ALTA President Discusses Best Practices to Reduce Settlement Risk During Panel at MBA Convention
October 23, 2012
ALTA 2012-13 President Frank Pellegrini participated on a panel discussion titled “Settlement Risk: The Last Frontier,” on Oct. 23 in Chicago at the Mortgage Bankers Association’s 99th Annual Convention and Expo.
Settlement risk is a major concern. Lenders assume the risk associated with how their funds are being handled during the settlement phase by third parties that they may or may not have chosen. The panel discussed the precautions and best practices to be considered, and how efforts around industry standardization and automated solutions can help meet regulatory and compliance standards.
The panel was moderated by Patrick McLaughlin, president of First American Mortgage Services. Pellegrini, who is CEO of Prairie Title Inc., was joined on the panel by Samuel E. Oliver, vice president, single family business transformation management for Freddie Mac and Marianne Sullivan, senior vice president, credit portfolio strategy for Fannie Mae.
Pellegrini shared ALTA’s recently developed the Title Insurance and Settlement Company Best Practices to highlight practices members of the title insurance industry exercise to protect lenders and consumers, while ensuring a positive and compliant real estate settlement experience.
“The best practices serve as a benchmark for the real estate settlement and mortgage lending industries and illuminate the high level of professionalism that ALTA members follow to protect consumers and businesses,” Pellegrini said. “The title insurance industry has always been serious about protecting consumers and combating criminal behavior.”
Here’s a glance at the best practices:
- Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services. The purpose is to ensure that the company is fully compliant with all applicable laws and regulations.
- Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation. These controls help meet client and legal requirements for safeguarding client funds.
- Adopt and maintain a written privacy and information security plan to protect Non-public Personal Information as required by local, state and federal law. Federal and state law requires a written information security plan describing how non-public customer information is protected.
- Adopt standard real estate settlement policies and procedures. This can ensure a settlement company can provide a safe and compliant settlement and meet state, federal and contractual obligations governing the settlement process and provide for ongoing employee training.
- Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance. Appropriate procedures for the production, delivery and remittance of title insurance policies ensures title companies meet their legal and contractual obligations.
- Maintain appropriate professional liability insurance and fidelity coverage. Appropriate levels of professional liability ensure that title agencies and settlement companies have the financial capacity to stand behind their professional services.
- Adopt and maintain procedures for resolving consumer complaints. 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.