This month’s article is presented by:
Randy Olson, Prime Title
by Randy Olson
Prime Title, Lafayette, La.
Unless you have been hiding under a rock, you should know that the way we have done business in the past is going to change significantly in the near future. As a result of the mortgage debacle, the federal government created the Consumer Financial Protection Bureau (the “CFPB”). This bureau does not have congressional oversight and has wide regulatory and enforcement authority over lenders. In April 2012 the CFPB issued a service provider bulletin which, in summary, provided that lenders are responsible for the actions of their third party vendors. Although title companies and title insurance was not specifically named, we were not excluded; therefore, it is presumed that we were included in the parameters of this bulletin.
This bulletin along with several regulatory actions which imposed large fines got the attention of the lenders. In an effort to avoid lenders becoming more involved in our business, or worse, having all title and escrow services being performed through title companies owned by the lenders themselves, NAILTA and ALTA have acted proactively to develop best practices and procedures the title industry can implement to protect consumers, lenders and themselves, , by ensuring a positive and compliant real estate settlement experience. Out of these programs will be a certification process whereby a title agency will be evaluated and, if it passes the numerous tests, will be given a certification that lenders may accept. It is the hope of our industry that this certification process will satisfy the lenders that they are dealing with reputable title company vendors.
The National Association of Independent Land Title Agents (NAILTA) Blue Ribbon Certification Program, soon to roll out to the general membership, is being designed to explain how an applicant can become a NAILTA Blue Ribbon-certified title professional. It is being created to help guide interested title insurance professionals through the certification process. Members seeking certification should know that the benefits of achieving this distinction are far-reaching and will enhance your career and reputation. NAILTA’s Blue Ribbon Certification program is based on 20 criteria:
- Current membership in a national title insurance trade association with an existing and binding Code of Ethics enforceable by the association to promote the highest standards and practices in the industry.
- Current membership in a state title insurance trade association with an existing and binding Code of Ethics enforceable by the association to promote the highest standards and practices in the industry.
- Current licensure as an insurance producer, agent or agency, in the business of title insurance as provided by the applicable state or domiciliary authority.
- The insurance producer, agent and/or agency is currently insured with a professional liability or errors and omissions policy in an amount no less than $500,000.00 for all title-related activities.
- At least five consecutive calendar years with no history of a state or federal regulatory penalty paid or served for alleged market conduct issues.
- At least five consecutive calendar years with no history of a state regulatory paid or served for alleged violations of state title insurance code provisions.
- All employees must have a criminal history with no felony convictions of any kind.
- At least five consecutive calendar years with no history of a federal regulatory penalty paid or served for alleged violations of the Real Estate Settlement Procedures Act (RESPA) or any other federal statute relating to consumer financial protection laws.
- No current ownership of any joint venture, affiliated business arrangement or controlled business arrangement engaged in the business of title insurance with any lender, real estate firm, mortgage company, homebuilder or developer, or any subsidiaries or affiliates thereof.
- The adoption and use of a written privacy and information security plan to protect non-public personal information as required by local, state and federal law.
- The adoption and use of a written escrow procedure and control policy for escrow trust accounts.
- The adoption and use of a written internal employee manual.
- The adoption and use of an internal controls policy manual.
- The adoption and use of a written consumer complaint resolution plan.
- The adoption and use of a written insurance fraud protection plan.
- The adoption of internal controls and corporate policies that prohibit the issuance of title insurance policies based upon current owner title searches.
- The adoption of internal controls and corporate policies that prohibit the use of title searches produced by foreign, off-shore or non-domestic sources.
- The adoption of internal controls and corporate policies that prohibit the use of blanket title insurance pricing and/or flat rates for title insurance premiums.
- The adoption of internal controls and corporate policies that mandate the reconciliation of all escrow trust accounts to a minimum of once per month and recommends the reconciliation of those same accounts on a daily basis.
- The maintenance of all applicable state unclaimed funds policies, procedures and requirements.
- The adoption of internal controls and corporate policies mandating and further implementing the use of “positive pay” banking services for any escrow trust account used by the title insurance producer, agent and/or title agency.
- Annual recertification of the NAILTA Agency Blue Ribbon Certification criteria as determined by the NAILTA Board and respective NAILTA Blue Ribbon Review Committee.
NAILTA’s Blue Ribbon Certification Criteria is not the only program available to assist the title agent in complying with CFPB and Lender vetting.
ALTA’s Best Practices are broken down into seven (7) Pillars. Which are listed as follows:
PILLAR #1 – LICENSING.
This Pillar requires that an agent must establish and maintain current licenses as required to conduct business in the title industry and to comply with both state and local rules and laws.
PILLAR #2 – ESCROW TRUST ACCOUNTS
Each agency must establish written procedures and controls for trust accounts. This written procedure should include three-way reconciliation, trust accounts with positive pay feature, third party reconciler of trust accounts, dual approval of bank wires, and a policy dealing with access to check stock, among other things. There will also need to be background checks on all employees, performed on a periodic basis.
PILLAR #3 – PHYSICAL AND NETWORK SECURITY
There must be a written policy describing how your company will keep the physical and internet information of the consumer secure, and providing for a clear desk policy, filing cabinets that lock, and proper disposal of written documentation. There may be other policies to be implemented as part of this pillar.
PILLAR #4 – RECORDING AND PRICING
There must be a written policy and procedure addressing the pricing of services. This policy must include a description of where each agency maintains access to established rates for services. The policy must describe how refunds of overpayments are to be handled. It also must establish how documents are recorded, shipped, and handled.
PILLAR #5 – POLICY ISSUANCE AND PREMIUM REMITTANCE
This pillar requires the creation of a written policy related to title policy production, delivery, reporting, and premium remittance.
PILLAR #6 – INSURANCE
Each title agency must maintain appropriate professional liability insurance and fidelity coverage.
PILLAR #7 – CONSUMER COMPLAINTS
Each title agency must adopt and maintain procedures for resolving consumer complaints.
The above is a just a thumbnail version of what ALTA’s Best Practices is all about. They are currently on Version 2.0, and ALTA expects further fine tuning.
Additionally, most title underwriters have provided similar information to their agents, to assist with agent compliance.
As Independent Title Agents and Attorneys, we are just beginning this process. LAILTA encourages all title agents to keep informed on this issue and to begin preparing their policies and procedures to be submitted to NAILTA and ALTA for certification.
As a service for LAILTA members and subscribers, you can expect an email each month with a short discussion on matters of interest to the real estate attorney and title agent. This is a monthly service, except for the months in which seminars are scheduled. LAILTA will email you recent cases of interest, notes on legislation and reminders of seldom thought of statutes and rules that affect our day to day work.
LAILTA is a non-profit trade association that represents the interests of independent title insurance agents and independent real estate settlement professionals from across the State of Louisiana. It was created by independent land title agents who seek to represent independent and locally owned businesses from the title insurance, abstracting, surveying, and real estate community.
Louisiana Association of Independent Land Title Agents
4980 Bluebonnet Blvd., Ste. A, Baton Rouge, Louisiana 70809