Monthly Archives: June 2014

Title Insurance Issues

ALTA Best Practice #4 Settlement Processes

ALTA defines the settlement process as:

The process of completing a real estate transaction in accordance with written instructions during which deeds, mortgages, leases and other required instruments are executed and delivered, an accounting between the parties is made, the funds are disbursed and the correct documents are recorded with the appropriate entities.

ALTA Best Practice #4 states:

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.

The reasoning behind it is:

Creating policies and trainings that are effective and appropriate for employees, helps the company stay up to date with state, federal and contractual obligations governing the settlement.

Agencies have procedures in place and training takes place on an ongoing basis.  In order to be compliant, those informal trainings need to be written down.  If you are ever audited, you need to be able to point to a document that says “This is what we do” and “we did it on these dates”

Learntitle has a course pending that will explain all of the ALTA Best Practices.  As soon as NJDOBI approves it, we’ll let you know.

Title Insurance Issues

ALTA Best Practice #3: Protecting NPI

This particular Best Practice seems to be creating the most buzz. What exactly is NPI? What is the best way to protect it? What is it going to take to be compliant? What are your thoughts.

Non-public Personal Information (NPI)

Personally identifiable data, for example: information provided by a customer on a form or application, information about a customer’s transactions, or any other information about a customer which is otherwise unavailable to the general public. NPI includes first name or first initial and last name coupled with any of the following: Social Security Number, driver’s license number, state-issued ID number, credit card number, debit card number, or other financial account numbers.

Best Practice

Adopt and maintain a written privacy and information security program to protect NPI as required by law.

Reason

Federal and state laws require title companies to develop a written information security program that explains how NPI is protected.

For more information about all the ALTA Best Practices and also 1 credit of title insurance continuing education, enroll in the ALTA Best Practice course at Learntitle. Click Here to Enroll

Title Insurance Issues

Alta Best Practice #2

This is the second installment of ALTA Best Practices.  It concerns 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 help ensure accuracy and minimize the exposure to loss of client funds. Settlement companies may engage outside contractors to conduct segregation of trust accounting duties.

Procedures to meet this best practice:

  • Escrow funds and operating accounts are separately maintained.
    • Escrow funds or other funds the Company maintains under a fiduciary duty to another are not commingled with the Company’s operating account or an employee or manager’s personal account.
  • Escrow Trust Accounts are prepared with Trial Balances.
    • On at least a monthly basis, Escrow Trust Accounts are prepared with Trial Balances (“Three-Way Reconciliation”), listing all open escrow balances.
  • Escrow Trust Accounts are reconciled.
    • On at least a daily basis, reconciliation of the receipts and disbursements of the Escrow Trust Account is performed
    • On at least a monthly basis, a Three-Way Reconciliation is performed reconciling the bank statement, check book and Trial Balances.
    • Segregation of duties is in place to help ensure the reliability of the reconciliation and reconciliations are conducted by someone other than those with signing authority.
    • Results of the reconciliation are reviewed by management and are accessible electronically by the Company’s contracted underwriter(s).
  • Escrow Trust Accounts are properly identified.
    • Accounts are identified as “escrow” or “trust” accounts. Appropriate identification appears on all account-related documentation including bank statements, bank agreements, disbursement checks and deposit tickets.
  • Outstanding file balances are documented.
  • Transactions are conducted by authorized employees only.
    • Only those employees whose authority has been defined to authorize bank transactions may do so. Appropriate authorization levels are set by the Company and reviewed for updates annually. Former employees are immediately deleted as listed signatories on all bank accounts.
  • Unless directed by the beneficial owner, Escrow Trust Accounts are maintained in Federally Insured Financial Institutions.
  • Utilize Positive Pay or Reverse Positive Pay, Automated Clearing House blocks and international wire blocks, if available.
    • Background Checks are completed in the hiring process. At least every three years, obtain Background Checks going back five years for all employees who have access to customer funds.

Ongoing training is conducted for employees in management of escrow funds and escrow accounting