Mortgage title issues can prove to be a significant cost to a lender and/or servicer irrespective of whether the loan is insured.
Lenders tend to work indirectly trying to cure items already being addressed by the respective underwriter or title agent. That is one of the reasons it is important to engage with a good title agent throughout the mortgage process, as it ensures a smooth closing and helps reduce stress, giving the lender and investor peace of mind.
The title agent’s job is to ensure that the lender’s and borrower’s investments are protected, and each loan situation is taken into consideration – i.e., the proper title endorsements and insurance coverage are being purchased. This will ultimately protect the investments against any losses that may result from hidden defects in the title. Hence it is extremely important that the title agent has a scalable ecosystem that can absorb and ensure compliance in the constantly evolving processes.
A lot of these measures are initiated by industry bodies such as the American Land Title Association (ALTA) and regulatory bodies such as the Consumer Financial Protection Bureau (CFPB).
ALTA and the CFPB act to minimize compliance risk and assist companies in adapting to a more secure environment.
There are a few important practices that title agents should take into account with regard to mortgage and/or servicing compliance.
Maintaining Current and Updated Licenses
It is necessary that all title agents maintain the required insurance licenses, corporate registrations and other licensing as required by their state. They also are required to comply with the ALTA Policy Forms licensing guidelines to ensure they are in good standing with the jurisdiction they operate in.
Ensuring All Escrow Trust Accounts Are Secured
Title agents need to have proper controls in place for escrow and trust accounts. This means there has to be a tab on the accounts which can effortlessly allow quick and effective reconciliation daily. In addition to these best practices, each agent as well as any staff member, responsible for handling funds, should undergo regular background screening to help ensure that the escrow funds are safe and secure.
Protecting Private Information
One of the main priorities of compliance in the title industry, as well as any other industry, is protecting sensitive consumer information. All the best practices require a written privacy and information security program to protect non-public personal information. Title agents are advised to develop a single, national standard to help protect consumer private information uniformly and consistently while maintaining an efficient home buying and selling experience.
Only authorized employees who have undergone a background check should be given access to restricted information. Title agents as well as lenders have a duty to make certain the personal data of consumers and investors remain safe.
Ensuring Proper Procedure to Record Documentation
Lenders count on title agents to provide closing services that have clear and written procedures to meet federal state and local guidelines and requirements for the closing and settlement process. This includes verifying that documents being recorded are prepared properly and being sent to the correct county recorder’s office in a timely manner. In addition title agents must ensure that documents are properly recorded, are responding promptly to rejections, and addressing issues arising from the gaps.
Another requirement title agents must fulfill for its Lender clients is compliance checks for third parties and vendors they retain through the closing process, checking that the Notaries are qualified with current licensing and have the required insurance and bonds to cover their services.
ALTA has notified best practices that require written procedures for the production and delivery of title insurance policies as well as sending the premiums to the underwriters. Some of these include the time frame for a title insurance policy to be issued and delivered to the customer and to be reported to the underwriter, time frame for the premiums to be remitted to the underwriter etc.
Addressing Consumer Complaints
It is imperative that title agents have a proper processes in place to address consumer complaints and resolve them. This means agents will have to set out appropriate procedures to make the right staff members aware of complaints. Once that is done, the particular person who is assigned the complaint should become a point of contact until the issue is resolved.
Lenders need to find a title agent who complies with applicable laws and regulations and follows suitable procedures. By partnering with a compliance-driven title company, lenders can keep their customers’ information safer and minimize potential risks regarding their transactions.
Lastly, when selecting a service provider, it is important to choose one that is sensitive to the growing cyber frauds. They must embrace practices, culture and certifications that enhance the security levels of data and personnel.
Dinesh Valecha heads the strategy and sales arm and also manages client relations at FUGO, a provider of title and settlement services.