click here for the CFPB home page
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was signed into law by President Obama on July 21, 2010. Dodd-Frank created a new federal regulatory bureau called the Consumer Financial Protection Bureau, or more commonly referred to as the CFPB.
The CFPB is charged with regulating a variety of consumer financial products and services, including the responsibility to propose regulations integrating consumer disclosures under RESPA and the Truth-in-Lending Act (TILA). On July 9, 2012, the CFPB issued a Proposed Rule addressing this project.
The Proposed Rule is intended to integrate, simplify and improve disclosures provided in mortgage transaction. The Proposed Rule addresses seven different areas: (1) the loan estimate form, (2) the closing disclosure form, (3) the three-day rule (4) the delivery of forms, (5) the tolerance levels, (6) all-in APR, and (7) record-keeping
The CFPB will release its Final Rule in the Fall of 2013.
In addition, on April 13, 2012, the CFPB issued a service provider bulletin detailing the relationship between lenders, their service providers and the CFPB’s regulatory authority over them. The CFPB is authorized to examine and obtain reports from supervised banks and non-banks for compliance with federal consumer financial law, and to exercise enforcement when it identifies violations of the law.
The CFPB expects supervised banks and non banks to have an effective process for managing the risks of service provider relationships. To limit the potential for statutory or regulatory violations and related consumer harm, the CFPB expect lenders to take the following steps:
- Conducting thorough due diligence to verify that the service provider understands and is capable of complying with federal consumer financial law
- Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents who have consumer contact or compliance responsibilities
- Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive or abusive acts or practices
- Establishing internal controls and ongoing monitoring to determine whether the service provider is complying with federal consumer financial law
- Taking prompt action to fully address any problems identified through the monitoring process, including terminating the relationship where appropriate
ALTA Best Practices: Providing a Common Standard for Title Insurance Agents
Click here to view for ALTA's Title Insurance and Settlement Company Best Practices
Click here to go directly to the ALTA - CFPB Consumer web page
On January 2, 2013, ALTA issued its Title Insurance and Settlement Company Best Practices.
According to ALTA, the purpose behind the Best Practices is to:
“…guide its membership on best practices to protect consumers, promote quality service, provide for ongoing employee training, and meet legal and market requirements. These practices are voluntary and designed to help members illustrate to consumers and clients the industry’s professionalism and best practices to ensure a positive and compliant real estate settlement experience.”
The Best Practices pertain to seven operational areas. They are as follows:
1. Best Practice: Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services.
Purpose: Maintaining state mandated insurance licenses and corporate registrations (as applicable) ensures that the company remains in good standing with the state.
2. Best Practice: Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation.
Purpose: Appropriate and effective escrow controls and staff training help title and settlement companies meet client and legal requirements for the safeguarding of client funds. These procedures ensure accuracy and minimize the exposure to loss of client funds. Settlement companies may engage outside contractors to conduct segregation of trust accounting duties.
3. Best Practice: Adopt and maintain a written privacy and information security plan to protect Non-public Personal Information as required by local, state and federal law.
Purpose: Federal and state laws (including the Gramm-Leach-Bliley Act) require title companies to develop a written information security program that describes their procedures to protect non-public customer information. The program must be appropriate to the company’s size and complexity, the nature and scope of the company’s activities, and the sensitivity of the customer information the company handles. A company evaluates and adjusts its program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring.
4. Best Practice: Adopt standard real estate settlement procedures and policies that ensure compliance with Federal and State Consumer Financial Laws as applicable.01/02/2013
Purpose: Adopting appropriate policies and conducting ongoing employee training can ensure that a real estate settlement company can meet state, federal and contractual obligations governing the settlement process and provide a safe and compliant settlement.
5. Best practice: Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance.
Purpose: Appropriate procedures for the production, delivery and remittance of title insurance policies ensures title companies meet their legal and contractual obligations.
6. Best Practice: Maintain appropriate professional liability insurance and fidelity coverage.
Purpose: Appropriate levels of professional liability (errors and omissions insurance) ensure that title agencies and settlement companies have the financial capacity to stand behind their professional services. In addition, state law and contractual obligations may require a company to maintain fidelity bond and surety bond policies with prescribed minimum amounts of coverage.
7. Best Practice: Adopt and maintain procedures for resolving consumer complaints.
Purpose: A process for receiving and addressing consumer complaints is important to ensure that any instances of poor service or non-compliance do not go undiscovered.
The New Title Insurance & Settlement Company Best Practices Framework
Click here to go directly to ALTA’s Title Insurance and Settlement Company Best Practices web page
On July 19, 2013, ALTA published Version 2.0 of ALTA’s Title Insurance and Settlement Company Best Practices. In addition, they published new Assessment Procedures and a new Certification Package. Collectively, these documents are referred to as ALTA’s Title Insurance & Settlement Company Best Practices Framework.
ALTA Best Practices Version 2.0 (click to view)
The ALTA Best Practices were originally published January 2, 2013. Improvements to Version 2.0 were based on discussions with agents, underwriters, lenders, regulators and other stakeholders.
What did Version 2.0 change?
- Employee credit checks were removed (reference Best Practice # 2)
Insurance requirements were simplified (reference Best Practice # 6)
- Recording timelines were clarified (reference Best Practice # 4)
Assessment Procedures (click to view)
Included in the Framework are the new Assessment Procedures.
What is the Assessment (Procedures)?
According to ALTA, it is a tool for title companies (i.e.: title and settlement agents) to determine if they are in compliance with the Best Practices.
How doe it work?
According to ALTA, a third party reviews the tile company’s operations and issues a Certificate to the title company.
Who will conduct the Assessments?
According to ALTA, any company that is acceptable to the title company’s lenders. Having a standard and uniform Assessment lets various entities conduct assessments including potentially underwriters, public accounting firms and CPAs.
How often does a title company need to undergo an Assessment?
According to ALTA, it is intended to be updated biannually.
ALTA Certification Package (click to view)
The new ALTA Certification Package is a three-part product: 1. Open Letter
- An open letter to customers (i.e.: lenders)
The open letter is provided to customers affirming that the company has implemented each of the Best Practices. It is also intended to be considered by any consumer, mortgage originator or mortgage servicer, doing business with the title company during the 24-month period following the date of the letter. Further, the open letter represents to customer that the title company will stay compliant for the next 24 months.
2. The Certificate
The Certificate is issued by the company that conducts the Assessment of the title company (i.e.: an underwriter). The Certificate notes two parts: (1) Information Security and Privacy, and (2) Everything else. The Certificate contains a reference to the performance of the title company and receives either a Pass or Fail grade. Like audits, it is intended to be relied upon only by the title company, not anyone else.
3. Insurance Information - A copy of “Declaration Page(s)”
A copy of the title company’s declarations page of E&O or professional liability insurance is the last piece to the Certification Package. It provides evidence of proper insurance coverage and may include other declaration pages of other insurance maintained by the title company, such as fidelity, surety or crime bonds.
One of the methods lenders may use to provide oversight of its service providers is having title underwriters audit and certify their agents. Alliant National believes that the lending community will have great confidence in its agent oversight processes.
Alliant National is fully engaged in the developing issues related to the CFPB and lender certification. Our priority is you, our agent: to inform you of the ongoing changing landscape relating to these issues, and to assist you in any way possible. If you are an Alliant National agent, please visit the Agent Resource Center (ARC) to learn more about what Alliant National is doing to secure your vital role in the real estate transaction process, and the development of critical tools and resources to assist you in becoming lender certified.