There is a lot of conversation currently among real estate professionals in North Carolina concerning the imminent effective date for the CFPB requirement for use of the new TRID disclosure forms, related software and implementation rules. Unfortunately some are under the impression that the requirement by lenders for implementation of the ALTA Best Practices for settlement service providers has, likewise, been postponed. It has not. All attorneys closing real estate transactions and all title companies issuing policies in North Carolina should already be in compliance. ALTA's Best Practices program is designed around a working model where title and closing services are typically offered by the same settlement services provider. Because closing a real estate transaction in North Carolina is construed as the practice of law, the title industry works in coordination with North Carolina attorneys who handle the settlement aspect of real property transactions and these Best Practices will apply differently depending on the respective responsibilities of the participants.
One of the first signs of lenders implementing their CFPB driven efforts to comply with the new requirements can be seen in their current requests for compliance with the policies promulgated by ALTA Best Practices Pillar Number 5. That Practice requires adoption of policies for the timely issuance of title insurance policies and that portion of the Practice is set out as follows:
5. Best Practice: Adopt and maintain written procedures related to title policy production, delivery, reporting and premium remittance.
Purpose: Adopting appropriate procedures for the production, delivery, and remittance of title insurance policies helps ensure title companies can meet their legal and contractual obligations.
Procedures to meet this best practice:
The ALTA Best Practices were written with the settlement service model in use in a large majority of states were title companies are the settlement service providers that abstract title, issue commitments, close transactions, disburse funds and then issue the title polices. Unlike that model, North Carolina has segregated the title abstracting and closing functions from the policy underwriting and issuance functions. This is done to reduce conflicts of interest and provide discrete regulatory protections for consumers.
Lenders do not typically make distinctions between the differences in the various state models and are typically beginning to demand that title insurance policies be delivered within thirty days of closing. They are apparently interpreting the policy statement to require that in order to comply with the policy that "Title insurance policies are issued and delivered to customers in a timely manner to meet statutory, regulatory or contractual obligations..." the service provider should "Issue and deliver policies within thirty days of ... the date of Settlement". This is not what the ALTA Best Practice 5 says, nor is it reasonable to interpret it this way in all cases in North Carolina. However, to the extent that this time line can be accomplished reasonably, Attorneys and title companies should work together to meet this timeline as often as possible.
The policy would be better understood as saying: "Title insurance policies will be issued and delivered to customers in a timely manner to meet statutory, regulatory or contractual obligations. To be timely they will be issued and delivered policies within thirty days of the date of Settlement, or as soon thereafter as the terms and conditions of title insurance commitment are satisfied." For title companies this will mean receipt of the Attorney's final opinion clearly evidencing that all of the title and closing requirements of the Commitment have been complied with along with the proper appropriately executed lien affidavits, indemnities and waivers, any required supporting documents and the premium check. For closing attorneys, stricter compliance with the North Carolina State Bar's requirements of prompt disbursement of client's funds and diligent handling of the client's legal matters will require a closer review of post-closing operations in the law firm. It has also been suggested that closing attorneys may be well advised to inquire as to the turnaround time for title insurers to whom they are sending business. If the insurer cannot report their actual statistical turnaround time for issuance and mailing of policies after "the terms and conditions of title insurance commitment are satisfied", it may well raise a question of that company's compliance with ALTA Best Practice 5.
Statewide Title, Inc. has adopted ALTA's Best Practices in compliance with the requirements promulgated by the CFPB. On March 5th 2015, Statewide Title completed a self-assessment using ALTA's Best Practices Assessment Procedures which resulted in a grade of pass.
North Carolina Attorneys developing or refining their own Best Practices Policies can now log in to their Statewide Title account and download sample forms drafted specifically for your use in developing compliant polices for North Carolina law firms. As the policies should be developed for the unique nature of each law practice, they should not be simply copied and the blanks filled in. The Best Practices are very general in their terms in many respects and currently, there are numerous unanswered questions both as to the detail that must be contained in the promulgated policies; how they are to be specifically implemented, and the extent to which these best practice policies must be documented.