An Express Article from the California Land Title Association
Bulletin 12/13-31 - September 14, 2012
On September 13, CLTA hosted a teleconference call of the UTC Section to discuss recent notices and/or perceived mandates to subscribe to specific third party vendors in order to “vet” their employees. These notices indicate that the UTC and/or settlement provider must subscribe and pay a fee to the third party vendor in order to handle transactions with specific warehouse lenders or other institutional lenders. A CLTA member who also sits on the ALTA Board was asked to join the call to give an ALTA update as he is very involved with the ALTA task force dedicated to addressing this issue. This Bulletin is being sent in an effort to keep CLTA members informed of the issue and answer as many questions as possible.
What is spurring the marketing of “vetting” processes by third party vendors?
The “vetting” and background check vendors seem to have popped up as of late in reaction to some CFPB regulations and consent decrees associated with recent settlements reached by large lenders and state attorney generals related to foreclosure litigation.
In short, some lenders are feeling pressure to do more to ensure that the handling of funds and personal information relating to clients meets the requirements of the CFPB regulations and the consent decree requirements. Various third-party vendors are representing to lenders that they can provide a service to vet employees and business practices of title agents and escrow providers.
What are CLTA and ALTA doing about this issue to protect the title industry?
The ALTA Board member on the call supplied invaluable information to the UTCs on the call. The ALTA is working very hard to draft a list of “best practices” for title agents for review and possible adoption by the ALTA Board. When completed, we anticipate that those “best practices” would then be provided to the CLTA.
What is the goal of adopting the “best practices” outlined above?
First and foremost, our goal is to ensure that lenders doing business in California with CLTA member title companies are protected under California law and procedures adopted pursuant to that law. The adoption and use of the “best practices” by a title company would help assure lenders that title agents incorporating these procedures into their business practices are properly handling closings, a matter of concern to lenders because of the consent decrees and CFPB regulations. Finally, following such “best practices” may be a viable substitute for privately “vetting” employees and business practices.
What is the time-line before ALTA anticipates that it will finalize the “best practices” mentioned above?
ALTA anticipates finalizing the “best practices” recommendations and putting them in front of its Board of Governors within the next several weeks.
What can you do in the meantime as lenders and third-party vendors continue to contact you trying to get you to sign onto a vetting program?
CLTA suggests that your management and your legal counsel discuss this issue internally within your company to decide what is the best way for you to proceed. Given that there is no statutory deadline that we are aware of that requires you to make an immediate decision, we would suggest that a sense of immediacy should not be driving your decision-making in this regard.
However, one step we suggest you take is to log onto the “Excluded Parties List System” at www.epls.gov. This site allows employers and interested parties the ability to conduct a background search –for free-- to see if an employee has been involved in a fraudulent activity related to FannieMae/FreddieMac. Even if you believe your employees are all beyond reproach, we suggest you go through this drill so that you can represent that you have vetted your own employees pursuant to this system.
On the left-hand side of the EPLS website you will find the “Search – Current Exclusions” portion of the site where you can search your company employees. Once you have searched for each of your employees you can represent to the warehouse lender or other party pushing the vendor vetting service that your employees have already been “vetted” through this process. It is our understanding that this approach appears to be working with lenders, at least in the short term.
When will I hear more?
CLTA will continue to work closely with ALTA and others to address this issue. As we know more, we will reach out to CLTA member companies through the CLTA News Express, memos to the Board of Governors, and teleconference calls for the CLTA members.