ALTA Best Practices

1. ALTA Best Practices

2. Changes in Regulatory Scrutiny • Dramatic increase in regulation and scrutiny– 3rd party service providers: • 2001 – OCC guidance on 3rd party service providers • 2006 FDIC guidance on 3rd party service providers • 2011 Formal enforcement action requiring lenders to improve oversight of 3rd party service providers

3. 2011 Formal Enforcement Action Foreclosure Weaknesses: Inadequate policies and procedures; Inadequate monitoring and controls; Lack of sufficient audit trails; Inadequate quality controls; Inadequate identification of risks; Inadequate staffing; and Discrepancy of fees charged.

4. Changes in Regulatory Scrutiny • Dodd Frank • CFPB 1. American Express - $85 million 2. Discover - $200 million 3. Capital One - $210 million • NAIC • Market conduct examinations • Bar Examiners and random audits

5. Changes in Regulatory Scrutiny • CFPB Bulletin 2012-03 • “Legal responsibility may lie with the supervised bank...as well as...service provider.” • Standard • Due diligence • Lender must produce proof of review of a service provider’s policies • Lender must express clear guidance as to compliance • Lenders must demonstrate prompt action for service provider missteps

6. Lender Response to the Regulatory Changes • National lender contacts title underwriters—minimum standards for title underwriter oversight • Annual background checks • Annual credit checks • Escrow controls • Policy inventory controls • Underwriter audit of agents • Operational oversight of agents • Agent Vetting Company • ICL on steroids

7. ALTA Response to Market Demands • Establish and maintain current licenses • Adopt and maintain appropriate written procedures and controls for IOLTA accounts • Safeguard clients funds • Reconcile receipts and disbursements on a daily basis • 3-way reconciliation once a month • Segregation of duties • Authority to access and transfer funds • Employee background and credit checks

8. ALTA Response to Market Demands • Adopt and maintain a written privacy and information security plan • Physical security of non-public information • Network security of non-public information • Proper disposal of non-public information • Disaster management plan • Oversight of service providers • Audit and oversight to ensure compliance

9. ALTA Response to Market Demands • Adopt standard real estate settlement procedures and policies that ensure compliance with federal and state laws • Submit Documents for recording within 2 days of closing • Procedures to ensure consumers are charged established rates 3. Post closing quality check

10. ALTA Response to Market Demands • Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance • Policies Delivered within 30 days of closing • Premium reporting and remittance by last day of month after closing

11. ALTA Response to Market Demands • Maintain appropriate professional liability insurance and fidelity coverage • Professional E and O • Fidelity coverage – when required by state law or contractual obligations • Surety coverage– when required by state law or contractual obligations

12. ALTA Response to Market Demands • Adopt and maintain procedures for resolving consumer complaints • Procedures for logging and resolving consumer complaints • Single point of contact • Complaint log