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TITLE INSURANCE: A Title Industry Framework Assists Credit Unions with Vendor Risk Management

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BY PETE PEARSON AND MATTHEW REKERS

The issuance of ALTA best practices is assisting credit unions in protecting their customers’ personal information. Nevertheless, the burden still falls on mortgage lenders to ultimately determine what is deemed acceptable when it comes to third-party compliance. What does all of this mean for your CU? Read on to find out.

For many years, credit unions have been subject to statutory and regulatory obligations to protect their customers’ nonpublic, personal information.However, the Consumer Financial Protection Bureau (CFPB)recently released Bulletin 2012-03,which restated and further emphasized the importance of those obligations,especially in the context of relationships with third-party vendors – such as those providing title insurance and settlement services to the lender’s clients.Many compliance officers have responded to the CFPB’s requirements by increasing their efforts to perform due diligence on title companies.The type of due diligence used has been inconsistent, with some credit unions asking vendors to complete questionnaires, others requesting vendors to submit their policies and procedures, and still others conducting interviews and onsite visits.These due-diligence processes have proven to be burdensome and inefficient for the lender and the title company.

The Title Industry’s Response

 In response, the American Land Title Association (ALTA) – the title industry’s national trade association since 1907 – stepped up to help its approximately 5,000 members and the industry as a whole.ALTA’s solution was to establish a “best practices” framework to assist title companies with satisfying their responsibility to clients, underwriters and mortgage lenders.Beyond the establishment of these voluntary best practices, ALTA also has proposed that title companies obtain certification by an independent third party to demonstrate their compliance with ALTA Best Practices.

While the development of the ALTA Best Practices Framework(ALTA Best Practices or Best Practices) is new to the industry, from an operational standpoint, many title insurance and settlement companies already have been applying similar standards to satisfy their responsibility to underwriters. ALTA Best Practices initially requires an organization to prepare a written set of policies and procedures that address each of the seven pillars as outlined by ALTA:

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