Ins and Outs of ALTA s Best Practices Maturity Model

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1 Ins and Outs of ALTA s Best Practices Maturity Model Cynthia Blair, NTP, Blair Cato Pickren Casterline LLC Lori Dorman, Director of Risk Management for Agents National Title Insurance

2 Gaining Perspective

3 History of our Industry Wikipedia The first title insurance company, The Law Property Assurance and Trust Society was formed in Pennsylvania in 1853

4 History of our Industry Did you know? That until 1868 a title search had no guarantees as to its accuracy Did you know? That Ben Franklin laid the groundwork for the model and concept of insurance as we know it today

5 History of our Industry RESPA Real Estate Settlement Procedures Act Protect Homeowners By Education During the Shopping process Eliminating Kickbacks and Referral Fees 1974

6 History of our Industry Settlement Services As the industry began to shift from ABSTRACTS-OPINIONS to the TITLE INSURANCE POLICY, Settlement Services (CLOSING AND DISBURSING) began to move towards TITLE AGENCIES 1980 S

7 History of our Industry GRAMM-LEACH BLILEY ACT Required THE FEDERAL TRADE COMMISSION and other Government Agencies that regulate Financial Institutions to implement Regulations to carry out the Act s FINANCIAL PRIVACY PROVISIONS 2001

8 History of our Industry July DODD-FRANK WALL STREET REFORM AND CONSUMER ACT - CFPB April 2012 CFPB BULLETIN REGARDING LENDER LIABILITY FOR THIRD PARTY PROVIDERS July THE EMERGENCE OF THIRD-PARTY SETTLEMENT AGENT VETTING COMPANIES October TILA-RESPA INTEGRATED DISCLOSURE RULE

9 EMBRACING CHANGE Years in this Industry

10 Now it makes sense why we are freaking out!

11 Gaining Perspective Change is inevitable and embracing change encourages development Analyze your Business Make change while you can before change makes you Everyone has doubt, fear and uncertainty Feeling negative is counterproductive to embracing change

12 Hopefully there is a new perspective as we further enter into the world of regulation and the CFPB

13 Best Practices CFPB to hold Financial Institutions and their Service Providers Accountable Two points of importance Point #1 5,250,000 existing homes were sold in ,000 new constructed homes were sold in 2015 Average sales price for new houses sold as of 12/31/15= $358,100 National Association of Realtors/YCharts

14 Best Practices Point #2 Click

15 Best Practices New Era Compliance- State of being in accordance with established guidelines or specifications, OR the process of becoming so. Policies and Procedures- A set of policies which are principles, rules and guidelines, formulated or adopted by an organization to reach its long-term goals and typically published in a booklet or manual that is accessible.

16 Tools for your Tool Box ALTA s Best Practices Framework was created for Title & Settlement Service Providers to assist Lenders in meeting their responsibility to manage third party vendors. ALTA has developed many tools to assess compliance with the Best Practices, 3 of which are: ALTA s Best Practices Assessment Procedures ALTA s Best Practices Maturity Model ALTA s Best Practices Maturity Model Summary

17 Maturity Model As defined by ALTA: This Maturity Model is a business tool that measures a company s procedures against an established standard, such as the ALTA s Best Practices. The term maturity refers to the strength of a company s procedures and whether they are followed consistently. There are several levels that benchmark a company s maturity.

18 Ad Hoc Just Starting Company has not yet established any policies or procedures

19 Planning Developing Compliance Controls and procedures exist but are not documented, or controls and procedures are documented but are not completely implemented

20 Defined Partial Compliance Some controls and procedures exist and are documented, but are not completely being followed

21 Managed Substantial Compliance Controls and procedures exist and are documented, but are not being followed consistently

22 Optimized Full Compliance Controls and procedures exist, are documented, and are being followed consistently

23 Maturity Model Pillar 1 Best Practice Related Assessment Procedures Benchmark Compliance Levels Ad Hoc Planning Defined Managed Optimized Establish and maintain current license(s) as required to conduct the business of title insurance and settlement Services 1.01, 1.02 Licenses and corporate registrations are not available and active for all states and jurisdictions in which the company operates on the assessment date Licenses and corporate registrations are available and active for all states and jurisdictions in which the company operates on the assessment date Establish and maintain appropriate compliance with ALTA s Policy Forms Licensing requirement 1.03 Company does not maintain active ALTA Policy Forms License Company maintains an active ALTA Policy Forms License

24 Maturity Model Best Practice Written procedures and controls exist for Escrow Trust Accounts Related Assessment Procedures 2.01 Neither written procedures nor controls exist Pillar 2 Benchmark Compliance Levels Ad Hoc Planning Defined Managed Optimized Controls and procedures exist but are not documented or controls and procedures are documented but are not completely implemented Some controls and procedures exist and are documented, but are not completely being followed Controls and procedures exist and are documented, but are not being followed consistently Controls and procedures exist, are documented, and are being followed consistently Escrow funds and operating accounts are separately maintained 2.03n Escrow and fiduciary funds are comingled with operating accounts Underwriter premiums and/or recording fees are comingled with operating accounts No escrow or fiduciary funds are comingled with operating accounts Escrow Trust Accounts are prepared with Trial Balances, listing all open file/escrow balances 2.03e, 2.03h, 2.03l, 2.03m No escrow accounts and fiduciary accounts are prepared with a Trial Balance Some escrow accounts and fiduciary accounts are prepared with a Trial Balance Most Escrow accounts and fiduciary accounts are prepared with a Trial Balance; however, underwriter premium and/or recording account may or may not be prepared with a Trial Balance All escrow accounts and fiduciary accounts are prepared with a Trial Balance, including recording account, but not underwriter premium account or underwriter account but not the recording account; however, compensating controls are in place All escrow accounts or fiduciary accounts are prepared with Trial Balances

25 Tools from your Tool Box- Comparison Assessment Procedure Number Assessment Procedure ALTA Best Practices Framework: Assessment Procedures ALTA Best Practice 1: Maturity Model Pillar 1 Establish and maintain current License(s) as required to conduct the business of title insurance and settlement services. Best Practice Related Assessment Procedures Benchmark Compliance Levels Ad Hoc Planning Defined Managed Optimized Obtain an understanding of the Company s process for monitoring and tracking the current License(s) as required to conduct the business of title insurance and settlement services. Confirm the active status of the Company and/or individual Licenses/registrations for each state in which the Company conducts business. In states where underwriter appointments are required, ensure that companies and/or individual producers are appointed by each underwriter as applicable. Establish and maintain current license(s) as required to conduct the business of title insurance and settlement Services 1.01, 1.02 Licenses and corporate registrations are not available for all states and jurisdictions in which the company operates on the assessment date Licenses and corporate registrations are available and active for all states and jurisdictions in which the company operates on the assessment date View Company s active ALTA Policy Forms License or verify compliance on ALTA website 1.03 Establish and maintain appropriate compliance with ALTA s Policy Forms Licensing requirement 1.03 Company does not maintain active ALTA Policy Forms License Company maintains an active ALTA Policy Forms License

26 Tools for your Toolbox Maturity Model Summary Benchmark Compliance Levels ALTA Best Practices Ad Hoc Planning Defined Managed Optimized Progress Plan Establish and Maintain current license(s) as required to conduct the business of title insurance and settlement services Establish and maintain appropriate compliance with ALTA s Policy Forms Licensing requirement Pillar 1 X Written procedures and controls exist for escrow trust accounts Pillar 2 Escrow funds and operating accounts are separately maintained Escrow Trust Accounts are prepared with Trial Balances, listing all file/escrow balances

27 Maturity Model Identifies the strength of a company s Policies and Procedures Identifies progress- can be measured Identifies a plan to move toward Optimized Provides an alternative way of determining how a company s procedures measure up against the Best Practices

28 Maturity Model What do Lenders need?

29 Best Practices Business Decision on your part Evaluate your market Ask questions Educate What tool is Best for you to use Proactively Communicate

30 Embracing Change

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