ALTA’s Board approves revision to Best Practices

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Change would require ALTA ID

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The Board of Governors of American Land Title Association approved a motion on February 21 to revise the Title Insurance & Settlement Company Best Practices to include a requirement for companies to be listed in the ALTA Registry. The amendment is under a 30-day review period ending April 12. Comments may be sent to bestpractices@alta.org.

The proposed amendment to Pillar 1 of Best Practices includes the following requirement:

  • “Establish and maintain a unique ALTA Registry Universal ID (ALTA ID) using the ALTA Registry platform for each settlement office location (subject to those business entity types supported by the ALTA Registry).

ALTA, the national trade association of the land title insurance industry, formally launched the national ALTA Registry in 2017, allowing title insurance agents and settlement companies to communicate with underwriters to confirm their company name and contact information.

Using the ALTA Registry, lenders and their vendors are able to identify title agents, title underwriters and other participants in the closing process and communicate in a timely and consistent manner throughout the mortgage transaction.

Because there has been no unique ID number used across the industry to help match provider records in different databases, communication has often been difficult and costly for the title industry and its customers. This is especially important with new regulations driving vendor oversight requirements and the need for collaboration.

The ALTA Registry is a free, searchable online database of underwriter-confirmed title agent companies and underwriter direct offices. The registered information includes the title agent’s legal entity name, location and contact information. ALTA offers a unique 7-digit identifier, the ALTA ID, which is automatically assigned to each new database record as a permanent ID number and is never changed, reassigned or reused. ALTA ID numbers are available free of charge to title agents and real estate attorneys.

ALTA’s Best Practices is designed to assist lenders in managing third-party vendors. Pillar 1 requires title companies (closing attorneys in South Carolina) to maintain licenses for doing business in the title industry. This includes the license required by the South Carolina Department of Insurance and the ALTA policy forms license. The registry helps lenders determine they are working with legitimate title providers.

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Accountants Develop ALTA Best Practices Guidelines

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Dirt lawyers: Your CPA should be able to assist!

accountant guyThe American Land Title Association announced on April 28 that the American Institute of Certified Public Accountants (AICPA) has issued guidelines for CPAs to verify whether closing attorneys comply with ALTA’s Best Practices.

The guidelines provide a uniform framework to ensure CPAs will perform ALTA Best Practices compliance testing and reporting in the same manner and in accordance with AICPA standards. By engaging a CPA who will use the new guidelines, closing attorneys should be confident about the quality of the assessment process.

We are not aware of any lenders doing business in South Carolina who have indicated at this point that they will require third party certifications. However, Mississippi based regional BancorpSouth announced in early March that its approved closing agents must comply with Best Practices through a certification from an independent third party vendor acceptable to the bank. The deadline for obtaining the certification was stated to be July 31.

Wells Fargo announced it supports ALTA’s Best Practices as sound business practices that should already be in place. Wells stated in a memorandum to its closing agents that completing a certification by August 1 will not be a requirement, but the bank hopes closing agents will, at minimum, have already completed a self-assessment and addressed any identified gaps by that date.

SunTrust Mortgage announced that it will require closing agents to complete an ALTA Self-Assessment no later than July 1, 2015.

Lenders will likely refine their requirements as we get deeper into implementation. It would not be surprising to hear that any lender who does business in South Carolina will require third party certifications, particularly since CPAs are now “in the loop” and able to make assessments.

The bottom line at this point is that all residential closing attorneys who plan to remain in the business should become Best Practices compliant as soon as possible so they will be able to meet any requirements along these lines that their lenders may impose.

If you need help with Best Practices compliance, call your title insurance company! They are able, willing and ready to assist!

Lenders Announce They Will Control More of the Residential Closing Process

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Regional bank will require third-party BP certifications on a short time frame!

work in progressLet’s take the big bank first. Bank of America recently shared more details about changes in its closing processes after August 1, 2015.  In addition to delivering Closing Disclosures, BofA will take the responsibility for complying with the three-business day waiting period. It will not require closing attorneys to monitor the timing of the delivery of the initial CD or any required re-disclosures.

BofA stated that close collaboration will be needed with closing attorneys for requests of information and notices of all loan and fee changes through its selected platform, RealEC® Technologies Closing Insight™. Closing attorneys will be notified of re-disclosure requirements and new closing dates through Closing Insight™.

BofA said it expects to engage closing attorneys to begin fee collaboration a minimum of ten calendar days prior to closing, and it intends to generate and send the CD six business days prior to closing.*

Now let’s look at an interesting announcement from a small bank, and please pay attention to the short time frame.

Mississippi based regional BancorpSouth announced in early March that its approved closing must comply with ALTA’s Best Practices through a certification from an independent third party vendor acceptable to the bank. Self-certifications will not be accepted.certified - blue (small)

The announcement stated that Memphis Consumer Credit Association and many of the large accounting firms have agreed to provide the certification. The bank asked closing attorneys to advise by March 23 whether they intend to obtain the certification. And the deadline for obtaining the certification was stated to be July 31.

*In almost all South Carolina transactions, we expect the “consummation date” to be the same as the closing date and the same as the date BofA refers to in this memorandum as the signing date.

Don’t Expect Uniform Closing Procedures in 2015

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And … Bank of America makes a big announcement.

changes comingLenders will not collaborate on a standard and consistent process for closings under the new CFPB rules effective August 1, 2015, at least not according to Wells Fargo.

Wells Fargo’s December 10, 2014 Settlement Agent Communication answered nine FAQs from settlement agents, the first of which sought confirmation on whether to expect standard closing procedures from lenders. Wells responded with a “no,” and stated that each lender is accountable and must determine its own method for achieving compliance.

This mega lender had announced on September 24 that it will control the generation and delivery of the buyer/borrower Closing Disclosure (“CD”), the form that will replace the HUD-1 Settlement Statement. The stated rationale was that the new CD is governed by the Truth-in-Lending Act (“TILA”), not the Real Estate Settlement Procedures Act (RESPA), and the risks and penalties for lenders are more severe under TILA.

Bank of America announced on December 17 that it will follow suit by generating and delivering the buyer/borrower CD.  Both banks have indicated settlement agents will generate the seller’s CD. Other lenders have not announced whether they will follow this procedure. It is entirely possible that settlement agents (closing attorneys in South Carolina) will prepare the CDs for other lenders.

The December 10 memo did state that Wells will work closely with settlement agents to determine fees, prorations, and other content required for the CD and, importantly, Wells will not assume the responsibility for disbursing loans. This quote from the Communication provides some comfort with regard to Wells’ attitude about keeping local settlement agents involved in the closing process:

“The settlement agent is critical and continues to be responsible for executing the closing including document signing, notarization, disbursement of funds, document recordation and delivery of final documents post-closing.”

Also comforting was the promise of training plans for settlement agents in collaboration with American Land Title Association, title underwriters and other service providers. The plans are said to include many educational communications and an information guide.

Bank of America stated that it will use Closing Insight™, an industry tool developed by Real EC Technologies®. All documents, date and information will be exchanged through Closing Insight™, discontinuing the use of e-mail, fax and other document delivery methods.

Bank of America also indicated that the requirement for the buyer/borrower to receive the CD three business days prior to closing will intensify the need for the bank to work very closely with the settlement agent to schedule the details of the closing.

stay tunedFor more information about Real EC ® Technologies and Closing Insight™, Bank of America invited settlement agents to visit their website at www.bkfs.com/realec.  The December 17 memo indicated that many title and escrow production systems are working with RealEC® Technologies to enhance current integrations in support of Closing Insight™. The bank suggested that settlement agents reach out to their title and escrow production system provider directly.

Stay tuned!

Embrace ALTA’s Best Practices

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 BestPractices2Some real estate practitioners are furiously bringing themselves into compliance with ALTA’s Best Practices, while others are furiously ignoring the entire topic or, at best, waiting until they hear marching orders from lenders. I propose that we all step to the plate and embrace Best Practices.

Residential practitioners can and should use compliance as a marketing tool. Some commercial practitioners are assuming that when lenders become educated and begin demanding compliance from residential practitioners, they will naturally ask for the same or similar compliance from commercial practitioners. Striving for compliance is an opportunity for all practitioners to demonstrate to their clients, to real estate agents and to lenders their value in real estate transactions.

ALTA is now encouraging practitioners to conduct a self-assessment of their adoption of Best Practices by September of 2014. Time may be of the essence because a practitioner may first hear marching orders from a lender in connection with a specific real estate closing. If it is impossible to demonstrate compliance quickly, that closing will likely be lost to someone who is better prepared.Best-Practice-processes

I am convinced that the numbers of residential real estate practitioners in South Carolina will be drastically reduced in the next year or two. Attorneys approaching retirement age may decide to retire rather than to learn how to use the new forms. Large law firms  who handle commercial transactions may decide that residential transactions are no longer worth the effort. Left standing will be the practitioners who embrace this change and tackle it now. There is opportunity for growth for those who act wisely in the face of change.

Title insurance companies are willing and able to help and have resources that can ease the pain. But no outsider can do the actual work. Each pillar requires careful consideration from a management standpoint, and only the closing attorneys themselves can make the necessary decisions for implementation. Each pillar will require on-going demonstration of compliance. Files must be papered. Calendars must be tickled. Software and hardware must be kept current. Compliance will not be a matter of establishing written procedures and continuing business as usual. We should establish a culture of compliance and make it the responsibility of all employees.

I can’t say this strongly enough: At some point, practitioners will either have to embrace compliance or get out of the game. The time to act is now.

If you want to continue to handle residential real estate transactions, call your title insurance company today and ask for assistance in nailing down each pillar.