The Trusted Adviser
February-March 2013 | Volume 6 · Number 2

UPDATE FROM ATG ADMINISTRATION:

ALTA Best Practices: A Seven-Point Program to
Improve the Industry

How Will it Impact ATG Agents?

Jerry T. Gorman photo
Jerry T. Gorman
ATG Senior Vice President - Downstate Operations

As the economy recovers from the disastrous mortgage meltdown, the federal government along with the lending and title industries have explored ways to make the mortgage lending and closing processes more secure. Initiatives from the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) specifically make lenders financially responsible for the activities of many third-party vendors providing services in connection with consumer credit transactions.

In an effort to assist the lending community in its efforts to reduce its liability, the title insurance industry has implemented new quality control standards designed to improve service, reduce risk, and ensure the highest level of regulatory compliance.

A top priority is to ensure the safety of closing funds. Early in this process, many settlement service providers were told by lenders that they and their employees would need to be subjected to a variety of stringent vetting processes, audited by third-party companies. The American Land Title Association (ALTA) quickly realized that such a process, while not only impractical to implement and very expensive for title agents, also provided little actual protection of escrow funds.

In response, the ALTA Board of Governors and ALTA staff began weekly meetings to develop a more meaningful and practical alternative to the third-party agent vetting process. ATG's President and CEO, Peter Birnbaum, is a member of the ALTA Board of Governors and has been instrumental in representing the interests of lawyer agents in this process. The result of this effort is ALTA’s Title Insurance and Settlement Company Best Practices, a seven-point program designed to improve the overall quality and safety of the escrow and title services provided by title insurers and agents. In Illinois, Best Practices protection is enhanced by the statutory requirement that the title insurer issues a Closing Protection Letter (CPL) to each party to the transaction – lender, buyer, and seller.

Review the information in the table below for a summary, or visit the Best Practices section of ALTA's website. 

Summary of ALTA's Best Practices

  1. Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services.
  2. Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts, allowing for electronic verification of reconciliation.

    Maintain real estate escrow account separate from operating account

    Conduct monthly three-way reconciliation

    Utilize Positive Pay, Automated Clearing House blocks, and international wire blocks, if available

    Establish proper separation of duties

  3. Adopt and maintain a written privacy and information security program to protect Non-public Personal Information as required by local, state, and federal law.

    Restrict access to Non-public Personal Information to authorized employees.

    Use only secure delivery methods when transmitting Non-public Personal Information.

  4. Adopt standard real estate settlement procedures and policies that ensure compliance with Federal and State Consumer Financial Laws, as applicable.

    Record documents within two (2) days of closing.

  5. Adopt and maintain written procedures related to title policy production, delivery, reporting, and premium remittance.

    Issue and deliver policies within thirty (30) days of Settlement.

    Report policies (including a copy of the policy) and remit premiums to the underwriter by the last day of the month following the month in which the insured transaction was settled.

  6. Maintain appropriate professional liability insurance and fidelity coverage.
  7. Adopt and maintain procedures for resolving consumer complaints.

We encourage ATG agents to review ALTA’s comprehensive summary, Title Insurance and Settlement Company Best Practices, as well as other information and FAQs on the Best Practices section of ALTA’s website.

ATG will implement a number of additional requirements as well as practical guides to accomplish each of the seven Best Practices. We realize that several of these standards will be difficult to implement for ATG agents in smaller offices. However, ATG is working to establish reasonable accommodations and is committed to building a platform that will allow our members to compete.

The ultimate goal is for the underwriter, through its audit of the agent, to certify that the agent complies with Best Practices. The agent will then be able to present that “ALTA Best Practice certification” to lenders who require it in order to close their loans. This means ATG's future audit procedures will reflect review of the Best Practices requirements. As an ancillary to Best Practices, to provide lenders with as much protection and assurance as possible on escrow closings, ATG now requires that all CPLs in all the states we cover be issued through ATG.

Implementing Best Practices will be our highest priority in 2013. Many of us are already substantially in compliance, but there is room for improvement. While no firm compliance deadline is mandated, ATG plans to start implementing Best Practices certification during the second half of the year. Here is how you can stay informed:

  • Read our detailed explanations of each of the seven Best Practices and compliance standards in a series of monthly articles in Casenotes & Underwriters Bulletin starting in April 2013. Please check your email and visit www.atgf.com on a regular basis.
  • Attend our free OnDemand e-Town Hall, ALTA Best Practices for ATG Agents. You will have a head start on this important topic, plus you earn 1.50 hours of CLE.
  • Watch for a live program near you. ATG will host a number of live programs in 2013 throughout Illinois, Wisconsin, and Indiana to further outline Best Practices and discuss with members how to implement them.

To effectively accomplish this significant but meaningful task, each of us will have to make some changes in the way we do business. But we firmly believe that these changes are good changes; they will force us to improve our processes on many levels and ultimately, will make us each just a little better at doing what we already do so well. Stay tuned for further updates from ATG on this most vital issue.

[Last update: 3-19-13]

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