Legal

ALTA’s Best Practices

March 3, 2014
ALTA

American Land Title Association logo

Everyone knows about HIPAA (Health Insurance Portability and Accountability Act) regulations for healthcare providers. We, at iTi, certainly sign our fair share of HIPAA agreements with all the healthcare providers we work with. It’s all about security and privacy double checked. As a language service provider to industries beyond healthcare, we also abide by Department of Defense specifications. We have a secure data center that complies with NIST SP 800-53 management, operational and technical standards. Our server room and servers were built to comply with department of defense standards. Your data is safe with us!

What about law firms and insurance companies? They certainly handle quite a bit of personal information on their clients such as social security numbers. You would think that there is some sort of regulatory board protecting the clients. However, I recently attended the Central Connecticut Paralegal Association’s monthly luncheon and learned that this is something new and upcoming in the Legal industry. The speakers at the luncheon were JoAnn Fenty and Lisa Lugauskas of Commonwealth Land Title Insurance Company. They put on a great presentation and I felt compelled to write about it as it seems there isn’t wide spread knowledge of what is coming for those in the field.

It all started when the housing bubble burst in 2007. This crisis resulted in the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB). The CFPB found sloppy account transfers, sloppy recordkeeping, poor payment processing, loss mitigation mistakes, lack of formal policies and procedures and general inconsistencies. Because of this the CFPB requires financial institutions to have processes in place to manage the risks of service provider relationships. Service providers (law firms and language service providers among others) must comply with privacy and security laws passed in the Financial Services Modernization Act of 1999 (aka the regulatory environment).  In response to this, ALTA the American Land Title Association, developed a list of best practices to help the mortgage lending and real estate settlement industry stay in compliance. However, these best practices are also useful for service providers. Although they are not bound by law, the insurance companies they work with are. If an insurance company gets fined because their service provider isn’t compliant, they most likely will not work with them again or bring legal action against them. Who wants to lose a client and future revenue because of that?!

 

Here’s a very brief overview of the 7 best practices JoAnn and Lisa presented:

  • Establish and maintain current Licenses as required to conduct the business of title insurance and settlement services.

    •  Establish and maintain applicable business Licenses

    •  Establish and maintain compliance with Licensing, registration,  or similar requirements with the applicable state regulatory  department or agency

    •  Appropriate compliance with ALTA’s Policy Forms Licensing    requirement

  •  Adopt and maintain appropriate written procedures and  controls for Escrow Trust Accounts allowing for electronic  verification of reconciliation. Escrow Trust Accounts are:

    •  Balanced monthly, three-way reconciliation

    •  Segregation of duties

    •  Do not commingle accounts

    •  IOLTA Account must be named IOLTA

    •  Background checks at hiring and every 3 years going back 5  years for all employees who have access to customer funds.

 

  •  Adopt and maintain a written privacy and information security  program to protect Non-public Personal Information as  required by local, state and federal law.

    •  Examples of Non-public Personal Information: tax returns,  mortgage applications, social security numbers, pay-off letters,  statement of identity forms such as drivers licenses

    •  Issues that need thought:

    •  Who has access to the areas that hold private/confidential  information?

    •  Consider cleaning services, repair technicians, and other third  parties.

    •  How do you dispose of paper records?

    •  What is your plan in the event of a natural disaster or accidental  disaster?

    •  Companies need to review their privacy and information security  procedures to detect the potential for improper disclosure of  confidential information.

  •  Adopt standard real estate settlement procedures and policies  that help ensure compliance with Federal and State Consumer  Financial Laws as applicable to the Settlement process.

    •  Adopting appropriate policies and conducting ongoing  employee training helps ensure the company can meet state,  federal, and contractual obligations governing the settlement.

  •  Adopt and maintain written procedures related to title policy  production, delivery, reporting and premium remittance.

    •  Timely delivery of policies to the insured

    •  Timely payment of premiums to underwriters

    •  Training of employees

    •  Determine “location” and maintenance of documents

    •  Written process on day to day operations

  •  Maintain appropriate professional liability insurance and  fidelity coverage.

    •  Errors and Omissions Insurance

    •  Fidelity Coverage or Surety Bonds

 

  •  Adopt and maintain written procedures for resolving consumer  complaints

    •  A process for receiving and addressing consumer complaints  helps ensure reported instances of poor service or non-  compliance do not go undiscovered.

Clearly, these best practices are very important for all areas of law across many industries. This doesn’t just relate to residential real estate. To learn more, visit ALTA’s website as there is so much more detail that goes into this. As I mentioned before, this applies to all service providers and if you want to continue working with certain financial institutions, I would suggest reflection on your current policies and procedures. Things change fast and you don’t want to be left behind.

 

Sources:

American Land Title Association’s Best Practices  www.alta.org

“Implementation of ALTA’s Best Practices” Presentation by: JoAnn Fenty & Lisa Lugauskas, Commonwealth Land Title

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