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Lawton Stokes: How to Maintain a Title Insurance Agency in Changing Times.

Posted By Cliff Tuttle | March 22, 2015

No. 1,129

Lawton Stokes Real Estate Attorney

Lawton Stokes
Real Estate Attorney

You may have heard that things are changing big time in the residential real estate closing business.  The operant words here are “big” and “business.” Closing residential loans has become a big business and those who handle closings of residential mortgages are doing it full-time on a large scale.  While law firms are not excluded from this arena, most closers are not law firms but are title agencies owned and operated by non-lawyers.  The trend has been for lenders to establish in-house title agencies and they have a monopoly in closing their own loans.

Lawton Stokes is an attorney who with his wife Kristin, also an attorney, operates real estate broker Achieve Realty.  The Stokes also operate a real estate closing agency which is in the process of transition to the new world of residential real estate loan closings. This transition is not going to be easy, but Stokes says that it can be done.

Q:  How has the title insurance business changed in recent years?

A: The underwriters have un-loaded all the “small agencies” over the past several years. So if you still have an agency, you must do enough business to justify your relationship with your underwriter. Problem is, the work load is going to increase.
Q:  Such as, what?
A: In my mind, the largest ongoing challenge will be conducting daily reconciliations of the escrow account.  The largest one-time challenge for me will be to encrypt the email, our computers, and our server.
Q:  The Consumer Finance Protection Bureau is mandating major changes this year, what are they?
A: The way HUD-1’s are prepared is going to change. You’re going to need settlement software that “links” with the lenders’ settlement software. If you’re currently using a vendor like Title Express, you should consider using their “cloud” (as opposed to server-based) service. TSS is working on a protocol now. This ought to add expense to the process.
A:  So, where can a smaller title insurance agent look for guidance in this new era?
A: Underwriters are encouraging their agents to comply with the “Seven Pillars of ALTA’s Best Practices.”
They are as follows:

1.      Pillar No 1: Establish and maintain current license(s) as required to conduct the business of title insurance and settlement services. [Easy.]

2.      Pillar No. 2: Adopt and maintain appropriate written procedures and controls for escrow trust accounts allowing for electronic verification of reconciliation. [This should be easy if you currently use title insurance software that creates settlement statements and also handles the accounting function. These companies are all adapting to help their customers meet this requirement. If you don’t have software that does this, you’ll have to obtain it.]

3.      Pillar No. 3: Adopt and maintain a written privacy and information security program to protect non-public Personal Information as required by local, state and federal law. [This is a challenge for offices that are not “compartmentalized.” If the public and/or your cleaning staff can access your files, regardless of the time of day, you have to modify your office layout. If you work from home and see no clients at home and conduct your closings away from home, you’re okay as long as you don’t have a cleaning person at your house. If you work from an office, you’ll have to keep the files locked away when you’re not working on them. Furthermore, you’re going to have to encrypt your email. And while you’re at it, encrypt your desk top and your server too.]

4.      Pillar No. 4: Adopt standard real estate settlement procedures and policies that help ensure compliance with federal and state consumer financial laws as applicable to the settlement process. [You probably already have these procedures in place. Formalize them.]

5.      Pillar No. 5: Adopt and maintain written procedures related to title policy production, delivery, reporting, and premium remittance. [Imagine recording, issuing your title policy and remitting within a maximum of 30-60 days.]

6.      Pillar No. 6: Maintain appropriate professional liability insurance and fidelity coverage. [You should already have this.]

7.      Pillar No. 7: Adopt and maintain written procedures for resolving consumer complaints. [Easy.]

CLT

Category: Real Estate
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CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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