Best Practices

ALTA does not recommend a specific “look back” period for Best Practices assessments. When determining an appropriate look back period for assessments, it is important to consider the activity of the company to ensure there is a sufficient sample size of transactions to test for compliance with the Best Practices.

Employee training may be conducted using whatever method the company determines best fits its needs, and such training methods should be noted in the company’s policies and procedures.

The 24 month timeline is suggested by ALTA.  However, each lender and underwriter requiring a ALTA Best Practices certification letter is free to choose a shorter or longer timeline.  Given the importance of updates in each revision of Best Practices, it may be worth considering addressing the changes reflected in the updates before the 24 month certification timeline.

No, ALTA does not conduct any assessment or certification services, and does not have a badge or similar designation to indicate that a company is Best Practices compliant.

You should send any evidence of your assessment and certification to your lender partners or underwriter, if requested. You do not send a copy to ALTA.

No, ALTA does not perform any Best Practices assessments, nor does ALTA certify any company’s compliance with the Best Practices. However, ALTA does provide a number of tools to help companies and third parties conduct assessments.

The Pillar 2 Requirements states: "In making disburements from Escrow Trust Accounts, and subject to state law requirements, Company should ensure that undue risk is not being undertaken for escrow deposits that are not fully settled or could be reversible."

Companies should be diligent in realizing that deposits, even if showing as “available” funds, may not be fully settled or can be reversible, and as such, Companies should analyze the risk and tolerance for that risk in making escrow disbursement decisions.

Be aware of the sales agreement requirements and your state good funds laws.  Deposits from certain types of banking transactions can appear to be “readily available” when they are potentially reversible.  Companies need to analyze the risk and understand when they are at risk of disbursing utilizing reversible funds as deposits.

Be mindful that for deposits using paper checks, it is not unusual for your financial institution to make those funds available before they have cleared, and cleared funds may not occur for up to five, even seven days.  As such, you should consider wiring out funds only if they have been wired in. This will help ensure your Escrow Trust Account can withstand disbursement activity should a deposit ever be reversed.

In addition, ACH deposits are governed by federal regulations allowing reversal requests under certain circumstances. 

If in doubt, ask your escrow deposit bank and your underwriter.  Learn more about Good Funds at ALTA’s Good Funds page:  https://www.alta.org/advocacy/technology/good-funds

For those who are either ALTA members or have a Best Practices Subscription, please see the document available here to download the content for more information on the purpose, creation, and implementation of a WISP.  ALTA Members and those with a Best Practices Subscription need to login to access this and other restricted content.  

For non-members or Policy Forms Licensees who want to obtain a Best Practices Subscription, please click here.  For those wanting to join ALTA as a member, please click this Membership Link.

Every ALTA Policy Forms licensee should have a copy of its license. Alternatively, you may contact ALTA at [email protected] to determine whether the company has an active Policy Forms License or has obtained an applicable waiver. 

If a company is an active ALTA member, it will also have a current Policy Forms License. You may search for ALTA members by visiting http://www.alta.org/membership/directory.cfm.

No, the licensing requirements of Best Practices Pillar 1 are applicable to business entities and to individuals working in states where individual licensure is required. 

The Pillar 2 Requirements states: "In making disburements from Escrow Trust Accounts, and subject to state law requirements, Company should ensure that undue risk is not being undertaken for escrow deposits that are not fully settled or could be reversible."

Companies should be diligent in realizing that deposits, even if showing as “available” funds, may not be fully settled or can be reversible, and as such, Companies should analyze the risk and tolerance for that risk in making escrow disbursement decisions.

Be aware of the sales agreement requirements and your state good funds laws.  Deposits from certain types of banking transactions can appear to be “readily available” when they are potentially reversible.  Companies need to analyze the risk and understand when they are at risk of disbursing utilizing reversible funds as deposits.

Be mindful that for deposits using paper checks, it is not unusual for your financial institution to make those funds available before they have cleared, and cleared funds may not occur for up to five, even seven days.  As such, you should consider wiring out funds only if they have been wired in. This will help ensure your Escrow Trust Account can withstand disbursement activity should a deposit ever be reversed.

In addition, ACH deposits are governed by federal regulations allowing reversal requests under certain circumstances. 

If in doubt, ask your escrow deposit bank and your underwriter.  Learn more about Good Funds at ALTA’s Good Funds page:  https://www.alta.org/advocacy/technology/good-funds

No. Pillar 2 of the ALTA Best Practices requires that transactions "are conducted by authorized employees only," and thus engaging a non-employee signer for a fiduciary account is not permissible.

Some eRecording vendors require clients to allow recording fees to be automatically debited from their accounts via ACH. Under ALTA Best Practices Pillar 2, a Company must prohibit or control the use of ACH transactions. An appropriate control includes, but is not limited to, the establishment of a separate recording fee disbursement account. In working with an eRecording vendor, a Company should establish specific controls for the use of ACH to ensure that only the eRecording vendor can debit funds from the Escrow Trust Account and that those debits are for the correct amount.  Also, be cognizant of the EFTA related controls, which may impact ACH transfers, as found in Best Practices.

If there is a business need to send an international wire, Pillar 2 states that you must have policies and procedures in place that prohibit or control the use of international wire transfers to protect against unauthorized transactions.  We recommend caution with all wires, including international wires, and it is a recommendation that wire transfer verification services may provide additional safety.

Compensating controls may be acceptable to your customers; however, this practice does not meet the minimum standards of Pillar 2 of the Best Practices. Pillar 2 states that “Segregation of duties is in place to help ensure the reliability of the reconciliation and reconciliations are conducted by someone who does not have signing or disbursing authority.”

The segregation of duties requirement within the Best Practices is designed to deter mishandling of accounts and to allow the company to promptly detect errors. Given the importance of monitoring Escrow Trust Accounts, it is crucial that reconciliations be performed by a person or entity that is independent from the receipt and disbursement function in order for the company to comply with this aspect of the Best Practices. Companies may elect to engage a third party, such as a bookkeeper, or use a software program to prepare reconciliations. If a company does not use or engage an independent person or entity to perform reconciliations, the company may impose controls to help detect errors or concerns in the reconciliation process, though such controls would not render the company in compliance with this aspect of the Best Practices. ALTA recommends that you note any deviations from the Best Practices in any assessments conducted to ensure transparency regarding your company’s policies and procedures.

Yes, recording accounts are Escrow Trust Accounts because the funds in such accounts are held on behalf of third parties and are not property of the settlement company.

For those who are either ALTA members or have a Best Practices Subscription, please see the document available here to download the content for more information on the purpose, creation, and implementation of a WISP.  ALTA Members and those with a Best Practices Subscription need to login to access this and other restricted content.  

For non-members or Policy Forms Licensees who want to obtain a Best Practices Subscription, please click here.  For those wanting to join ALTA as a member, please click this Membership Link.

Yes, the standards in ALTA Best Practices Pillar 3 apply to any devices where NPI may be found.

No, you may not use a confidentiality agreement in lieu of performing due diligence requirements on third parties with access to NPI. Pillar 3 of the ALTA Title Insurance and Settlement Company Best Practices requires that companies "Select service providers and third-party systems whose information security policies are consistent with Company’s WISP."

The purpose of this provision of the Best Practices is to ensure that any third parties to whom the company provides customer NPI protects that NPI to the same extent as the company itself. Companies are expected to maintain controls to monitor the security procedures of third-party service providers, which can include, but are not limited to, reviewing background checks of third parties, reviewing audits of security tests, and viewing intrusion logs. Though companies may also elect to have third-party service providers enter into confidentiality agreements to prevent disclosure of company NPI, such agreements do not take the place of a third-party service provider’s compliance with the Company's WISP.

As long as the method selected by the company prevents any unauthorized individuals from viewing or accessing files containing NPI, the company has met this provision of the Best Practices.

Yes, the Best Practices have in place specific due diligence requirements a company must meet when engaging a third party that has access to NPI. When engaging a third-party signing professional who will have access to customer NPI, the company must meet the standards contained within Pillar 3 that pertain to oversight of service providers. Specifically, Pillar 3 states that the Company must "Select service providers and third-party systems whose information security policies are consistent with Company’s WISP."  

In addition, Pillar 4 requires the following oversight for signing professionals:  "Establish and implement written procedures to monitor and verify that all signing professionals possess the appropriate state licensing and insurance to notarize documents (both in person and remotely, if applicable), conduct the Settlement (if applicable), and safeguard NPI. These requirements are determined by a mix of legal and contractual obligations, including state regulations and Title Insurer requirements and restrictions."

No, this practice is not prohibited and in fact is commonly utilized. The ALTA Best Practices do not express a preference regarding technology or software providers, including the use of cloud technology. A company should perform due diligence on any third parties, including technology and software providers, to ensure those third parties protect the company's customer NPI to the same extent as the company itself.

No, there is not a Best Practice specifically prohibiting the sharing of consumer data with vendors. The Best Practice requires a Company to maintain appropriate risk-based physical and network security designed to protect against unauthorized use of consumer data. It is recommended that Companies have a written privacy policy, which is shared with consumers and others – outlining the Company’s policy concerning the sharing of information with vendors and other third parties. 

Locking your office at night is sufficient when no person will have access during off-business hours.  If cleaning people, security or other individuals are able to access your office during off-business hours then files should be locked up in a drawer, filing cabinet or separate file room that the cleaning people, security or other persons are not be able to access.

Yes. Pillar 3 and Gramm Leach Bliley require title and settlement companies to provide their own privacy notices consistent with their unique operations, practices and usage of consumer data.

There is no national industry standard on closing file retention, but Pillar 3 requires you to have a policy regarding record retention and disposal of information. In addition, various state laws, underwriting agreements, local customs and practices, legal advice and your own needs should guide your policy on closing file retention.

Yes, provided that the national notary service company agrees to assume the obligation to  monitor and verify that the third-party signing professional within the national notary service company's network complies with ALTA Best Practices requirements.

Pillar 4 of Best Practices requires a Company  to oversee signing professionals, which includes verifying licensing, E&O insurance, and safeguarding NPI. Pillar 4 allows the Company to essentially subcontract out the requirements to oversee signing professionals to the national notary service company, who will take on the task of verifying that the signing professional has the appropriate licensing, E&O insurance, agrees to safeguard NPI and otherwise meets the requirements of Pillar 4.  Make sure to confirm with the national notary service company that they are undertaking these Pillar 4 requirements.

No.  Pillar 4 identifies who is responsible to oversee signing professionals, including third-party signing professionals (aka notaries). As stated in Pillar 4, if the Consumer (which includes a seller) in a transaction is being permitted to select their own notary, then the vetting of that notary remains with the party selecting the notary:

• “For a third-party signing professional contractually retained by anyone other than Company (e.g., the lender, Consumer, or an attorney representing any of these parties), the responsibility for verifying that the third-party signing professional meets applicable standards rests with that party.”

However, there are many instances where aspects such as the Title Agent’s internal policy or risk mitigation concerns, contractual requirements between a Title Agent and the Title Insurer, and/or requirements imposed by a lender, result in the seller, purchaser, or other ancillary parties to a transaction not being permitted to select their own notary and instead utilizing a Title Agent’s selection of a verified notary. 

It is worthwhile for the Title Agent to review their contractual requirements with the Title Insurer, their own policies, and to actively address any concerns, including of potential seller impersonation and fraud (see, Red Flags and Tips to Help Prevent Seller Impersonation in Real Estate) that would drive a decision as to whether to permit any third party request to provide their own notary.

Not necessarily. Pillar 4 of the best practices requires that documents be “Submit[ted] electronically or deliver documents for recording to the appropriate recording jurisdiction or the person or entity responsible for recording within two (2) business days of the later of: (i) the date of Settlement, or (ii) receipt by Company if the Settlement is not performed by Company.” In the context of Pillar 4, the “date of Settlement” should be viewed as the date that the closing occurred—that is, the date that any conditions that must occur prior to recording a document are completed. Only once the transaction is complete, and the documents are ready to be recorded, will the two-day time frame for recording be triggered. ALTA recommends that companies outline the prerequisites to recording, along with any statutory or regulatory requirements for recording, within the company’s policies and procedures.

No, the Best Practices do not require the company to perform any specific due diligence requirements when the lender or customer selects the third-party signing professional. Pillar 4 of the Title Insurance and Settlement Company Best Practices states, “For a third-party signing professional contractually retained by anyone other than Company (e.g., the lender, Consumer, or an attorney representing any of these parties), the responsibility for verifying that the third-party signing professional meets applicable standards rests with that party.”

No, the ALTA Best Practices do not provide specific guidelines for issuing refunds under a certain predetermined amount. Pillar 4 of the Best Practices requires companies to issue refunds upon discovery regardless of the refund amount.

Documents must be submitted for recording by the end of the second day following the date of Settlement.  For example, if the Settlement occurs on a Monday, the Best Practice requires the Company to submit documents for recording by close of business on Wednesday.  If the Settlement occurs on a Thursday or Friday – or on a day immediately preceding a holiday when the recorder’s office is closed - the weekend days, or holiday day(s) are not included in the 2 day timeframe. 

The Best Practices in Pillar 4 do not provide a specific time frame for refunds. The company should define a reasonable time frame for refunds in its policies and procedures.

Best Practice Pillar 4 does not specify a minimum amount of E&O coverage to be required of third party signing professionals. Settlement companies should set their E&O minimums based on the state law requirements and other considerations appropriate under the circumstances.

ALTA Best Practices Pillar 6 recommends cyber liability insurance, according to company size and settlement volume. Best Practice Pillar #6 requires that title companies have at a minimum errors and omissions insurance and fidelity or surety bonds as required by state law and that those insurances be adequate for the company's size and risk.  With the greater level of cyber liability and crime coverage have become more important to the safety of operations.

There is nothing in Best Practices that requires or promotes the use of Bond Ratings.

The term “complaint” is not defined within ALTA’s Best Practices; however, ALTA recommends that companies define the term within their policies and procedures. When defining the term, ALTA recommends that companies consider definitions that are common in the market, including definitions from their state regulators, lender partners, or other title insurance and settlement companies.

The ALTA Best Practices requires that companies develop a standard consumer complaint form and maintain a log of consumer complaints that includes whether and how the complaint was resolved. If you have not received a complaint, your company should still have in place policies and procedures for handling a complaint. Your company may also want to consider how it communicates with consumers to determine whether there are undocumented complaints.