ALTA Best Practices

Changes in Regulatory Scrutiny

• Dramatic increase in regulation and scrutiny– 3rd party service providers:1. 2001 – OCC guidance on 3rd party service

providers2. 2006 FDIC guidance on 3rd party service

providers3. 2011 Formal enforcement action

requiring lenders to improve oversight of 3rd party service providers

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2011 Formal Enforcement ActionForeclosure Weaknesses:•Inadequate policies and procedures;•Inadequate monitoring and controls;•Lack of sufficient audit trails;•Inadequate quality controls;•Inadequate identification of risks;•Inadequate staffing; and•Discrepancy of fees charged.

Changes in Regulatory Scrutiny

• Dodd Frank• CFPB

1. American Express - $85 million2. Discover - $200 million3. Capital One - $210 million

• NAIC• Market conduct examinations• Bar Examiners and random audits

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Changes in Regulatory Scrutiny

• CFPB Bulletin 2012-03– “Legal responsibility may lie with the supervised bank...as

well as...service provider.”• Standard

1. Due diligence2. Lender must produce proof of review of a service

provider’s policies3. Lender must express clear guidance as to compliance4. Lenders must demonstrate prompt action for service

provider missteps

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Lender Response to the Regulatory Changes

• National lender contacts title underwriters—minimum standards for title underwriter oversight

• Annual background checks• Annual credit checks• Escrow controls• Policy inventory controls• Underwriter audit of agents• Operational oversight of agents• Agent Vetting Company• ICL on steroids

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ALTA Response to Market Demands

• Establish and maintain current licenses• Adopt and maintain appropriate written

procedures and controls for IOLTA accounts1. Safeguard clients funds2. Reconcile receipts and disbursements on a daily basis3. 3-way reconciliation once a month4. Segregation of duties5. Authority to access and transfer funds6. Employee background and credit checks

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ALTA Response to Market Demands

• Adopt and maintain a written privacy and information security plan1. Physical security of non-public

information2. Network security of non-public

information3. Proper disposal of non-public

information4. Disaster management plan5. Oversight of service providers6. Audit and oversight to ensure

compliance

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ALTA Response to Market Demands

• Adopt standard real estate settlement procedures and policies that ensure compliance with federal and state laws1. Submit Documents for recording within 2 days of

closing2. Procedures to ensure consumers

are charged established rates3. Post closing quality check

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ALTA Response to Market Demands

• Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance1. Policies Delivered within 30 days of

closing2. Premium reporting and remittance

by last day of month after closing

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ALTA Response to Market Demands

• Maintain appropriate professional liability insurance and fidelity coverage1. Professional E and O2. Fidelity coverage – when required by state law or

contractual obligations3. Surety coverage– when required by

state law or contractual obligations

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ALTA Response to Market Demands

• Adopt and maintain procedures for resolving consumer complaints1. Procedures for logging and resolving consumer

complaints2. Single point of contact3. Complaint log