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Title Insurance and Settlement Company Best Practices

Best Practices

1. Establish and maintain current License(s) as required to conduct the business of title insurance and Settlement services.

Purpose: EBlock Title Company will maintain state-mandated insurance Licenses and corporate registrations, as required, to ensure compliance with the state requirements for operations.

EBlock Title’s procedures to meet this best practice:

  • Establish and maintain for the Company and individuals, as needed:
    • Applicable business License(s); compliance with the Licensing, registration, and business requirements of the applicable state regulatory authority
    • Appropriate compliance with ALTA’s Policy Forms Licensing (PFL) requirement
    • A confirmed listing in the ALTA Registry (subject to those business entity types supported by the ALTA Registry)

2. Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation.

Purpose: EBlock Title Company will maintain appropriate and effective Escrow controls and staff training help to meet federal, state, and contractual requirements for the safeguarding of funds. These procedures help ensure accuracy and minimize the risk of loss of funds. Loss of funds may not be covered by the Title Agency’s Errors and Omissions (“E&O”) insurance or the contract with its Title Insurer. Such losses would then become the responsibility of the Title Agency. Settlement companies may engage outside contractors to conduct Escrow Trust Accounting duties.

Procedures to meet this best practice:

  • EBlock Title will properly identify Escrow Trust Accounts.
    • Accounts are identified as “escrow” or “trust” accounts. Appropriate identification appears on all account-related documentation including bank statements, bank agreements, disbursement checks, and deposit tickets.
  • Funds held in Escrow Trust Accounts or other funds the EBlock Title maintains under a fiduciary duty to another person or entity (e.g., investment accounts) are separately maintained and not commingled with the EBlock Title’s operating account or any individual’s personal account.
  • EBlock Title utilizes Positive Pay or Reverse Positive Pay, if available for the payment type, and policies and procedures are in place that prohibit or control the use of Automated Clearing House transactions, international wire transfers, and electronic/digital receipt of funds from web based fintech applications.
    • When utilizing a third-party earnest money deposit or disbursement platform that facilitates the digital transfer of Escrow Trust Account receipts and disbursements, ensure that the platform meets any good funds law requirements and is not subject to the Electronic Funds Transfer Act (EFTA) which allows for reversal of consumer payments.
  • A written wire transfer procedure is in place and tested at least annually.
    • For outgoing wire transfers, this includes documented procedures to verify wire transfer instructions independent of the initial communication. Such should include the use of multi-factor authentication and should be similar in nature to those currently cited by ALTA in the Outgoing Wire Preparation Checklist.[1]
    • For incoming wire transfers, this includes a documented procedure to alert Consumers about the potential risks of wire fraud and guidelines to mitigate losses.
  • Transactions are conducted by authorized employees only.
  • Outstanding Escrow Trust Account file balances are documented and reviewed from time to time to determine appropriate status or action. Balances older than six months require management approval of activity.
  • If available, efficient, and economical, make use of wire transfer verification service providers. Such service providers should be vetted to understand any risk of use, security protocols, and the providers’ protection of Consumer data.
  • A written wire fraud response procedure, which includes the recommendations of the ALTA Rapid Response Plan for Wire Fraud Incidents is in place and is reviewed at least annually.[2]
  • Escrow Trust Accounts are supported by detailed Trial Balances listing all open escrow file balances.

 All Escrow Trust Accounts are reconciled

[1] (For a more detailed list and for specific areas that need to be addressed, please refer to ALTA’s Information Security page https://www.alta.org/business-tools/information- security.cfm)

[2] (For a more detailed list and for specific areas that need to be addressed, please refer to ALTA’s Information Security page https://www.alta.org/business-tools/information-security)

3. Adopt and maintain a written information security plan (“WISP”) and a written privacy plan to protect NPI as required by local, state, and federal law.

Purpose: Federal and state laws (including the Gramm-Leach-Bliley Act) require title companies to develop a written information security plan (“WISP”) that describes the procedures they employ to protect NPI. The WISP must be appropriate to Company’s size and complexity, the nature and scope of Company’s activities, and the sensitivity of the Consumer information EBlock Title handles. EBlock Title evaluates and adjusts its program considering relevant circumstances, including changes in business or operations, or the results of security testing and monitoring.

EBlock Title’s procedures to meet this best practice:

  • Establish and implement a WISP designed to protect the security and confidentiality of NPI and the security of the Company’s information systems.
  • Preparedness and Training.
  • Comply with applicable federal and state laws which may require companies that possess records containing NPI to maintain records securely, to retain records for prescribed time periods, and to dispose of records (physical and electronic) in a manner that protects against unauthorized access to or use of NPI.
  • Select service providers and third-party systems whose information security policies are consistent with Company’s WISP, including but not limited to:
  • Establish a privacy policy explaining how data is collected and used and publish it on EBlock’s website(s) or provide information directly to Consumers in another useable form.

4. Adopt standard real estate Settlement policies and procedures that help ensure compliance with: (i) federal and state consumer financial protection laws and regulations, and (ii) contractual obligations as applicable to the Settlement process.

Purpose: EBlock Title Company adopts appropriate policies and procedures, including conducting ongoing employee training, to help ensure compliance with federal, state, and contractual obligations governing the Settlement. These policies and procedures are appropriate to the locale because consumer financial protection laws may vary from state to state. Appropriate and effective training helps Settlement Companies safeguard Settlement documents. These procedures help maintain accuracy, minimize errors in completing the Settlement, and provide a framework for a positive Consumer experience.

EBlock Title’s procedures to meet this best practice:

  • Train staff to provide a framework which will:
    • Minimize errors in completing the Settlement, and
    • Enable a timely response to concerns raised by ant of the parties following the Settlement.
  • Establish and observe proper pricing procedures.
  • Disclose Affiliated Business Arrangements.
  • Prepare and execute documents accurately.
  • Oversee signing professionals.
  • Perform due diligence and analyze risk profile when providing functions that fall outside of the Title Agency’s relationship with the Title Insurer and when not issuing a title insurance policy for the transaction. These functions may include (1) collection and/or disbursement of premiums, escrows, security deposits or other funds, (2) handling escrow or Settlement, and/or (3) recording documents.
  • Selecting Remote Notarization Platforms.
  • Establish and follow consistent and correct recording procedures.

5. Adopt and maintain written procedures related to title policy production, delivery, reporting, and premium remittance.

Purpose: Adopting and implementing appropriate procedures for the production, delivery, and remittance of title insurance policies helps ensure that Eblock Title can meet legal and contractual obligations.

EBlock Title’s procedures to meet this best practice:

  • Title policy production and delivery.
  • Premium reporting and remittance.

6. Maintain appropriate insurance and fidelity coverage.

Purpose: Appropriate levels of professional liability insurance or E&O insurance, cyber liability insurance, and crime coverage help ensure Eblock Title maintains the financial capacity to stand behind their professional services. Specific types of insurance or coverage may be required by law, regulation, or contractual obligations.

EBlock Title’s procedures to meet this best practice:

  • EBlock Title maintains appropriate professional liability insurance or E&O insurance, cyber liability insurance, and crime coverage, according to Company size and Settlement volume.
  • EBlock Title complies with requirements for professional liability insurance, E&O insurance, fidelity coverage, or surety bonds, as required by state law or Title Insurer contractual obligations.
  • Insurance coverage limits and exceptions, particularly E&O insurance, cyber liability insurance, and crime coverage, change frequently and should be thoroughly reviewed with the EBlock Title’s insurance broker/agent at least on an annual basis.

7. Adopt and maintain written procedures for resolving Consumer complaints.

Purpose: A process for receiving and addressing Consumer complaints helps ensure reported instances of poor service or non-compliance do not go undiscovered or unresolved.

EBlock Title’s procedures to meet this best practice:

  • Consumer complaint intake, documentation, tracking, and resolution.
    • Standard procedures for logging and resolving Consumer complaints help ensure that sufficient information to understand the nature and scope of the complaint is being received and acted upon.

Definitions

Background Check: A Background Check is the process of compiling and reviewing both confidential and public employment, address, and criminal records of an individual or an organization. Background checks may be limited in geographic scope. This provision and use of these reports are subject to the limitations of federal and state law.

Company: Eblock Title Company, the entity implementing these best practices.

Consumer: Buyer(s), borrower(s), or seller(s) in a real estate transaction.

Escrow: A transaction in which an impartial third-party acts in a fiduciary capacity for all or some of the parties (including the Consumer, or lender) in performing Settlement services according to local practice and custom.

Escrow Trust Account: An account at a Federally Insured Financial Institution utilized to hold funds in trust for a real estate transaction. These funds are held in the account holder’s fiduciary capacity as established by written instructions.

Federally Insured Financial Institution: A financial institution that has its deposits insured by an instrumentality of the federal government (e.g., Federal Deposit Insurance).

Licenses: The various business and professional licenses which are required to conduct the business of title and Settlement services including, but not limited to, Title Agency or producer licenses or registration, escrow/settlement licenses, a license to practice law, and local business operating licenses.

Non-public Personal Information (NPI): Personally identifiable data such as information provided by a Consumer on a form or application, information about a Consumer’s transactions, or any other information about a Consumer which is otherwise unavailable to the general public. NPI includes first name or first initial and last name in combination with any of the following: Social Security Number, driver’s license number, state-issued ID number, credit card number, debit card number, or other financial account numbers. NPI can exist and be stored in both paper and electronic formats.

Positive Pay or Reverse Positive Pay: A system by which the authenticity of a check is determined before payment is made by the financial institution against which the check is written.

Settlement: In some areas called a “Closing.” The process of completing a real estate transaction in accordance with written instructions during which deeds, mortgages, leases, and other required instruments are executed and/or delivered, an accounting between the parties is made, the funds are disbursed, and the appropriate documents are recorded in the public record.

Title Agency: Any person, company or entity which is authorized by a Title Insurer to issue title insurance policies. A Title Agency may also perform one or more of the following functions outside of their relationship with the Title Insurer: (1) collect and/or disburse premiums, escrows, security deposits or other funds, (2) handle escrow or Settlement, (3) solicit or negotiate title insurance business, and/or (4) record documents.

Title Insurer: Any person, company, or entity that is licensed to issue and insure title insurance policies.

Trial Balance: A list of all open individual Escrow ledger record balances at the end of the reconciliation period.

Three-Way Reconciliation: A method for determining whether the three main components of the Escrow Trust Account are in agreement at a regular interval (e.g., monthly, weekly, daily). This process is also used for discovering shortages (whether incidental or intentional), charges that must be reimbursed, or any type of errors or omissions that must be corrected in relation to an Escrow Trust Account. This process requires a comparison of: (1) the Trial Balance, (2) the book balance, and (3) the reconciled bank balance. If all three parts do not agree, the difference must be investigated and corrected.