2012-03 requires lenders’ title insurance and settlement companies to comply with these regulations as well.
In response to the banking industry’s concerns about title company regulatory compliance, the American Land Title Association (ALTA)—the title industry’s national trade association since 1907—stepped in to help its approximately 5,000 members (title insurance companies, title agents, independent abstractors and attorneys) and the title industry as a whole by establishing a best practices framework to assist title companies with satisfying their responsibility to clients, banks and mortgage lenders. Beyond the establishment of these voluntary best practices, ALTA also has proposed that title companies obtain certification by an independent third party to demonstrate the title company’s compliance with the association’s Best Practices.
The Best Practices Framework includes the following seven pillars that must be passed when tested using procedures developed by ALTA:
- Licensing — Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services.
- Escrow Accounting Procedures — Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation.
- Privacy and Information Security — Adopt and maintain a written privacy and information security program to protect nonpublic personal information as required by local, state, and federal law.
- Settlement Procedures — Adopt standard real estate settlement procedures and policies that ensure compliance with federal and state consumer financial laws as applicable.
- Title Policy Production & Delivery — Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance.
- Professional Liability Insurance Coverage — Maintain appropriate professional liability insurance and fidelity coverage.
- Consumer Complaints — Adopt and maintain procedures for resolving consumer complaints.
While this program is relatively new, PYA is beginning to see organizations within the banking industry encourage their title companies to adopt ALTA’s Best Practices and seek certification. In one situation, a mortgage originator requested each of its title company vendors to provide its policy and procedures for protecting consumer data to the organization’s compliance officer. After being overwhelmed with the vendors’ responses, the compliance officer is developing an approach of encouraging its title company vendors to adopt ALTA’s Best Practices and to pursue certification.
PYA is recognized as a premier service provider of ALTA’s Best Practices services for the title industry. In this role, we can assist the banking industry by educating their title company vendors on Best Practices, serve as a resource as title companies develop the appropriate policies and procedures to comply with Best Practices, and perform the assessment procedures required to attain certification. PYA is currently meeting with compliance officers to discuss the benefits of how ALTA’s Best Practices addresses the vendor risk management challenges faced by banks.