Title Insurance and Settlement Company Best …

1 Title Insurance and Settlement Company best PracticesAmerican Land Title AssociationCurrent Forces at WorkDodd Frank Wall Street Reform & Consumer Protection Act of 2010 Established the Consumer Financial Protection Bureau (CFPB)Our New Regulator Mission: ..to make markets for consumerfinancial products and services work for Americans whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumerfinancial products. CFPBF irst regulatory body focused on the CONSUMER!Emphasized Existing Regulatory Guidance Regulatory Guidance to Lenders on Service Providers Office of Comptroller of Currency 2001 (updated Nov. 2013) Federal Deposit Insurance Corp. 2006 Federal Government and state attorneys general 2011-2012 CFPB Bulletin -April 2012 Federal Reserve December 2013 Market Forces that may affect you and your customers!

2 Federal Regulators Remind Lenders of Their Liability CFPB Enforcement ActionsAmerican Express -$85 millionDiscover -$200 millionCapitol One -$210 The Message Lenders are responsible and liable for acts of third party providers that harm consumersLender Concerns FINANCIAL ENFORCEMENT REPUTATIONALP rotecting the Consumer is EverythingCFBPC omplaint ProcessComplaint Portal on Can Be Done? Determine Your Business Partners Talk to Your Lender Clients What are they concerned about with third-party oversight Tell them about your compliance program Discuss the New Mortgage DisclosuresALTA Responds Voluntary Tools and Resources for our industry to provide transparency in the protection of funds and non public private information Standardize an Assessment Process EMPHASIZE THE PRACTICES OF OUR AGENTSBest and maintain current licenses as procedures & controls for trust & network security protect money & confidential customer consistent pricing & refund overpayments (if they happen)

3 & record documents in a timely Title policies, report & remit premium in a timely liability Insurance & to consumer complaints in a timely mannerFor more information, go to Practices Establish and Maintain Current License(s) as Required Purpose: Maintaining state mandated Insurance licenses and corporate registrations (as applicable) helps ensure the Company remains in good standing with the state. Procedures to meet this best practice Establish/maintain applicable business license(s) Comply with licensing, registration or other requirements with applicable state regulatory body ALTA Policy Forms licenseOther ConsiderationsNotary PublicContinuing Education CertificationsContinuing Legal RequirementsEscrow and/or Closing LicensesAbstractor, Searcher, Examiner LicensingAnd The Money!

4 best Practices Written Procedures and Controls for Escrow trust Accounts 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 help ensure accuracy and minimize the exposure to loss of client funds. Procedures to meet this best practice Monthly three way reconciliations Separation of duties Employee background checksProcedures to meet this best practice:Escrow funds and operating accounts are separately funds or other funds the Company maintains under a fiduciary duty to another are not commingled with the Company s operating account or an employee or manager s personal trust Accounts are prepared with Trial Balances trust Accounts are separate from operating Daily reconciliation of receipts and disbursements Monthly Three Way Reconciliation Segregation of duties to assure reliance of reconciliation Review of Reconciliation by management Electronic access of reconciliation for underwriterEmployee ManagementBackground checks at hiring and recurring every 3 yearsLimit access to escrow funds to only authorized and trained employeesOngoing

5 Training program for both new and existing employeesProtection of trust AccountsAccount identified as trust or Escrow accounts on statements, checks, deposit ticketsUtilize Positive Pay or Reverse Positive PayImplement International Wire BlocksMaintained in Federally Insured InstitutionsUse separate computer for banking with access limited to authorized employees onlyWorkbook ExampleBest Practice # 2 Adopt and maintain appropriate written procedures and controls for Escrow trust Accounts allowing for electronic verification of the control / procedure included in the Company s existing written procedures?Is compliance with control / procedure documented?ESCROW trust ACCOUNT CONTROLSYESNOD escriptions/Comments1 Are escrow funds or other funds the Company holds in a fiduciary capacity kept separate from the Company s operating accounts and the personal accounts of managers and employees?

6 2 Describe the controls and procedures the Company has in place for ensuring that escrow funds and other funds held in a fiduciary capacity are kept separate from the Company s operating accounts and the personal accounts of managers and : Funding checks are restrictively endorsed "for deposit only" to the escrow trust account immediately upon receipt. 3 Are all Escrow trust Accounts properly identified as either an escrow or trust account on all account-related documentation including bank statements, bank agreements, disbursement checks and deposit tickets? best Practices Written Privacy and Information Security Program to Protect Non-Public Personal Information Purpose: Federal and state laws require Title companies to develop a written information security program that describes their procedures to protect non-public customer information.

7 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. Gramm Leach Bliley -1999 Reasonable procedures based on Company size and book of business Procedures to meet this best practice Physical & network security Disposal of Company records Disaster management planPillar 3: Physical and Network SecurityoDevelop guidelines for the appropriate use of Company information technology. ieinternet access, surfing, downloadsoEnsure secure collection and transmission of Non-public Personal SecurityoProhibit or control the use of removable phones, iPads, thumb drivesoUse only secure delivery methods when transmitting Non-public Personal InformationEmail Encryption.

8 Internal Controls Printing before or after hours Clean Desk Policy Access to controlled areas Mail Boxes Fed Ex/UPS Pickup sitesDisposal of DataCopy MachinesFAX machinesRecycled equipmentPaper, paper and paper!Disaster Management PlanPrepare for the worst!Fire, flood, break-inData BreachEmployee TheftOversight of 3rdParty VendorsSoftware vendorsDelivery servicesJanitorial ServicesLandlord access to officesMobile NotariesBest Practices Adopt Written Policies Ensuring Compliance with Federal and State Consumer Financial Laws (as applicable) Purpose: Adopting appropriate policies and conducting ongoing employee training helps ensure a real estate Settlement Company can meet state, federal and contractual obligations governing the Settlement process and provide a safe and compliant Settlement .

9 Procedures to meet this best practice Submit documents for recording within 2 days of closing Procedures to ensure consumers are charged established rates Post closing quality checkPolicies in place to assure that appropriate rates and fees are chargedAre your employees trained to use those rates and feesDo you document rates and fees in your filesLenders are tracking the performance of Title and Settlement companies to look for red delivery of closing packageTimely Pay-off Timely Recording Greater scrutiny on VA loans, reverse mortgages, co-op do you manage?Policies and Procedures in place for processing of recordingsTraining for your employeesUse of delivery or third parties for recordingAppropriate charges for recording feesTimely refunds to consumersBest Practices Adopt Written Procedures Related to Policy Production, Delivery, Reporting and Premium Remittance Purpose: Appropriate procedures for the production, delivery and remittance of Title Insurance policies helps ensure Title companies meet their legal and contractual obligations.

10 Procedures to meet this best practice Policies delivered within 30 days of closing/ Settlement Premiums remitted by last day of month a closing/settlementYou and Your UnderwriterPremium funds -separate trust accountPolicy for tracking and remitting Policy IssuanceTraining and process to implement! best Practices Maintain Appropriate Professional Liability Insurance and Fidelity Coverage Purpose: Appropriate levels of professional liability Insurance ensure that Title agencies and Settlement companies have the financial capacity to stand behind their professional services. Procedures to meet this best practice Professional liability or E&O Insurance Fidelity/Surety coverage as requiredIts Your BusinessWhat s required by State or UnderwriterAre Coverages Adequate?