6. Michelle Korsmo CEO American Land Title Association 202-261-2939 mkorsmo@alta.org

7. Compliance Consumer Protection Market Drivers:

8. Economic, Regulatory, and PoliticalEnvironments

9. Economic Environment

10. The Title Industry in 2014  The Title Industry was a $11 Billion Business in 2014 ($11,360,581,698 total premium written)  Title Insurance Companies paid $670 Million in Losses in 2014

11. The Title Industry in 2014  2014 was a challenging year Premiums Written down 10.9% from 2013 Total Operating Income down 9.1%  However, Operating Expenses down 10.6% Loss and Loss Adjustment Expenses down 10.5%  Resulting in Net Operating Gain improving by almost 17.5%. Factor in a reduction of 25.4% in Net Investment Gain  8.4% Increase in Net Income ($799.8 Million)

12.  Consumer Confidence Up 2.5 points in March 2015  Unemployment Unchanged at 5.5% in March 2015  Workforce Participation 62.7% in March 2015 ○ 37 year low for the past 11 months (Pre-Housing Crash around 67%)

14. Americans Still Care About Homeownership ALTA and our Coalition Partners are Spreading that Message and Using Our Influence to Affect Change Mortgage Bankers Association National Association of Realtors American Bankers Association Commercial Bankers Association Independent Community Bankers Association American Bar Association Financial Services Roundtable Housing Policy Council U.S. Chamber of Commerce National Association of Insurance Commissioners

15. Regulatory Environment

16. Regulatory Forces  Federal Regulators Remind Lenders of Their Liability  Office of Comptroller of Currency (OCC): Bulletin on third-party relationships and risk management principles – 2001  Federal Deposit Insurance Corp (FDIC): third-party risk awareness – 2006  FDIC: managing third-party risk guidance – 2008  OCC: consent orders and bank supervision – 2011  49 State Attorneys General: national mortgage settlement – February 2012  CFPB: Service Provider Bulletin - April 2012  FDIC: compliance manual – December 2012  OCC: risk management guidance update – 2013  Federal Reserve Board: letter on managing outsourcing risk – December 2013  CFPB Enforcement Actions  American Express - $85 million  Discover - $200 million  Capital One - $210 million

17. Lender Concerns Financial Enforcement Reputational

18. The Title Industry Responds

19. Title Insurance and Settlement Company Best Practices 1.Comply with All State and Local Licensing 2.Procedures and Controls Regarding Escrow Trust Accounts – Reconciliation 3.Physical and Network Security—Protecting Confidential Customer Information and Trust Accounts 4.Recording and Pricing Procedures 5.Title Policy Delivery, Premium Reporting and Remittance 6.Errors and Omissions Insurance / Fidelity Coverage 7.Dealing with Consumer Complaints www.alta.org/bestpractices

20. What’s Next on Best Practices  Lender Support is Growing  Wells Fargo letter to settlement agent network “Wells Fargo supports ALTA's Best Practices, and considers them to be guidelines for sound business practices that should ideally already be in place for businesses providing title and closing services for our customers.” Sun Trust Bank Bancorp South …more to come this summer  How to Show Best Practice Compliance is Taking Shape AICPA Guidance on CPA Reporting ALTA Compliance Management Program for “Self-Certification”

21. Why You Should Implement Now

22. The CFPB Established as an Enforcement Agency In 2010 Dodd-Frank Act and Opened in July 2011 First Regulatory Body Focused on the Consumer

23. Protecting the Consumer Takes Center Stage CFPB Complaint Process Complaint Portal on www.consumerfinance.gov Homepagewww.consumerfinance.gov

24. CFPB Director Cordray to U.S. Conference of Mayors – January 22, 2014 “Complaints are not only opportunities for us to help specific people; they also make a difference by informing our work and helping us identify and prioritize problems. We know that if we hear about a particular problem from fifty consumers, it likely looms larger than if we hear about it from two. We know that if we begin to see a disturbing trend, we should consider allocating some of our limited resources to combat that particular problem.”

25. Pillar 7: Consumer Complaints Establish a Process for Recording Complaints Have a Single Responsible Party for Managing Process Keep a Log Complaint Made with Date Person Responsible for Follow Up Issue Resolved

26. Also Brought to You by the Dodd-Frank Act

28. Known Knowns  The New Integrated Mortgage Disclosures will take affect on August 1 st, 2015  These are not just new forms; this is a significant change to the business process to finance real estate

29. Known Unknows  Will we be ready? Will our business partners be ready? Will the software and automation portals?  How will we disagree on interpretation of Mortgage Disclosure Rule?  Enforcement fear is paralyzing for creditors. How does that affect our business and the process?  Are the Closing Disclosure forms going to accurately reflect our local practice and customs? e.g. seller paid jurisdictions

30. Unknown Unknowns  What is the market going to look like? Leading up to August 1 st August 1 st through the balance of 2015  How will our industry change? grow? utilize technology?  How will we be valuable partners in the process financing and conducting real estate settlement?

31. Your Market is Changing Biggest Competitor for Big Banks? ---- Community Banks

33. TRID Prepare, Ask Questions, Train  Have you set expectations for all involved (consumers, lenders, title, real estate agents)?  How will lenders get title rates before the LE is delivered?  Owner’s Title Insurance is listed as “Optional” on the LE; what are you doing to get to consumers before they come to closing?  Who (lender/settlement agent) will prepare the CD?  How will information on the CD be exchanged?  How are you demonstrating evidence of compliance?  How will simultaneous issue title rates be disclosed?  Are your Closers trained on what to say about the value of title insurance?  Are your Closers trained on what to say to various versions of the CD?  How are you providing lenders actuals for a final CD?

34. Our Biggest TRID Challenges  TILA Liability Rest with Creditor  Includes Private Right of Action  Inaccurate Disclosure of Title Policy Fees  We Can Figure Out How to Handle the Calculation  Will the Consumer Understand?  Do You Have a Plan to Get to the Consumer in Time?  ALTA Created a Model “ALTA Settlement Statement”  We are preparing our case for a post-implementation change  Owner’s Title Insurance is Optional

35. Two Important ALTA Initiatives

36. Universal ALTA ID  Purpose  Response to market needs  Lenders increasing oversight of third-parties  Help lenders, vendors identify settlement agent across industry databases  Series of simple questions about the company’s practices and procedures  What You Should Do  Update company record  Learn your Universal ID  Make updates by March 2015 www.alta.org/universalid

37. Consumer Message Campaign  Critical to educate consumers about title insurance EARLY  EARLY education has quantifiable impact  Use examples people believe might actually happen  Homebuyers want info about title insurance EARLY in the process  Key messages include: “protects your financial investment for as long as you own your home” and “one-time fee”

38. Political Environment

39. The Tenor of the Campaign Matters …especially to business professionals

40. Priorities  Congressional oversight of the CFPB’s integrated mortgage disclosures  Small business advisory board  Advisory opinion process  Clear guidance from Reform bulletins, press releases & enforcement  Tax Reform  GSE Reform  FHA Rules  NAIC – Data Calls

41. Priorities  Managing the Conversation Around Points and Fees Legislation “…70 cents on every dollar is pure commission for the title agents.” – Senator Warren, April 2015 “Title insurance is already an uncompetitive market rife with reverse competition where the seller decides what the buyer purchases….Consumers have little or no influence over the price of title insurance but have not choice to purchase it….state law alone does not offer adequate protection.” – Congressman Ellison, April 2015  New Legislation from Congressman Ellison

42. Your Participation Counts  Title Insurance Political Action Committee (TIPAC)  Title Action Network  Join at www.titleactionnetwork.comwww.titleactionnetwork.com  National Title Professional  ALTA Congressional Liaisons

44. Protecting the Consumer is about Compliance Compliance is the Market Driver

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