ALTA Best Practices

Changes in Regulatory Scrutiny Dramatic increase in regulation and scrutiny– 3rd party service providers: 2001 – OCC guidance on 3rd party service providers 2006 FDIC guidance on 3rd party service providers 2011 Formal enforcement action requiring lenders to improve oversight of 3rd party service providers

2011 Formal Enforcement Action Foreclosure Weaknesses: Inadequate policies and procedures; Inadequate monitoring and controls; Lack of sufficient audit trails; Inadequate quality controls; Inadequate identification of risks; Inadequate staffing; and Discrepancy of fees charged.

Changes in Regulatory Scrutiny Dodd Frank CFPB 1. American Express - $85 million 2. Discover - $200 million 3. Capital One - $210 million NAIC Market conduct examinations Bar Examiners and random audits

Changes in Regulatory Scrutiny CFPB Bulletin 2012-03 “Legal responsibility may lie with the supervised bank...as well as...service provider.” Standard Due diligence Lender must produce proof of review of a service provider’s policies Lender must express clear guidance as to compliance Lenders must demonstrate prompt action for service provider missteps

Lender Response to the Regulatory Changes National lender contacts title underwriters—minimum standards for title underwriter oversight Annual background checks Annual credit checks Escrow controls Policy inventory controls Underwriter audit of agents Operational oversight of agents Agent Vetting Company ICL on steroids

ALTA Response to Market Demands Establish and maintain current licenses Adopt and maintain appropriate written procedures and controls for IOLTA accounts Safeguard clients funds Reconcile receipts and disbursements on a daily basis 3-way reconciliation once a month Segregation of duties Authority to access and transfer funds Employee background and credit checks

ALTA Response to Market Demands Adopt and maintain a written privacy and information security plan Physical security of non-public information Network security of non-public information Proper disposal of non-public information Disaster management plan Oversight of service providers Audit and oversight to ensure compliance

ALTA Response to Market Demands Adopt standard real estate settlement procedures and policies that ensure compliance with federal and state laws Submit Documents for recording within 2 days of closing Procedures to ensure consumers are charged established rates 3. Post closing quality check

ALTA Response to Market Demands Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance Policies Delivered within 30 days of closing Premium reporting and remittance by last day of month after closing

ALTA Response to Market Demands Maintain appropriate professional liability insurance and fidelity coverage Professional E and O Fidelity coverage – when required by state law or contractual obligations Surety coverage– when required by state law or contractual obligations

ALTA Response to Market Demands Adopt and maintain procedures for resolving consumer complaints Procedures for logging and resolving consumer complaints Single point of contact Complaint log