TITLE INSURANCE and Settlement Company BEST PRACTICES for vendor and compliance managers of financial institutions Corporate Compliance Office 201 E...
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TITLE INSURANCE and Settlement Company

BEST PRACTICES for vendor and compliance managers of financial institutions

Corporate Compliance Office 201 E Pittsburgh Ave, Suite 200 Milwaukee, WI 53204 (414) 727-4545

Version 2014 2Q


Knight Barry Title Group Best Practices


Jeff Green has served as President & CEO since 1979 after practicing law in Milwaukee. Craig Haskins, the Chief Operating Officer joined the company in 1996 and with Jeff has aggressively expanded the company into four states.

OUR PROFILE Knight Barry was established seven years prior to Abraham Lincoln’s Presidency - 160 years ago. To this day, Knight Barry is still providing top notch closing services and title products to customers in the Midwest for properties across the country.

WHAT WE DO SS We issue title insurance for consumers, lenders, lawyers, developers, builders and real estate professionals. SS We protect sensitive documents and information from real estate closings. SS We disburse closing funds safely, securely and soundly.

The Knight Barry Title Group (“KBT”) seeks to inform lender vendor managers, compliance directors and consumers about KBT’s operations and practices, which are designed to protect consumers, promote quality service, provide for ongoing employee training, and meet legal and market requirements. KBT’s Statement of Best Practices is modeled after the “Title Insurance and Settlement Company Best Practices” published by the American Land Title Association (ALTA) in 2013 (“ALTA’s Best Practices”). ALTA’s Best Practices are designed to help illustrate to consumers and clients the title industry’s professionalism and best practices to ensure a positive and compliant real estate settlement experience. Although ALTA’s Best Practices are not intended to encompass all aspects of title or settlement company activity, they do serve as a benchmark for the mortgage lending and real estate settlement industry.

Knight Barry Title Group Best Practices Knight Barry Title Group Best Practices


Cheri Hipenbecker

Adam Sipe

Rachel Petrach

Director of Compliance and Security

General Counsel

Director of Title Production

Cheri serves as a first point of contact for Knight Barry’s staff on legal matters and insurance claims. She also assists with dayto-day title and settlement issues facing consumers.

Adam oversees title production for the company and is responsible for balancing the demand for the rapid issuance of title products with safe and sound title searching procedures.

Nobody knows escrow security better than Rachel. In the past 24-months she has implemented numerous security features including a complete overhaul of our escrow account software.

Lisa Barnekow

Jon Van Deurzen

Jason Wautier

Director of Administration

Information Technology Manager

Software Development Manager

Getting hired at Knight Barry requires a thorough review of an applicant’s background, including credit checks for those employees handling money. Lisa oversees those safeguards to ensure only the best qualified people end up in the closing rooms.

Jon oversees all computer hardware technology and has moved all sensitive data into a secured off site data center. This allows our staff from Hayward to Milwaukee to quickly and securely access and disseminate information to consumers.

Nearly all of the software and products distributed to consumers are created by software developed by Jason. This includes an in-house developed encryption system for safe transmission of a consumer’s non-public privtate information.



Knight Barry Title Group Best Practices

WHY YOU SHOULD CARE The CFPB expects lenders to better oversee their service providers. Period. On April 13, 2012, the Consumer Financial Protection Bureau (CFPB) issued Bulletin 201203, which outlined the CFPB’s expectations for business relationships between lenders and service providers as well as the CFPB’s authority over them. The CFPB expects lenders to oversee relationships with their service providers to ensure that they comply with Federal consumer financial laws and operate in a manner to protect consumers. To help lenders meet the CFPB’s expectations regarding title and settlement providers, the American Land Title Association (ALTA) developed the best practices to highlight policies and procedures the industry exercises to protect lenders and consumers, while ensuring a positive and compliant real estate settlement experience.



...especially good ones that have been well earned. But when a lender selects a title and settlement vendor to handle the title and closing process it’s putting its reputation on the line. Poor performance by that vendor not only damages the lender’s credibility with the consumer, but could have negative consequences from the CFPB, which puts the lender’s reputation in the market at risk.

This section probably needs no explanation. However, allow us to enlighten you on the cleverness of thieves who want to steal both the lender’s and consumer’s money from the title company’s escrow account. Billions of dollars flow through those accounts and you should be sure your title company has safeguards in place.

LENDERS LOVE FINAL POLICIES There’s one thing that really irks the post closing departments of all lenders -- title companies who stink at issuing final policies in a timely manner. With a Best Practice compliant company, lenders will receive policies in 30 days or less. Gone are the days of blacklisting and fining bad title companies. Simply use Best Practice compliant title companies and your post closing department will thank you.

LENDERS LOVE RESOLUTIONS If there is one thing we know about the CFPB, it’s that unresolved and undocumented consumer complaints are very bad. The CFPB requires a well documented consumer compaint and resolution process. Best Practice compliance ensures that your title company has a rock solid compliance program in place to keep consumers satisfied.

Hackers from overseas are very clever and constantly come up with ways to get to the money that doesn’t belong to them. If you do nothing else with this booklet, you should make sure pillar 2 on the following pages is rock solid at your title company because if it’s not, and hackers steal money from the company you chose, the CFPB probably won’t care and probably will look to you, as the lender, to compensate the consumer.

BAD GUYS STEAL IDENTITIES Lets face it, lenders and title companies have access to sensitive financial and personal information that belongs to consumers. Identity thieves will stop at nothing to get their hands on that info so that they can do bad things. Security of that information is critical. Good old fashioned emailing and casual handling of this information is a terrible idea. Encryption, security controls, cloud access.....these are all hot buzzwords that your title company better be experienced with.

Knight Barry Title Group Best Practices











PILLAR 1 SS Establish and maintain applicable business license(s). SS Establish and maintain compliance with licensing, registration, or similar requirements with the applicable state regulatory department or agency. SS Establish and maintain appropriate compliance with ALTA’s Policy Forms Licensing requirement.

Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services. Purpose: Maintaining state mandated insurance licenses and corporate registrations (as applicable) ensures that the company remains in good standing with the state. Knight Barry maintains all of the proper licenses to do business in each market it operates with brick and mortar locations, including all of Wisconsin, Illinois, Michigan and Minnesota. In addition, Knight Barry is licensed to do business in nearly 30 other states. Either Knight Barry and/or Craig Haskins is licensed in accordance with the state’s licensing, registration and other state regulatory requirements. Knight Barry is a proud member of the American Land Title Association (“ALTA”) and maintains a license to use the ALTA forms, including title insurance policies and endorsements.



Knight Barry Title Group Best Practices

PILLAR 2 SS Escrow funds and operating accounts are separately maintained. SS Escrow Trust Accounts are prepared with Trial Balances. SS Escrow Trust Accounts are reconciled. SS Escrow Trust Accounts are properly identified. SS Outstanding file balances are documented. SS Transactions are conducted by authorized employees only. SS Unless directed by the beneficial owner, Escrow Trust Accounts are maintained in Federally Insured Financial Institutions. SS Utilize positive pay, Automated Clearing House blocks and international wire blocks, if available. SS Background checks are completed in the hiring process and regularly conducted for existing employees. SS Ongoing training is conducted for employees in proper management of escrow funds and escrow accounting.

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. Knight Barry maintains separate operating and escrow accounts with local institutions in the markets in which it operated. The escrow accounts are prepared with trial balances and reconciled at least monthly, with most accounts reconciled daily (and often live) using RhynoLive software. The duties of the personnel in the closing and escrow deptartments are segregated so that employees involved in reconciliation duties have no signing authorities on those accounts. Further, management reviews each electronically stored reconciliation report. Each escrow account is labeled “Custodial Escrow Account” and both positive and negative file balances are documented. Knight Barry takes security seriously. As such, only authorized employees can conduct closings/settlements and only those employees who have satisfactory credit reports and background checks are authorized signatories on escrow accounts. Former employees are immediately removed as signatories from bank accounts. Escrow accounts are established only at Federally Insured Financial Institutions with Positive Pay, ACH blocks and international wire transfers in place on escrow accounts where available. Knight Barry’s employees love to learn. Numerous training sessions are given to closing/settlement employees in person, in writing, via online video training and via teleconference. The company even makes many training videos available to its customers, to consumers and even to its competition with free videos posted on Youtube.

Knight Barry Title Group Best Practices

PILLAR 3 SS Physical security of Non-public Personal Information. SS Network security of Non-public Personal Information. SS Ensure safe disposal of Non-public Personal Information. SS Establish a disaster management plan. SS Appropriate management and training of employees to ensure compliance with company’s information security program. SS Oversight of service providers to ensure compliance with a company’s information security program. SS Audit and oversight procedures to ensure compliance with company’s information security program. SS Notification of security breaches to customers and law enforcement.

Adopt and maintain a written privacy and information security program to protect Nonpublic Personal Information as required by local, state and federal law. Purpose: Federal and state laws (including the GrammLeach-Bliley Act) require title companies to develop a written information security program that describes their procedures to protect non-public customer 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 firm’s business or operations, or the results of security testing and monitoring. Non-public personal information, if physically maintained at Knight Barry, is accessible only by authorized employees. If electronically maintained, is done so on secure servers with access restricted to only authorized employees. Storing data on removable media such as smart phones, USB drives and disks is controlled and often prevented by our Information System Manager. Documents containing non-public personal information is transmitted from KBT using, a vendor specializing in safe delivery of documents using encryption and password protection. Knight Barry maintains and tests its written Disaster Recovery Plan on an annual basis. All existing and new employees are trained on information security. Each KBT office maintains its own document shredder or contracts the service to a shredding vendor to ensure disposal of non-public personal information. Vendors who handle courtesy closings or witness closings and also come into possession of non-public personal information must have acknowledged in writing that they comply with Federal and State privacy laws and KBT’s information security plan.



Knight Barry Title Group Best Practices

PILLAR 4 SS Efficient recording procedures for delivery of closing documents to the county recorder. SS Proper pricing procedures are in place to ensure consumers are charged the proper established rates.

PILLAR 5 SS Title policy production and delivery within 30 days. SS Premium reporting and remittance to ensure the insurer’s premium is delivered timely.

Adopt standard real estate settlement procedures and policies that ensure compliance with Federal and State Consumer Financial Laws as applicable. Purpose: Adopting appropriate policies and conducting ongoing employee training can ensure that a real estate settlement company can meet state, federal and contractual obligations governing the settlement process and provide a safe and compliant settlement. Knight Barry requires its closing/settlement employees to submit documents for recording within two business days of disbursement using eRecording when available and tracking the documents. The company also maintains an online rate calculator to ensure that consumers are being charged the appropriate premiums.

Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance. Purpose: Appropriate procedures for the production, delivery and remittance of title insurance policies ensures title companies meet their legal and contractual obligations. KBT issues and delivers policies to its customers in a timely manner often electronically to meet the demands of lenders and consumers. KBT reports policies and remits payments for those policies to its underwriters in a timely manner to meet statutory, regulatory and contractual obligations.

Knight Barry Title Group Best Practices

PILLAR 6 SS Professional liability or errors and omissions insurance is in place. SS The Company complies with requirements for professional liability insurance, errors and omissions insurance, fidelity coverage or surety bonds, as provided by state law or title insurance underwriting agreements.

PILLAR 7 SS Consumer complaint intake, documentation and tracking.

Maintain appropriate professional liability insurance and fidelity coverage. Purpose: Appropriate levels of professional liability (errors and omissions insurance) ensure that title agencies and settlement companies have the financial capacity to stand behind their professional services. In addition, state law and contractual obligations may require a company to maintain fidelity bond and surety bond policies with prescribed minimum amounts of coverage. KBT maintains appropriate levels of Errors & Omissions insurance, Fidelity coverage and Surety coverage to meet state law and contractual obligations.

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. Knight Barry has a written process to deal with customer complaints that allows the office manager to settle the complaint; or if unable to do so, to transfer the issue to the company’s Chief Operating Officer.




CFPB Director on vendor oversight

“ We’re going to be aggressive about going on site and looking at [lenders’] vendors. I think that will be a change for some of these [lending] institutions, and they will need to adjust their compliance regimes accordingly.“

“ Best Practices are the benchmark for the real estate settlement and mortgage lending industries. They illuminate the high level of professionalism that ALTA members follow to protect consumers and businesses in the real estate and mortgage settlement. “