7/31/2019 NJAILTA Vetting Letter

http://slidepdf.com/reader/full/njailta-vetting-letter 1/2

 

76 West Main Street - Suite 100Freehold, New Jersey 07728

www.njailta.org 

(732) 333-0149

October 22, 2012

VIA REGULAR MAIL

Kenneth E. Kobylowski

Acting Commissioner 

State of New JerseyDepartment of Banking and Insurance

20 West Street

PO Box 325

Trenton, New Jersey 08625-0325

Re: CFPB Bulletin 2012-03

Service Provider Bulletin & Third Party Vetting

Dear Acting Commissioner Kobylowski

I am writing you on behalf of the National Association of Independent Land Title Agents (NAILTA – www.nailta.org) and independent title insurance agents that we represent in the State of New Jersey to

 bring your attention to a matter about which we have recently become aware. A number of our agents

have told us that they are receiving notices from their warehouse lenders requiring them to pay a third

 party as a condition of doing business. We believe that this “requirement” not only violates federal law

found at RESPA Section 8 and its prohibition against kickbacks in the settlement process but also

contemplates a new, quasi-form of insurance in which the lender would receive indemnity in the event of 

a closing agent defalcation or other loss. Because the third party vendors are not licensed insurance

 producers, we believe this action violates New Jersey law under the Insurance Code and requires your 

immediate action.

To better explain this recent phenomenon, please note the following. The third party firm is offering to

“vet” the title insurance agents on behalf of the lenders who have agreed to participate in this program.The third party company, known as Secure Settlements, Inc. (SSI) out of New Jersey, is apparently

seeking to charge the title agent an annual flat fee per escrow officer, as well as non-escrow officers who

may play some role in closing the transaction or handling the closing file. Title agents, attorneys, closers,

title searchers, abstractors, surveyors, real estate agents, mortgage brokers, and loan officers will all have

to fall under the SSI vetting program, despite the fact that SSI is not a licensed provider of such services.

SSI has recruited hundreds of warehouse lenders to participate in their vetting scheme. Those

 participating lenders have sent out the enclosed correspondence to title agents across New Jersey

requiring them to take action that is not otherwise required by law and that is already performed by the

agent’s title insurance underwriters. The fees for vetting are now being passed along to the consumers in

the form of higher settlement costs with no attendant benefit to the consumer or the insured’s.

7/31/2019 NJAILTA Vetting Letter

http://slidepdf.com/reader/full/njailta-vetting-letter 2/2

This would be a new significant expense for title insurance companies that could quickly become an

extreme burden if multiple “vetting companies” enter the market and the New Jersey title agent faces the

 prospect of having to pay the same fee to several companies in order to be eligible to handle transactions

with multiple lenders.

These demands may be an outgrowth of increased regulatory pressures on lenders, including the enclosed

Consumer Financial Protection Bureau Bulletin 2012-03 which requires lenders to take certain steps to

oversee their business relationships with service providers. SSI appears to be offering a supposed “safe

harbor” to the covered lenders under this Bulletin. However, on October 1, 2012, I met the author of the

enclosed CFPB bulletin who assured us that no such intention was ever conveyed to SSI nor contemplated by the correspondence. Consequently, we believe that further state action is required

 because SSI’s approach places an unnecessary burden on title insurance agents and consumers with no

tangible benefit.

As you know, in New Jersey title insurance agents are licensed by the NJDI required to take continuing

education, undergo extensive background checks and regularly receive thorough annual audits of their 

escrow accounts and quality control systems by both the NJDI and their respective title insurance

underwriters. Any perceived benefit to lenders or consumers from the requirement that a private third

 party firm duplicate the efforts of NJDI is illusory.

Finally, this type of firm presents a new security concern under both federal and state law. In addition to

the fees charged, SSI is asking for extensive confidential information about the escrow and title personnelas well as sensitive company information including bank account numbers. Thus, there is a legitimate

concern that this information could be used in a fraudulent manner, creating a risk to consumers and their 

escrow funds as well as a solvency concern for New Jersey settlement agents. Additionally, the privateinformation on their escrow and title personnel that title agents are being asked to release, including social

security number, date of birth and driver’s license number, creates potential liability for them as an

employer as well as an identity theft risk for the employees.

These are a few of the concerns that have arisen, and there may well be others. We would like to meet

with you soon to discuss this potential problem further and answer any questions you may have.

Yours truly,

Anthony L. Affatati, Sr.,

President, NAILTA