In the competitive world of residential mortgage lending, title companies, settlement companies, title agents, closing attorneys, closing agents, and real estate settlement professionals (collectively referred to herein as “title agents”) must perform at the top of their game, which means using the best equipment available. Thanks to the American Land Title Association (ALTA), title agents now have a new piece of gear they can use to set themselves apart from their competitors and comply with residential mortgage lenders’ (lender) requirements.
Developed by ALTA, its Board of Governors, and title insurance professionals representing the title and settlement industry (the “industry”), the ALTA’s Best Practices Framework: Title and Insurance Settlement Company Best Practices (“ALTA Best Practices” or the “Framework”), as published November 13, 2014, provides title agents with industry-developed best practices. The Consumer Financial Protection Bureau (CFPB) encourages the industry to continue to develop tools that meet the CFPB’s expectations of protecting consumers during a financial transaction including consumers’ personally identifiable information, personal private information, personal private data, or non-public personal information (collectively referred to herein as “NPI”). Wells Fargo said that ALTA Best Practices provides “guidelines for sound business practices that should ideally already be in place for businesses providing title and closing services for our customers.”
Using ALTA Best Practices as the compliance benchmark can help title agents demonstrate that they have proper procedures and safeguards in place to comply with the relevant laws and regulations designed to protect borrowers’ NPI.
First Things First: What is ALTA?
ALTA is the national trade association for companies who settle mortgages, underwrite title insurance policies, perform title abstracts, and act as title agent to borrowers. Founded in 1907, ALTA’s membership includes title insurance underwriters, title agents, settlement attorneys, as well as lenders, builders, and developers—and many others involved in the myriad of real estate aspects.
The Scouts: Why Are Lenders Looking for ALTA Best Practices Compliance?
Since the release of CFPB‘s requirements, which re-emphasized the ever-present importance of protecting sensitive consumer NPI, lenders have been under increasing pressure to better scrutinize their title agents’ compliance with federal consumer financial laws, including securing nonpublic customer data and maintaining legal and regulatory compliance. In fact, lenders must document for the CPFB their process for monitoring their title agents’ compliance with applicable laws and regulations and the results of their ongoing monitoring, or face fines and other enforcement actions.
ALTA’s Best Practices:
- Highlight Industry best practices that should be adopted to protect lenders and consumers,
- Provide a comprehensive and consistent framework for the due diligence and monitoring that the CFPB requires.
Gaining the Advantage: What Are the Benefits of ALTA Compliance?
Although it is currently mainly voluntary, (some lenders are requiring self-certification, while some regional banks are beginning to require third-party certification), there are numerous reasons to follow ALTA Best Practices. Third-party certified compliance can offer title agents the following key benefits:
- Stronger assurance. Third-party assurance is more persuasive evidence of compliance with ALTA Best Practices than a self-assessment. An independent and objective review will likely uncover deficiencies in policies and procedures that an internal assessment may miss.
- Time and cost savings. An ALTA Best Practices certification may exempt title agents from having to complete multiple, labor-intensive due diligence packages for lenders and reduce the number of their onsite visits. Plus, an independent review of your processes and procedures will likely identify and highlight process improvements and efficiencies.
- More business from lenders. Being third-party certified is a tremendous marketing advantage over your peers. Title agents that have met a rigorous standard of compliance with industry laws and regulations make themselves more attractive to lenders who are concerned about consumer protection and due diligence requirements.
- More business from consumers. An ALTA Best practices certification may increase consumer confidence because it indicates that your efforts toward protecting their valuable personal NPI and providing a higher standard of service.
The Referees: Why Should a CPA Firm Perform Your ALTA Assessment?
ALTA Best Practices contain the framework that an independent third-party uses to evaluate your ALTA Best Practices compliance.
When performed by a CPA firm, these evaluations adhere to the AICPA’s independence, objectivity, and professional standards. Lenders have long looked to CPA firms to provide assurance on financial and non-financial information to mitigate their business risk. Because CPA firms are trusted by financial lending institutions for the third-party assurance they need to meet their various regulatory requirements, a CPA-issued certification holds more value.
Further, CPAs who are experienced in working with banking and financial institutions fully understand their regulatory environment and are sound advisors for risk management requirements.
Call CRI Before You Step Out on the ALTA Compliance Court
When you are looking for ways to stand out among the competition, an ALTA Best Practices compliance certification issued by a CPA will strengthen your game. In addition to testing your policies, procedures, and internal controls over legal and regulatory compliance and data security, demonstrating adherence to ALTA Best Practices also exhibit those efforts to clients—especially to lenders who are looking to satisfy due diligence requirements as stipulated by the CFPB.
Lenders already trust and value an independent CPA firm’s assurance on management assertions regarding compliance and internal controls. CRI has been serving clients in the professional services, real estate, and mortgage lending industries for years and is well equipped to provide ALTA Best Practices compliance certifications. If you are ready to put your best foot forward in the mortgage lending game and gain market share, then contact our ALTA certification CPAs for an assessment of your current level of ALTA Best Practices compliance (through a CRI Readiness Assessment), including a gap analysis and a remediation plan for deficiencies that will need to be mitigated before compliance testing can begin. CRI will review your compliance testing options with you so that you will meet your lender requirements regarding the type of certification assurance report that they will require.