LookingA PUBLICATION OF NORTH AMERICAN TITLE INSURANCE COMPANY APRIL 2015 VOL. 2 / ISSUE 3

FROM THE PRESIDENT NATIC gears up for new TRID forms

COMPLIANCE MATTERS ‘Read your closing instructions’ heard loud and clear at ALTA conference

What will your workflow look like after Aug. 1?

Settlement agents will exchange closing data under new industry standard

How to disclose simultaneously issued policies under the integrated mortgage disclosure rule

BEST PRACTICES Are you ready for what is coming?

NATIC INSIDER NATIC agents talk housing with Fed economist

EVENTS AT A GLANCE

ISSUE HIGHLIGHTS

Are you ready for the new TILA-RESPA forms?

It’s the final countdown...

NATIC MARKETING AND EDUCATIONFor inquiries or comments, contact a member of NATIC’sMarketing and Education Team.

Chris Casa, Director of Marketing and Educational ProgramsKelly McCarel, Industry Education and Research SpecialistCeleste Wagner, Education and Research Developer

7550 Lucerne Drive, Suite 401Middleburg Heights, OH 44130naticeducation@natic.com(440) 891-6820www.natic.com

For inquiries or comments regarding LookingNorth or for article submissions andreprint requests, contact Kelly McCarel at kmccarel@natic.com or (440) 590-6504.

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TILA-

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MSFROM THE PRESIDENT

N A T I C G E A R S U P F O R N E W T R I D F O R M S

The TILA-RESPA Integrated Disclosure (TRID) forms were central to the educational content delivered at the American Land Title Association’s (ALTA) Business Strategies

Conference in March. Members of NATIC were part of the important discussions taking place, and we have captured key implementation pointers to report back to you in this issue.

We noticed several recurring themes over the three-day event, which focused heavily on how the relationship between lenders and settlement agents will need to transform so efficient workflows can be developed to fulfill the Consumer Financial Protection Bureau’s (CFPB) requirements. Here are the main directives speakers emphasized regarding the forms:

� Read your closing instructions; � Collaborate with your lenders and real estate

agents; � Get ready now: The CFPB is unlikely to make any

changes to the regulations prior to Aug. 1; � Be aware that each lender will have a different

way to handle processes and workflows, including how you exchange invoices and how you document them;

� Be on notice that some lenders are “score-carding” agents; and

� You will likely need to provide a settlement statement and/or addendum to the forms: ALTA is working on a uniform settlement disclosure for agents to use as a supplemental form to the Closing Disclosure.

NATIC is paving the way for its agents to be compliant by Aug. 1. We have developed a three-part webinar training series; formulated numerous articles on sticking points of the new regulations, many of which will be housed on NATIC’s new AgentLink website; created a TILA/RESPA resources page on AgentLink; and developed an internal CFPB Task Force group, chaired by NATIC’s chief underwriting counsel. Leading the efforts to ensure our agents receive the necessary training, the task force meets regularly to discuss important implementation issues, answer agent questions, and develop materials to educate agents and their customers. NATIC is also attending the TRID Forums taking place around the country, participating in ALTA committee meetings about the forms and gathering information for an FAQ document to share with agents.

The busy buying season is underway and although there is much to think about in preparing for the new regulations over the coming months, we are confident NATIC agents will be well equipped and ready for the changes, to move into the new environment with optimism.

Economic growth is expected to strengthen in the coming quarters, and the latest housing forecasts show improvement in 2015, with housing numbers projected to surpass 2014 levels.

“The economy is getting a boost from the strong employment numbers we’ve seen last year and at the start of 2015. When this employment growth partners with income growth and consumers experience a rise in their personal household income, we should see a similar boost in the housing sector,” said Fannie Mae Chief Economist Doug Duncan.

Freddie Mac’s chief economist, Len Kiefer, agreed. “Housing markets are getting back on track. The national MiMi [Multi-Indicator Market Index] improved for the fourth consecutive month. Nearly 80 percent of the state and metro housing markets MiMi tracks are improving or in their stable range of activity,” he said.

These reports are a good sign that things are shaping up for our industry. I encourage our agents to tap into NATIC’s resources and work hard these next few months to ensure readiness for that Aug. 1 deadline. Being ready will prevent any delays in transactions and in turn ensure we are taking full advantage of the improved housing market in the second half of 2015.

Emilio Fernandez, President

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COMPLIANCE MATTERS

Lenders give specific tasks to agents for TRID implementation

‘Read youR closing instructions’ heaRd loud and cleaR at alta confeRence

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| BY KELLY MCCAREL

Read your closing instructions was the most recurring, emphasized statement heard by title and settlement agents attending a TILA-RESPA Integrated Disclosure forms (TRID) session at the American Land Title Association’s (ALTA) Business Strategies

Conference, held in Philadelphia March 18-20. The phrase was used frequently by lenders to answer agents’ questions about how to handle specific situations that might occur with the new TRID forms after the Aug. 1 effective date.

ALTA President Diane Evans led the discussion with lender panelists Penny Reed of Wells Fargo Home Mortgage, Bob Kelly of Bank of America (BofA) and Dottie Hackett-Cole of the Trident Group.

“Sitting in the closing space working with buyers and sellers face-to-face, we know that change occurs. It will happen after Aug. 1 no doubt about it. What are going to be your expectations on how we manage a last-minute change? What can we do, or what can’t we do?” Evans asked.

“My usual answer to that is read every creditor’s closing instructions carefully,” said Reed, who serves as vice president, industry outreach – business capabilities development at Wells Fargo. “They’re going to have a lot of do’s and don’ts in there.”

Reed noted there are many mortgage rules layered on top of other rules in today’s regulatory environment, and this makes it difficult to answer questions now about how lenders would handle unique changes occurring in transactions after Aug. 1. For instance, the qualified mortgage rule and the appraisal delivery rule will still be in effect after Aug. 1 and those rules could cause interference in some situations.

“Depending on what the change is [in the transaction], you may have to adhere to another rule. The lender’s going to have to say yes or no if that can happen. And they’re going to have to make the decision yes or no if that starts the time clock over again,” Reed said.

Kelly, senior vice president of BofA, agreed and stressed agents should read the closing instructions immediately upon receipt and not wait until the closing is imminent.

“Everybody’s closing instructions are going to go under some significant revisions. There will be some that are very specific to the transaction. When you’re looking at them, if there are questions, we can work those out during that period of time when we actually have time. On the day [the transaction] happens, it’s going to be too late,” Kelly said.

“Everybody’s closing instructions are going to go under some significant revisions. There will be some that are very specific to the transaction.”

Bob Kelly Senior Vice President, Bank of America

With lenders busy making updates to their instructions now, it is unclear when title and settlement agents can expect to receive the revisions.

Wells Fargo is currently working on its instructions, but Reed said staff

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members are waiting for answers from the Consumer Financial Protection Bureau (CFPB) on certain unanswered questions they have about the new rule. This in turn is slowing down the process of sharing the new instructions with their agents.

Hackett-Cole, vice president of processing and training, said Trident Group’s target date to release its new instructions is May.

Hackett-Cole advised agents to reach out in April or May to the lenders they work with frequently to find out what their requirements will be under the new TRID rules. This will aid agents in determining what their staff’s workflow matrix will look like after Aug. 1.

Follow the three-day rule

The time clock Reed referred to is the three-day rule, which is an important change in the settlement process. The new TRID regulation states the homebuyer must receive the Closing Disclosure form three days prior to consummation. Lenders and title industry members have realized that from a practical standpoint, the three days is actually seven days.

Because of this timing requirement, lenders will likely follow the “mailbox rule.” The only exception to the mailbox rule would be in situations in which the Closing Disclosure is hand-delivered to the consumer, face-to-face, three days prior to consummation.

Reed explained the mailbox rule like this:

“Whatever day you’re [mailing] it out is day zero. You count three days and you can assume delivery at that point. And the consumer needs to have it three days in advance. No matter how you look at it, that’s roughly seven days,” Reed said. “My best guess is a lot of lenders or creditors will follow this mailbox rule as the default position even if they

choose another method of delivery [such as courier or email].”

The text of the CFPB TRID rule provides that if there is evidence of receipt for a delivery method, then you can begin counting the three days from that date. But with the mailbox rule, evidence of receipt is not required.

Kelly said the industry’s attitude toward the three-day rule will likely change over time, with people working to find ways to shorten the seven-day window. At BofA, the plan is to overnight the Closing Disclosure to the consumer; however, it will still observe the mailbox rule.

“We are hoping that our title partners examine their workflow

process and calibrate how they do things so they’re ready

for the new requirements.” Dottie Hackett-Cole

Vice President of Processing and Training Trident Group

“I think if I was a settlement agent, I’d be happy, because [BofA is] going to drop [the Closing Disclosure] in the mail seven days before the closing date,” he said.

He emphasized, though, that settlement agents and the parties to the transaction need to be ready. If the lender doesn’t have the information required to complete the form in advance, it will not meet the mailbox rule, which would force the closing to be delayed.

Evans noted the liability for the mailbox rule is on

the lender. For those lenders choosing to deliver the Closing Disclosure to the buyer, the burden is on them and not the agent to provide either proof of receipt or that the three-day rule was met.

Kelly warned agents that the new timing requirements causes everything to shift on the transaction timeline. Those things now occurring the day before closing or the day of closing, will need to take place seven or eight days before closing after the rule goes into effect.

More requests from the lender

Lenders are urging agents to talk with them to get major questions answered, such as who will complete and deliver the closing disclosure, how will data be exchanged between the lender and agent, and what will be expected of the settlement agent after Aug. 1. It is hoped that by now, the majority of agents have determined new workflows with their lenders and the next few months will be fine-tuning those processes.

“One of the things we want is engagement,” Kelly said. “We want settlement agents getting engaged early, understanding the rule, looking at the documents and [registering for] the closing agent portal we are going to use.”

Closing Insight is an agent portal tool developed by RealEC Technologies that both Wells Fargo and BofA announced they will use for the transmitting of data for the real estate transaction. Although not all lenders will use this portal, other larger ones will likely follow suit. Kelly said he expects the portal to be open for registration in April.

For lenders not using a portal such as Closing Insight, it is critical that agents provide feedback to the lender now as to how the data and information is going to be exchanged for the transaction.

“We are hoping that our title partners examine their workflow process and calibrate how they do things so they’re ready for the new requirements,” Hackett-Cole said.

She added that after Aug. 1, lenders completing the Closing Disclosure may give only a day for the settlement agent to approve it. It will be helpful if the settlement agent determines now who that point of contact will be to approve the form and give the lender the green light to send it on to the buyer. n

Kelly McCarel is Industry Education and Research Specialist at NATIC. She can be reached at kmccarel@natic.com or (440) 590-6504.

NATIC identifies three options

North American Title Insurance Co. has had the opportunity to discuss with lenders nationwide what the workflow processes will look like for title and settlement agents

after Aug. 1 when the new Loan Estimate and Closing Disclosure forms take effect.

“The way you do closings today is going to change and reengineering your workflow to match those changes is going to be very important,” said Michael Holden, vice president, field operations, for NATIC.

During Part 2 of NATIC’s TILA-RESPA Integration Disclosure (TRID) forms webinar, Holden outlined three possible scenarios for new workflow processes NATIC has identified.

Workflow No. 1

The first option for lender and settlement agent workflows under the new forms is for the lender to prepare and deliver the Closing Disclosure to the homebuyer. Under the Consumer Financial Protection Bureau’s TRID regulations, the lender is liable to ensure the form is filled out correctly and in the consumer’s hands three days prior to closing. Because of this, some larger lenders, such as Wells Fargo and Bank of America, have announced they will be collecting information from title agents in order to complete the form. The lenders will then deliver the Closing Disclosure directly to the homebuyer.

Workflow No. 2

Option No. 2 is somewhat of a hybrid between workflow No. 1 and workflow No. 3. In No. 2, some

lenders may require the title agent to log into the software system that is hosted or used by the loan originator to input the information generated from the title end of the transaction. In this scenario, the agent would be completing much of the Closing Disclosure.

“There will be some sort of collaboration in which you will be providing information through an online portal and using a dataset and transfer integration with your software company. And that will probably still result in the lender delivering the form to the borrower,” Holden said.

Workflow No. 3

Workflow No. 3 represents all of the undisclosed collaborations between individual lenders and title and settlement agents. Holden said these collaborations could include small lenders, credit unions and state-chartered banks. These workflows would likely result in the settlement agent preparing and delivering the Closing Disclosure form, which includes the Truth in Lending information about the loan. In this workflow, agents would need to collect the information from the lender to complete the form.

Workflow processes will vary from lender to lender. “It’s not going to be one-size-fits-all. You’re going to have some lenders do it one way and some lenders do it another way,” Holden said.

Preparing the form

For those agents who fall into the workflow No. 2 or 3 category, training will be required to understand the implications of completing the new form.

In addition, agents will need to determine what information they need from their lenders.

“You’re going to need all the Truth in Lending information, all of the figures, the interest rate, all of those kinds of things to be able to input them into the form,” Holden said. “You need to have a thought process in mind of how you’re going to gather that information.”

If the lender is going to prepare the form, agents must determine how they are going to send the information to the lender. Some larger lenders are requiring agents to register in a portal, such as Closing Insight.

Agents who will be tasked with delivering the form should decide now how that will be done and test to see if the rule’s three-day requirement can be met with their delivery method of choice. Holden said some industry members have suggested the three-day rule may result in agents scheduling a pre-closing appointment with the homebuyers.

“Borrowers would come to your office three days before closing and actually pick up and sign that they have received the form three days in advance. Those kinds of situations are certainly possible,” he said. n

This report is based on information shared in NATIC’s Part 2 of its three-part Mortgage Disclosure Forms Webinar Series. Part 2 offers training on completing the Closing Disclosure Form and technology considerations. It will air again April 21, 2 p.m. ET and offers CE and CLE credit in select states. Go to natic.com for more information.

What Will your WorkfloW look like after aug. 1?TRID

“The way you do closings today is going to change and reengineering your workflow to match those changes is going to be very important.”– Michael Holden, Vice President, Field Operations, NATIC

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Fannie Mae and Freddie Mac will soon require lenders to deliver loan data in an industry standard dataset format for every loan the two government sponsored enterprises

(GSEs) purchase. The Uniform Closing Dataset (UCD), created by Fannie and Freddie under the direction of the Federal Housing Finance Agency, is a new component in the Uniform Mortgage Data Program, which is an ongoing endeavor by the GSEs to improve the quality and accuracy of loan data.

The UCD supports implementation of the Consumer Financial Protection Bureau’s (CFPB) Closing Disclosure.

For software providers who must update systems to support the new Closing Disclosure – which is effective Aug. 1 – the UCD will take much of the guesswork out of determining which pieces of data go into which spots on the form. In addition to providing a blueprint to populating the disclosures, the UCD will also serve as a standard data format for settlement software and loan origination systems to exchange information about loan costs.

“All the folks in the supply chain have to exchange data,” said Freddie Mac’s Ann Epstein at the American Land Title Association’s (ALTA) Business Strategies Conference March 18. “And wouldn’t it be better if we exchanged data with common standards, common definitions and common formats so there are no gaps or miscommunication? That’s really what the data standard is about.”

The GSEs recently published the UCD Mortgage Industry Standards Maintenance Organization (MISMO)-mapping document, Appendix B: Closing Disclosure Mapping to the MISMO v3.3 Reference Model.

“Everything that we’ve done is built on MISMO,” said Epstein, who serves as senior director of product development at Freddie Mac. “The lenders need to send [the data] to us, but the lenders may rely on their settlement companies to send us the dataset. Or, they may get the data originally from their settlement companies, [the data] goes into their systems and then it goes to the GSEs.”

ALTA recommends vendors and service providers develop a plan for how they will implement the dataset delivery and support their lenders. In

particular, they will need to verify their respective software systems can accept electronic information from various data systems.

“Lenders, in particular, will likely demand this capability from settlement providers in order to ensure compliance with the TILA-RESPA Integrated Disclosure three-day rule. Rekeying of data from one system to the other may not be practical under these new regulations,” ALTA stated.

“...wouldn’t it be better if we exchanged data with

common standards, common definitions and common

formats so there are no gaps or miscommunication? That’s really what the data standard is about.”

Ann Epstein Senior Director, Product Development

Freddie Mac

According to Epstein, there are a number of settlement software vendors that have embraced the UCD already. She is encouraging the industry to begin using the new dataset before it’s mandated.

For the past two years, Epstein along with Lisa Mitiguy, product manager in Fannie Mae’s single-family strategic initiatives division, has managed the development and deployment of the dataset standards with guidance from the CFPB on regulatory issues and in conjunction with MISMO.

“The reason we feel it’s so important to engage the settlement side of the house in the industry is that lenders will likely start saying, ‘When you give us information, we need it to be in the MISMO version 3.3 standard.’ We’ll need to receive a file and there’s a

specific way we should get that file,” said Mitiguy.

Next stepsMitiguy noted it will be valuable for settlement agents to understand what the GSEs are going to expect from lenders when the new data standards are effective, which will likely be in 2016.

“My guess is we’re looking at the latter part of 2016 before we start collecting [data]. Prior to that though, we will be testing. Lenders will be sending us files to review,” Mitiguy said.

For industry professionals implementing the new Closing Disclosure or for anyone involved in the exchange of Closing Disclosure data between business partners, it is recommended to review Appendix B: Closing Disclosure Mapping to the MISMO v3.3 Reference Model found on the GSEs’ websites, FannieMae.com or FreddieMac.com. In addition, Epstein suggested settlement agents visit the GSEs’ sites to submit their contact information to receive future news and information surrounding the UCD. Conversations should also take place with lenders and software providers on how the UCD may affect joint processes and technologies.

“Because you are their business partners and you provide much of this information, just know that this is likely to be information that they will ask from you and that you should be aware,” Mitiguy advised settlement agents. “The dataset and the embedded Closing Disclosure is going to be required. Our lenders are gearing up for this.” n

Lisa Mitiguy, of Fannie Mae, (left) and Ann Epstein, of Freddie Mac

Settlement agentS Will exchange cloSing data under neW induStry StandardFannie, Freddie to require loan data delivered in specific format

GSEWWW.NATIC.COM

Do you remember when you first opened your business? Do you remember all the details you had to take care of before you closed your first deal?

You had to make sure your licenses, appointments, bonds, and errors and omissions insurance were in place. You had to hire qualified, knowledgeable, trustworthy employees. You had to set up bank accounts, get checks, and learn the banks’ wiring procedures. You had to find the right location for your offices, then design a layout that worked for your staff and your customers. You had to furnish your office and obtain all the necessary equipment, computers and settlement software. You had to implement policies and procedures for your staff. You had to gather all your forms and establish your fee schedule. You had to install a phone system with a fax machine and Internet connection.

The nervousness of preparing for your first title order was special, but exhausting. You thought that feeling would never go away. Once it did, you hoped it would never come back. Well, guess what? It’s back!

With the implementation deadline for the Consumer Financial Protection Bureau’s (CFPB) Integrated Disclosure Rules slated for Aug. 1, and the new standards of the American Land Title Association’s (ALTA) Best Practices, you will effectively have to re-create every aspect of your business, and do it in written form by the looming deadline.

The CFPB has indicated that there will be no “grace period” or delay of the commencement date. Any loan application taken by a lender ON OR AFTER AUG. 1 will be handled and closed under the new rules. That means you are going to have at least a three-phase transition period and you need to be ready.

Obviously, for those transactions currently in your shop and those that come in before the new rules’ effective date of Aug. 1, you will continue to do business in the same fashion you have always done. In fact, because of the time periods involved under the new rules and the fact that Aug. 1 is a Saturday, it is not likely that you will actually conduct a closing using the new TILA-RESPA Integrated Disclosures until about Aug. 10 or thereafter. But even then, while you will be closing most consumer loans under the new rule, there are still several categories of loans to which the new rule does not apply: home equity lines of credit; reverse mortgages; no-interest second mortgages; and loans from creditors who make five or fewer loans per year. So as you transition into compliance with the new rule, you will still be doing some things the old way, and continue to do so after the new rule takes effect.

If you have not yet implemented everything necessary to comply with the seven Pillars of ALTA’s Best Practices, you cannot put this off any longer. It is coming and if you are not in a position to be in compliance, you will be out of business. The good news is that many of the recommendations of the Best Practices are things your office already does as part of your standard processes. However, do you have all those processes in writing where all employees and customers can review them for completeness?

ALTA’s website (alta.org) contains some excellent tools and materials to assist you in implementing your own set of Best Practices. There are even self-assessment tools that are helpful in determining where you are on the readiness scale. Even if you feel your company is fully compliant, get these materials and review them to be sure you haven’t missed anything.

Have you established and maintained current licenses as required (Pillar 1)? You will need to actually review each license for each person as is appropriate. Confirm with the

Department of Insurance or other state regulatory agency that you have everyone licensed who needs to be licensed. Check your bar association status, if appropriate, and make sure your company is properly registered in every state where you conduct business. Confirm your membership with ALTA or if not a member, make sure you have secured the appropriate ALTA policy forms license. Make sure all of the foregoing is reduced to writing in a policy and procedures document or handbook.

Have you adopted and do you maintain written procedures and controls for escrow trust accounts that allow for electronic verification of reconciliation (Pillar 2)?

Obviously, security and proper handling of the money is of paramount concern to everyone. You will need to work with your depository banks, software providers and IT advisors to attain the new standards required by this pillar. We all know we cannot pay bank fees and charges from escrow accounts, but those accounts must all be blocked for international wires, blocked for clearing house debits and subjected to Positive (or Reverse Positive) Pay. All deposits and withdrawals must be marked with the appropriate case number, and persons authorized to deal with the accounts must be limited and segregated from those persons responsible for auditing the accounts.

Instant or daily reconciliation software is virtually a requirement now. Three-way reconciliations are necessary within 10 days of receipt of bank statements, and trial balances, outstanding checks and deposits in transit must be listed on the reconciliation. Written and implemented policies are necessary for dollar limitations for persons dealing with the account, with approvals from senior management needed for those transactions that exceed the established limitations. You must have a policy to address dormant or inactive accounts that are now considered anything with no

are you ready for What iS coming?An ALTA Best Practices update

Do you have a Best Practices implementation story? We’d like to hear it. We invite you to share your story through our Agent Exchange column by emailing Kelly McCarel at kmccarel@natic.com.

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BEST PRACTICES

| BY MARK A. HEACOCK

activity for 180 days. Background checks must be run on all employees. Any payoff checks outstanding more than 10 days after issuance and underwriter premium payments outstanding more than 60 days must be researched and resolved. If any shortage is revealed by a reconciliation, it must be funded within five days of discovery and means of doing so must be established. Management must consistently review all aspects of funds handling on an ongoing basis. Lastly, appropriate training of employees must take place and be reduced to a written policy.

Have you adopted and do you maintain a written privacy and information security program to protect nonpublic personal information (NPI), as required by local, state and federal law (Pillar 3)? This is potentially one of the most extensive and costly of all the pillars for compliance. All systems and physical offices and employee conduct within each area must be reviewed for network and physical security. Your written and implemented policy must ensure NPI privacy, procedures for retaining and disposing NPI in addition to disaster recovery and requirements for employees and third-party providers to safeguard NPI. You must review your policies in this regard at least annually.

Does your policy provide for a qualified third party to routinely test your information systems to detect security risks, vulnerabilities and threats? You will need to limit physical access to any location containing physical or electronic NPI. A procedure is necessary to timely detect security breaches and report them to management.

This pillar also includes a clean desk policy, a record retention and disposal policy, a procedure to get your privacy policy to your customers, an acceptable use of information technology policy, a policy for secure disposal of hard drives and computers, and a policy for periodic changes of passwords.

Lastly, background checks on all employees, training of those employees and disciplinary procedures for violators are necessary under this pillar. One approach to compliance with Pillar 3 is to work with a third-party security and data breach professional. They test your systems and offer your IT team guidance on how to secure data. Most of your lender customers will focus with the greatest scrutiny on this portion of your Best Practices plan.

Have you adopted standard real estate settlement procedures and policies that help ensure compliance with federal and state consumer financial laws as may be applicable to the settlement process (Pillar 4)?

This is effectively your settlement operations manual, and every aspect of what you do needs to be reduced to writing in a procedure and policy format. You need to detail procedures for conducting closings and for recording documents on the closings you perform. You should have a procedure to track packages sent for recording and for a quality review of those documents for proper form and “recordability” before you send them. You must have a written procedure for confirmation of recording and a way to timely identify and handle any documents rejected by the recorder. You need to have a policy to do a post-closing review to be certain proper charges were made to the consumer, and that all recording charges were proper and any necessary refunds are timely processed and made. Lastly, you must have a policy for training your personnel on settlement, recordation and post-closing procedures.

Have you adopted and maintained written procedures related to title policy production, delivery, reporting and premium remittance (Pillar 5)? The days of waiting for recorded documents to be returned from the recorder’s office as a trigger to policy issuance are over. You need a written procedure to provide for timely policy issuance, reporting, premium remitting, as well as a procedure for delivery of policies to the respective insureds within 30 days following the end of the month of closing. That policy needs to provide for discovery of those cases that have closed and where no policy has been issued. You need a procedure to confirm that all requirements in the commitment have been met, and a follow-up to be sure all necessary recordings, especially mortgage lien releases, have occurred. All policies must be reported and premiums remitted before the last day of the month following the month of closing, and your written policy must so provide. Lastly, your policy must provide for a review of files to confirm proper premium charges were assessed and remitted to your underwriter along with copies of all your policy schedules.

Do you maintain appropriate professional liability insurance and fidelity and/or surety coverage (Pillar 6)?This is probably the easiest of the Best Practices pillars with which to comply because you likely are already in compliance. Even so, you need to obtain copies of declaration pages and establish a written procedure for timely renewal of any and all insurance policies and bonds that may be required in your jurisdictions of operation. This could be something as simple as an Outlook calendar item posted for 60 days in advance of your renewal date. The policy must provide for timely and periodic reviews to be

certain all necessary personnel are listed on those insurance policies and bonds, if required. Don’t forget the need to obtain evidence from any third-party providers that they also have appropriate insurance and/or bonds in place, as may be required by your title insurance carrier or your errors and omissions insurance carrier. The CFPB is placing all parties to the closing and settlement process on notice that you have an obligation to vet and audit your third-party providers. If they are not compliant, you will not be considered compliant.

Have you adopted, and do you maintain, written procedures for receiving, investigating, tracking and resolving consumer complaints (Pillar 7)? You must start with a definition of what is a complaint, have a single point of contact or department for complaints, utilize a standard complaint form, and have a policy for logging the complaint. Even contacts you do not ultimately consider as being a complaint, should be logged and their resolution tracked. Next, your procedure must provide for a timely review, investigation and resolution of the complaint. Lastly, your policy should be to train existing employees and all new hires on complaint procedures and disposition.

If you have not yet created and implemented all of the foregoing standards, you are urged to focus on this immediately. Failure to do so could result in your loss of a significant portion, if not all, of your business. ALTA is an accessible source of helpful information and has tools necessary to attain compliance with the Best Practices. NATIC has provided useful information on its AgentLink site to assist with implementation as well.

Much discussion has centered around how agents will prove their compliance with the seven pillars. Some lenders will permit “self-assessment and self-certification” but others will not. If your lender requires a third-party audit and certification of your compliance, you will need to plan for this in sufficient time to correct any deficiencies and obtain a clean certification before the Aug. 1 new rule effective date. n

Mark Heacock is Regional Underwriting Counsel, Mid Atlantic, for NATIC.

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AGENT SPOTLIGHT

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COMPLIANCE MATTERS

hoW to diScloSe SimultaneouSly iSSued policieS under the integrated mortgage diScloSure rule

BY MICHAEL HOLDEN

In its blog post on Sept. 16, 2014, the American Land Title Association (ALTA) addressed potential problems with the Consumer Financial Protection Bureau’s (CFPB) Integrated Mortgage Disclosure

final rule regarding the disclosure of title insurance policies issued simultaneously. The blog article stated:

Loan policy

As a reminder, the loan policy should be disclosed on the “Services you can shop for category.” The loan policy should be calculated as the full premium without any adjustment that might be made for the simultaneous purchase of an owner’s title insurance policy and whether the buyer or seller is paying. The enhanced policy or endorsements can be used if the creditor knows that these products will be purchased.

Owner’s policy

Meanwhile, disclosure of the owner’s policy is a bit more complicated. The owner’s policy should be disclosed in the “Other” category and should be calculated by adding the simultaneous issuance premium to the full owner’s title insurance premium, and then deducting the full premium for the lender’s coverage. The owner’s policy must be listed as “optional” on the Loan Estimate and Closing Disclosure.

This means in 28 states that the agent will have to calculate the full stand-alone price for a loan policy, then reverse engineer the premiums to calculate the cost of the owner’s policy and the simultaneously issued loan policy.

An example may be most helpful. Assume you are closing a transaction where an owner’s policy and a loan policy will be issued. We will say the owners policy cost is $500. We will also say the simultaneously issued loan policy is $75. For our example, the stand-alone loan policy costs $350. Under the new rule, the $350 cost would need to be shown on the final Closing Disclosure. The total cost of the owner’s policy, plus the simultaneously issued loan policy (in this example $575) would then have the $350 stand-alone loan policy price subtracted

from it to arrive at the “optional owner’s policy cost” of $225.

Because most state rate filings assume the owner’s policy is the base policy, and the loan policy is priced as an add-on policy, this will create several controversies, the most serious of which is the potential need for state rate manuals to be re-filed to show a totally different rate structure, identifying the loan policy, base policy and the owner’s policy as the simultaneously issued policy.

Re-filing rates across the United States could have significant repercussions. Such pricing changes could unintentionally affect changes in refinance loan policy prices, potentially raising costs for refinances. Additionally, because many state departments of insurance have begun scrutinizing title insurance rates and rate filings, unknown difficulties could be created.

The need for changes in other areas may also be necessary. Leslie Wyatt, director of Industry Relations at SoftPro and a member of the ALTA CFPB Task Force said, “This rule change causes multiple issues. First and foremost would be the cash to close. The new requirement can cause the bottom line to the borrower and seller to be off base on who is paying for what policy. This can be very confusing to the consumer at the closing table.”

The Texas Land Title Association (TLTA) is being proactive and is trying to address how to disclose the bottom line to the borrower and seller when it is different than the filed rate is for the particular policy being sold. The TLTA has proposed new rules mandating the use of a form called the “Texas Title Insurance Disclosures and Escrow Disbursement Authorization.” The proposed form states: “The owner’s policy and loan policy (lender’s policy) premiums set out below represent Texas rates as promulgated by the Commissioner of Insurance. The simultaneous owner’s and loan policy premiums shown on the Closing Disclosure were disclosed in the manner required by federal regulation. The aggregate owner’s and loan policy premiums shown on the Closing Disclosure equal the aggregate owner’s and loan policy premiums shown below.” As many as 28 states may encounter this issue and may have to either change rate manuals or adopt disclosure forms to address

confusion at the closing table. The Florida Land Title Association is working with regulators to adopt an approved form of this nature.

Wyatt said other problems with this rule may also exist. “Software systems will need to have additional forms that settlement agents can use to show the rate calculations as required within that state,” she noted.”

Perhaps another challenge is how to show adjustments between the buyer and seller when the seller is paying for part or all of the owner’s title insurance policy. From our previous example, if the real estate contract indicated the “seller will pay for the cost of the owner’s policy of title insurance,” would that mean the seller would pay for $500 or would the seller instead pay the $225 optional owner’s policy amount? The CFPB has been scant in their direction on this issue and it would appear they are leaving it to local regulation and custom to determine.

ALTA’s ending statement in its Sept. 16 blog post is still the current state of this issue: “ALTA will continue to work with the bureau to find a solution to these problems. ALTA does not expect the bureau to reverse their policy decision on the disclosure of title fees because they considered some of these issues when ALTA and the California Land Title Association originally brought them up during the public comment period. However, ALTA believes there may be some guidance the CFPB can provide to offer clarity on how the simultaneous issue may be disclosed.” n

Michael Holden is Vice President, Field Operations for NATIC. He can be reached at mholden@natic.com. This article first appeared in Holden’s “Ramblings of a Title Man” column.

Showing the title insurance charge just got harder

11

APRIL 2015NATIC INSIDER

natic agents talk housing with fed economistOffsite event offers insight into boom and bust cycles

NATIC hosted a unique educational outing March 19 at the Federal Reserve Bank of Philadelphia for its agents. A group of 25 title insurance professionals in attendance at the American Land Title Association’s (ALTA) Business Strategies Conference were treated

to an exclusive visit to the Federal Reserve facilities.

The event included a presentation by, and open discussion with, Leonard Nakamura, vice president and economist of the Federal Reserve’s Regional and Microeconomics Department.

Nakamura shared an economic analysis of the factors driving the recent housing boom and bust and how housing demand shifted throughout the cycle.

“I very much enjoyed discussing Federal Reserve research on housing with this knowledgeable group. Together we explored how booms and busts in housing affect the way homes are bought and sold, and how these institutional changes in real estate markets can extend booms, turning them into bubbles,” Nakamura said.

“Together, we explored how booms and busts in housing affect the way homes are

bought and sold, and how these institutional changes in real estate markets can extend

booms, turning them into bubbles.” Leonard Nakamura

Vice President, Economist Federal Reserve Bank of Philadelphia

“Speaking to economist Leonard Nakamura was a special treat for NATIC agents in attendance. His insight and critical research on recent real estate booms and busts gave our agents an edge in assessing current trends,” said Valerie Jahn-Grandin, executive vice president and chief underwriting counsel at NATIC.

Pat Lenar, exhibit manager for the Federal Reserve Bank, greeted the

group with an informative message about how technology has changed the inner workings of the bank over time. Lenar also fielded questions as group members viewed the bank’s “Money in Motion” exhibit, providing background on current and original historical bills, as well as information on how counterfeit money is identified and analyzed.

“The initial comments by our guide were fascinating and gave good insight into how the Fed works,” said Cory Thompson, NATIC state agency manager for Indiana and Ohio. “The agents really enjoyed the visit.”

Educational offerings like the Fed visit have been well-received by NATIC agents at industry conferences. Last October, a group of 40 NATIC agents was invited to tour Zillow’s Seattle headquarters while in town for ALTA’s Annual Convention. That visit included a market update from an economist, a guided tour of Zillow’s impressive offices, one-on-one time with Zillow employees and an opportunity to network with peers. n

Leonard Nakamura

nati

cevents

April 19-21

Louisiana Land Title Association2015 Spring ConferenceGrand Hotel Marriott ResortPoint Clear, ALwww.llta.org

April 20Ohio Land Title Association2015 Spring SeminarMarriott NorthwestDublin, OHwww.olta.org

April 20-22Real Estate Services Providers Council2015 Annual ConferenceThe Andaz HotelSan Diego, CAwww.respro.org

April 29National Association of Mortgage BrokersMidwest Mortgage Matchmakers ConferenceAmeristar Casino ResortSt. Charles, MOwww.namb.org

May 3-6Mortgage Bankers AssociationLegal Issues/Regulatory Compliance ConferenceSheraton Chicago Hotel & TowersChicago, ILwww.mbaa.org

May 5Michigan Land Title AssociationLegislative DayRadisson HotelLansing, MIwww.milta.org

May 7-9New Mexico Land Title AssociationAnnual ConventionHyatt Regency Tamaya Resort & SpaBernalillo, NMwww.nmlta.org

May 11-16National Association of REALTORS®Legislative Meetings & Trade ExpoWashington, D.C.www.realtor.org

May 12National Association of Mortgage BrokersThe Great Northwest Mortgage ExpoCrowne Plaza Downtown PortlandPortland, ORwww.namb.org

May 13-14Wisconsin Land Title AssociationSpring Conference & Lobby DayThe Hilton, Downtown, MadisonMadison, WIwww.wlta.org

May 14-15Montana Land Title AssociationSpring Education SeminarBest Western Helena Great Northern HotelHelena, MTwww.mtlandtitle.com

May 18 – 20American Land Title Association2015 Federal Conference & Lobby DayMandarin OrientalWashington, D.C.www.alta.org

Looking

Toll Free 866.596.2842 | join@natic.com | www.natic.com©2015 North American Title Group and its subsidiaries. All Rights Reserved. North American Title Group and its subsidiaries are not responsible for any errors or omissions, or for the results obtained from the use of this information. NATIC 14-5818 R 4-10-15

Events at a Glance