ALTA Best Practices

You have heard of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) and potential "vetting" companies. Generally speaking, if you touch consumer funds in any way, you are going to be affected by Dodd-Frank and the CFPB. You may have heard of the "Best Practices" initiative of the American Land Title Association ("ALTA") to assist settlement service providers to adapt to this new stricter environment. Though attorneys may be exempt from provisions of Dodd-Frank under § 1027(e), lenders are subject to strict liability and it is their liability which is the underlying trigger for these changes.

This Website and the Chicago Title - North Carolina Approved Attorney Handbook are a starting point for quick access to information to help North Carolina attorneys learn about and adopt "Best Practices" consistent with the ALTA initiative.

The information to follow includes multiple checklists, questionnaires and resources from the ALTA Best Practices (the industry standard) and adapted to NC practice to help NC attorneys . This includes adapted versions of the ALTA Best Practices Framework: Title Insurance and Settlement Company Best Practices, Version 2.0, Assessment Procedures and Certification Package (published July 19, 2013, Copyright 2013 American Land Title Association, www.alta.org/bestpractices, instructions are in ALTA Best Practices below.), Chicago Title and North Carolina comments along with other supplemental information and resources interspersed. Each Best Practice Chapter Includes:

This website, the Handbook, links and resources, are intended to assist North Carolina closing attorneys in getting started on this process!

CFPB & ALTA

What's Going On (And Why You Should Care)

Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) www.consumerfinance.gov with authority to assure that providers of financial products or services, including real estate closings, must comply with applicable consumer financial laws listed in the Act. As a result, the CFPB can bring enforcement actions directly against a real estate settlement services provider (such as a closing attorney or a title insurance agent) for a violation of a consumer financial protection law. (See History)

Over the last few years, enforcement actions have increased with huge settlements.

On April 13, 2012, the CFPB issued Bulletin 2012-03

Relating to consumer financial services generally, which provides: The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships. The CFPB will apply these expectations consistently, regardless of whether it is a supervised bank or nonbank that has the relationship with a service provider. To limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps should include, but are not limited to:

So lenders can (and increasingly are expected to) conduct due diligence investigations or require some type of assurance of a closing attorney's ability to comply with the above.

The American Land Title Association (ALTA) began to develop a uniform set of "Best Practices" for the closing and title examination industry, - for firms large and small - as well as a process by which closing attorneys (or agents in other states) could be assessed and provide assurance to any lender that they comply and should be allowed to continue to close transactions. These would allow the firm to do a self-assessment, in preparation for a third party assessment of their compliance with the Best Practices, -- the “Assessment Procedure.” The Assessor would then issue a certification of compliance and the closing attorney and their firm could create a simple Certification Package to present on request from any lender.

This website, the Handbook, links and resources, are intended to assist North Carolina closing attorneys in getting started on this process!

Best Practices #1 Licensing

Licensing

Establish and maintain current license(s) as required to conduct [the business of title insurance and] settlement services.

Purpose

Maintaining state mandated [ ] licenses and corporate registrations (as applicable) ensures that the company remains in good standing with the state.

>>  ALTA Best Practices Resources & Documentation Page

    >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

      >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

        >>  Sample Checklists

          >>  Sample Policies and Procedures

            Best Practices #2 Trust Account Controls

            Trust Account Controls

            Adopt and maintain appropriate written procedures and controls for Escrow Trust* Accounts allowing for electronic verification of reconciliation.

            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 ensure accuracy and minimize the exposure to loss of client funds. Settlement companies may engage outside contractors to conduct segregation of trust accounting duties.

            >>  ALTA Best Practices Resources & Documentation Page

              >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                  >>  Sample Checklists

                    >>  Sample Policies and Procedures

                      Best Practices #3 Information and Data Privacy

                      Information and Data Privacy

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

                      Purpose

                      Federal and state laws (including the Gramm-Leach-Bliley Act) require title companies to develop a written information security program that describes the procedures they employ to protect Non-public Personal Information. 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. A Company evaluates and adjusts its program in light of relevant circumstances, including changes in the Company’s business or operations, or the results of security testing and monitoring.

                      >>  ALTA Best Practices Resources & Documentation Page

                        >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                          >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                            >>  Sample Checklists

                              >>  Sample Policies and Procedures

                                Best Practices #4 Settlement Policies and Procedures

                                Settlement Policies and Procedures

                                Adopt standard real estate settlement procedures and policies that help ensure compliance with Federal and State Consumer Financial Laws as applicable to the Settlement Process.

                                Purpose

                                Adopting appropriate policies and conducting ongoing employee training helps ensure the Company can meet state, federal, and contractual obligations governing the Settlement.

                                >>  ALTA Best Practices Resources & Documentation Page

                                  >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                                    >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                                      >>  Sample Checklists

                                        >>  Sample Policies and Procedures

                                          Best Practices #5 Title Production

                                          Title Production

                                          Adopt and maintain written procedures related to submitting final title opinion, documents and premium to title insurer in order to obtain timely issuance of title insurance policies post-closing.

                                          Purpose

                                          Appropriate procedures for the delivery of final title opinions, documents and premiums to the title insurer ensures attorneys meet their legal and contractual obligations under the lender’s written closing instructions.

                                          >>  ALTA Best Practices Resources & Documentation Page

                                            >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                                              >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                                                >>  Sample Policies and Procedures

                                                  Best Practices #6 Errors & Omissions and Fidelity Coverage

                                                  Errors & Omissions and Fidelity Coverage

                                                  Maintain appropriate professional liability insurance and fidelity coverage.

                                                  Purpose

                                                  Appropriate levels of professional liability (errors and omissions insurance) ensure that attorneys have the financial capacity to stand behind their professional services. In addition, lenders may require a law firm to maintain fidelity bond and surety bond policies with prescribed minimum amounts of coverage.

                                                  >>  ALTA Best Practices Resources & Documentation Page

                                                    >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                                                      >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                                                        >>  Sample Policies and Procedures

                                                          Best Practices #7 - Consumer Complaints

                                                          Consumer Complaints

                                                          Adopt and maintain procedures for resolving consumer complaints.

                                                          Purpose

                                                          A process for receiving and addressing consumer complaints is important to ensure that any instances of poor service or non-compliance do not go undiscovered.

                                                          >>  ALTA Best Practices Resources & Documentation Page

                                                            >>  NC Attorneys: What You Should Know - Issues to Consider & Discuss

                                                              >>  Resources - Articles, Contacts, Websites, Statutes, Ethics Rules & Opinions

                                                                >>  Forms

                                                                  >>  Sample Policies and Procedures

                                                                    >>  ALTA Assessment

                                                                      >>  ALTA Certification

                                                                        >>  Resources