Jump on Board or Be Left Behind—Is Your Title Company Prepared to Complete the ALTA Self-Assessment by September 2014?

real-estate-dollar-sign-e1406634724191The following article was distributed to members of the Tennessee Land Title Association.

If you thought that the American Land Title Association (ALTA) Best Practices were just another passing fad or knee-jerk reaction to another new regulation, think again.  In a July 10 article, ALTA announced that its Board of Governors had approved a motion encouraging its members to perform a self-assessment of their adoption of ALTA’s Best Practices no later than September 2014.  With this timeframe now in place and an official nudge from ALTA, efforts toward implementation are moving forward.

The good news is that title companies have until the end of September to complete this self-assessment, but performing the self-assessment is no small task. To get started, most title companies should focus on one Best Practice “pillar” at a time, since tackling the whole process can be somewhat overwhelming.

ALTA’s Best Practices Task Force has developed an “Assessment Readiness Guide” tool (http://www.alta.org/bestpractices/documents.cfm) to help members determine preparedness to undergo an assessment in accordance with ALTA’s Best Practices Assessment Procedures. ALTA will roll out a guide for each pillar throughout the coming weeks.

Pillar 1, which is divided into two parts, addresses establishing and maintaining the required license(s) to conduct the business of title insurance and settlement services.  Part 1 requires you to document business and demographic information. Part 2 is a questionnaire asking specific questions about licenses and ALTA membership. Also included in the guide is an appendix with templates for documenting licenses, ALTA Policy Forms, and Policies and Procedures.

Written procedures are not a Best Practices requirement for Pillar 1 Licenses and Pillar 6 Insurance; however, it is recommended that you develop them to help you maintain the appropriate licenses and insurance.

Below is a suggested structure for your Pillar 1 policies and procedures:

  1. Documentation of ALTA’s Best Practice 1.
  2. Policy indicating your company will comply with ALTA’s Best Practice 1.
  3. Procedures for establishing and maintaining current company licensing.
  4. Procedures for establishing and maintaining individual licensing.
  5. Procedures for establishing and maintaining appropriate compliance with ALTA’s Policy Forms licensing requirements.

What is the benefit of getting on board with ALTA’s challenge to complete your self-assessment by September 2014? Competitive advantage!  Once you have completed the self-assessment, you should immediately communicate your compliance program to all of your lending customers.

With the Consumer Financial Protection Bureau’s (CFPB) focus on protecting consumers, along with the lender’s increased accountability over third-party vendor relationships, settlement and title companies will have a competitive advantage when they communicate their compliance with consumer protection regulations. Although assurance of a title company’s compliance with sound policies and procedures has been non-existent, the overarching need has been there for years and ALTA has come up with a solution. Step one is ALTA Best Practices implementation, step two is self-assessment, and step three is independent certification.  Make sure to get on board, or you may find yourself left behind.

If you have questions about ALTA Best Practices services or would like to request a speaker on this topic, contact Debra Gentry at (800) 270-9629.

ALTA Best Practices Ensure Compliant Real Estate Settlement Experience

The financial industry was placed in the hands of the U.S. government in July 2010 when the Dodd-Frank Act was signed into law. This act gave birth to the Consumer Financial Protection Bureau (CFPB) to protect consumer interests. With the recent amendments to Regulation X (the Real Estate Settlement Procedures Act) becoming effective in January 2014, there has been increased regulatory pressure on banks and mortgage lenders to protect their customers’ non-public, personal information especially in the context of their relationships with third-party vendors, which includes title companies.

In response, the American Land Title Association (ALTA)—the title industry’s national trade association since 1907—stepped in to help its members and the title industry as a whole in 2013 by establishing a best practices framework to assist lenders in satisfying their responsibility to manage third-party vendors. These best practices are voluntary and designed to help title companies convey to customers and clients that they are meeting the industry’s minimum set of controls over their operations to ensure a positive and compliant real estate settlement experience. On March 6, 2014, Wells Fargo gave its support of ALTA’s Best Practices in its Settlement Agent Communications Newsletter.

Beyond just the establishment of a set of best practices, ALTA has proposed that title companies obtain certification. This involves an independent third party “certifying” that:

  1. The title company has adequately documented policies and procedures over operations.
  2. The policies and procedures cover all of the best practices.
  3. The title company is following its written policies and procedures.

ALTA has not specifically addressed who the independent third party should be. Discussions have focused around who has the ability to certify, are they truly independent, and would their certification be accepted by the lenders. This opens the door for CPA firms because they meet all of ALTA’s expectations.  Be on the lookout for a PYA whitepaper on this topic in the near future.

If you would like more information about ALTA Best Practices or title company certification, contact Mike Shamblin at PYA, (800) 270-9629.