Version 1.0 – 2/24/2014Initial Powerpoint Version 1.1 – 2/25/2014Added Next Steps, Q&A and Thank You slides at the end Version 1.2 – 2/28/2014Updated bullets on Service Provider “flight to quality” slide
Basic Let’s start with some background on the CFPB. The CFPB was formed in 2011 out of the Dodd Frank Act as a means to better regulate the financial markets and to protect consumers from financial harm. The Bureau has direct supervisory authority over banks and “non-banks” – meaning mortgage companies. While the CFPB does not have supervisory authority over the title and settlement industry today, the Bureau does have enforcement authority over RESPA and the Truth-in-Lending Act. Expanded One of the most interesting things about the CFPB is that it brings Federal supervisory authority over non-banks for the first time. Banks have been under Federal supervision for decades thanks to FDIC, OCC, Federal Reserve and other regulators. We have already seen that mortgage bankers are trying very hard to “catch up” to where the banks have been from a compliance standpoint. And though the CFPB does not have supervisory authority over our title and settlement industry – they have been very active in the area of RESPA enforcement actions, especially regarding illegal payment of fees and affiliated business arrangements. Also, know that the CFPB does not replace any other agency but exists alongside the Federal Reserve, Office of Comptroller of Currency, FDIC and HUD. In addition to the close working relationship with other federal agencies, they also have information sharing agreements in place with a majority of the state regulators and they have set up regular meetings to improve communication. To summarize, they are very “plugged in” to what other federal agencies and state regulators are doing.
Basic So, the CFPB is involved in protecting consumers in all financial transactions across a broad range of products ranging from payday loans and prepaid gift cards all the way to mortgage loans. However, there are really four primary areas of focus where the CFPB impacts the title and settlement industry. Those areas are Disclosures, Controls (which we know as “vetting”, Complaints and most recently, Transformation of the Mortgage Closing Process. As we talk through the slides, we will be discussing each of these areas in more detail. Expanded Just know that the Disclosures includes everything in the Final Rule such as the 3-Day Rule, limits on fees and detail about who can “prepare and deliver” the Closing Disclosure. We will spend most of our time talking about the Controls – where we will discuss the CFPB’s service provider bulletin, guidance from other federal agencies, the ALTA Best Practices and, of course, the concept of “third-party vetting.” The third area of concentration will be the Bureau’s Consumer Complaints Database and the lenders’ focus on ensuring that service providers have good consumer complaints handling processes. Finally, we will look at the Bureau’s newest initiative, “Transforming the Closing Process” and some of the things they learned while going through the process of integrating the disclosures. Now that we have identified our major topics, let’s move on….
Basic When we talk about “Integrated Mortgage Disclosures”, what we are really talking about is a new Loan Estimate that replaces the Good Faith Estimate (or GFE) and the Initial Truth-in-Lending (or TIL) following loan application. It also calls for the replacement of the HUD-1 and the Final TIL with the new Closing Disclosure. While the focus of today’s presentation will be more on requirements that we have to comply with today, we will take a brief look at the Closing Disclosure format that we will see more of when it becomes effective on August 2015. The Final Rule states that either the lender or settlement agent may deliver the Closing Disclosure to the consumer which our industry considers to be a “win” – but much still needs to be decided about “how” that is accomplished. Expanded Perhaps the most troublesome aspect of the new integrated disclosures is the fact that the lender and settlement provider must collaborate on the creation and delivery of a ‘single’ form. The final rule also includes some language about possible liability under Regulation Z that settlement agents may be assuming when delivering the Closing Disclosure. There will be more coming out on this but know that the new disclosures are a “game changer” with respect to preparation, delivery and possibly liability.
Basic While the focus of our talk today is on service provider compliance and many of you have likely already seen the new forms, we wanted to provide a quick glance of the “look and feel” of the new forms that were developed in cooperation with consumer groups from around the country. As you can see, they are much easier to read and better organized than the GFE, TIL and HUD-1. Since the industry has until August 1st, 2015 to implement the new disclosures, most lenders are focusing their compliance efforts on more immediate demands such as the recently announced Ability-to-Repay and Qualified Mortgage rules. Expanded One of the key areas of debate with regard to the new Closing Disclosure is that owner’s title policies are listed as (Optional). This may require some up-front conversations with buyers to help them understand the benefits of an owner’s title policy.
Basic So let&apos;s move on to our primary area of focus today which we call Service Provider Compliance. Shown on the screen is the service provider bulletin published in April 2012 that sort of “rocked our world” because it gave rise to what the industry calls &quot;third-party vetting&quot;. The simple three page bulletin outlines expectations placed upon both banks and mortgage companies (i.e. non-banks) in how they oversee their services providers – which would include title and settlement services. First, they expect lenders to conduct thorough due diligence to make sure they understand Federal consumer financial law. That is a ‘defined term’ which would likely mean understanding Regulation X (RESPA) today and Regulation Z (Truth-in-Lending) beginning August 1st of next year. Second, they are expected to request and review policies, procedures, internal controls and training materials. This is where we have seen banks, mortgage bankers and even warehouse lenders requesting copies of policies and procedures. Also, note the focus on anyone who has consumer contact or compliance. Third, lenders are expected to include clear expectations about compliance in contracts which, in most cases, will be the closing instructions. Fourth, lenders are expected to establish internal controls and on-going monitoring. Finally, the fifth bullet point shows the Bureau’s expectation about taking prompt action to fully address any problems. As you can see, the lenders have a lot to do and the more third-party services they use – the more time and expense they incur. This is why many lenders began a “flight to quality” last year when they started narrowing their lists to agencies who have underwriting agreements with strong underwriters that can help to pass the vetting process. Expanded Again, note that the requirements are broad and vague which means that they are open to interpretation by every lender. That’s why we see such a broad range of reactions ranging from
Basic The Bureau is not alone in issuing guidance on third-party risk. Since the Bureau released their service provider bulletin in April 2012, the OCC, FDIC, FF IEC and even the Federal Reserve have issued updated guidance and requirements to financial institutions regarding their management of third-party service providers. Since these agencies do not directly supervised the settlement industry, we are faced with having to meet the expectations of each bank credit union or mortgage banker based upon their interpretations of these guidelines and their risk profile. Just note that some lenders are taking a very conservative approach and placing significant requirements on their title and settlement providers. Expanded (none)
Basic As a result of the increased pressure on lenders to supervise their third-party service providers, the American Land Title Association created the “Title Insurance and Settlement Company Best Practices” which are now at version 2. The Best Practices have been well received by the lending community that is working hard to understand how best to conduct “vetting” of settlement providers. The ALTA Best Practices cover seven key areas that range from licensing, escrow reconciliation and consumer privacy to title and settlement procedures, insurance coverages and handling of consumer complaints. Stewart participated in the creation of the ALTA Best Practices and continues to provide full support. However, keep in mind that the Best Practices describe “what” a settlement company should aim for but does not prescribe the “how” of accomplishing these steps. Expanded (to be used later this year when workshops are implemented) Teams at Stewart have been working over the last year on creating solutions for each one of these seven areas and we are pleased to announce local workshops where we will be able to work together on building out the necessary compliance framework needed to provide assurance to both lenders and regulators in the new era. More information on the workshops is going to be released soon.
Basic Now, most of you probably know that lenders have started asking for copies of “policies, procedures and internal controls” as mentioned in the CFPB Service Provider Bulletin. Creating policies and procedures from “scratch” can be very time consuming – so we have created the Stewart Trusted Provider Policy Templates especially for this reason. A sample policy template is shown on the screen Each policy template outlines the scope, elements of the policy and even includes the approvals and revision history sections needed to demonstrate to lenders and regulators that your agency takes these requirements seriously. The Stewart Trusted Provider Policy Templates are available to help agencies on their path toward compliance and can be obtained by executing a license with the underwriter. Already, hundreds of our independent agencies have licensed the templates for customization and use in their own operations. Expanded (none)
Basic The updated list of policy templates is shown here and, as you can see, it covers just about every area of your operation. The policy templates highlighted in bold were added in October of last year at the request of a major national lender. As you may have heard on some of our recent Agency Services webinars, Stewart’s goal is to continue to have the highest quality network of independent agencies in the United States. Making the Stewart Trusted Provider Policy Templates available for use in your operation is just one more step to help you “stay in the game.” If you haven’t licensed these templates, please see me later and we can get you set up quickly. Expanded (none)
Basic Earlier in this presentation, I talked about the rise of third-party vetting. This has been a hot topic in our industry since the Bureau released the Service Provider Bulletin in 2012. As you know, Stewart uses Deloitte as our auditor which provides a higher level of comfort to the national, regional and local lenders we have talked with. Deloitte brings over 100 years of experience, a well-respected name and a deep understanding of title and settlement to our audit program. Discussions about our use of this arms-length audit partner have been very well received by our national lender partners. Expanded (none)
Basic Just as lenders are assured by our use of Deloitte, they have also been very receptive to the Stewart Trusted Provider program. The combination of rigorous programs for initial due diligence and on-going monitoring create a very compelling message for lenders looking for assurance of high-standards. The best thing you can do for your agency in 2014 is to make full use of the Stewart Trusted Provider Marketing materials that we make available. As you will see later in today’s presentation, we even have new tools that will allow you to showcase your status as a Stewart Trusted Provider in presentations to your lender and Realtor customers. Expanded (none)
Basic Many of you have probably already received ‘vetting requests’ from local or regional lenders. We expect this trend to continue and have even included an e-mail template that you can modify to memorialize the presentations you make to your lender customers. When you go through a one-on-one or group presentation to showcase your status as a Stewart Trusted Provider, most lenders will ask about “something for their files.” Such requests basically speak to the need to document the meeting as a record of their efforts to perform initial due diligence and on-going monitoring over their service providers. This email template includes a list of most topics that are covered during these due diligence requests and you can simply modify the template as needed for any single case. This email template is made available when you license the Stewart Trusted Provider Policy Templates. Expanded (none)
Basic Now, it’s time to move on to Consumer Complaints. The CFPB created their centralized Consumer Complaints Database when they found that many borrowers had no clear path of communication with their lender. In many cases, borrowers simply had nowhere to turn to when they had questions or concerns – especially with regard to working with lenders to avoid foreclosure. Since that time, the Complaints Database has been opened up to include complaints about student loans, credit cards, mortgages - even settlement and closing costs. With over 300,000 complaints handled since inception, the Bureau considers this effort to be a success. That said, we expect lenders to continue stepping up their efforts to provide a more direct path for consumer complaints. This is likely going to be an area of focus in 2014 as lenders seek to ensure that their service providers also have good processes in place. We are already hearing from lenders that they are operating under broader definitions of what a “complaint” is in order to make sure they take care of consumers’ issues earlier in the process. Expanded
Basic Here is a brief look at the Mortgage Complaints database and just a random record that happens to show “Settlement process and costs” as the category. These constitute a very small percentage of the overall complaints – but each one is important which is why the lenders want to know that service providers have good consumer complaints processes. All of this really goes back to “good business” which is why we see this addressed in ALTA Best Practice #7 - Adopt and maintain written procedures for resolving consumer complaints. As the purpose statement outlines, it is a process for receiving and addressing consumer complaints to help ensure reported instances of poor service or non-compliance do not go undiscovered. Again – it’s good business. Expanded
Basic An infographic that was just released highlights that almost every aspect of customer complaints seems to be improving since the advent of the CFPB’s database. Time to resolution is improving but it seems that firms with few complaints could improve responsiveness by enhancing investigation procedures and implementing more advanced monitoring systems as shown here in the red outline. Basically, our thinking is that companies that get very few complaints have not had to develop robust systems. Then, when complaints do come along, the process that is in place is probably not providing the best experience. So, we believe the Bureau has made note of this and will be looking for smaller companies to improve in this area. Expanded (Stewart may be providing a Stewart Compliance Accelerator document with guidance as to how to implement a third-party, hosted help desk system that small agencies can implement for managing consumer complaints. TBD)
Basic In a final word on Consumer Complaints before we move on, please keep in mind that the Stewart Trusted Provider Policy Templates include policy templates, forms and logs needed for building out a complaints management system. Whether you do this yourself or license the policy templates, lenders and regulators are going to want to make sure these documents are on-file and in-use in your operations. Expanded
Basic The fourth area of CFPB’s influence in our industry lies in their Transforming the Closing Process initiative which was announced at the Boston Field Hearing on November 20th of last year. Basically, the Bureau came to understand that more work was needed to improve the closing process and that new disclosures just wouldn’t be enough. Now, the Bureau has announced their new initiative and they believe that technology and industry collaboration can greatly improve this experience for consumers. Expanded (none)
Basic The five major goals in this new initiative are: To create efficiency with technology Reduce the overall number of disclosures (which they call “whack the stack”) Ensure the accuracy of up-front quotes Deliver docs earlier in the process so consumers have time to read and understand them Educate the consumer as they go through the process – before they arrive at the closing table Because there has been very little in print and the Bureau has not yet proposed any changes, you may not have heard much about this initiative. Expanded In January of this year, the CFPB put out a Request for Information Regarding the Mortgage Closing Process. There were nearly 500 comments from consumers, closers, lawyers, loan officers, institutions and consumer groups that either answered the 17 questions posed by the Bureau or merely illustrated “pain points” that come about during closings. The Bureau will be going through each of the submissions and taking those responses into consideration as they move forward. Look forward to some expectations from the Bureau with regard to how consumers receive educational materials and information about their transactions throughout the process.
Basic We recognize there is a LOT to learn about the CFPB’s involvement in the realty, mortgage and settlement industries so Stewart has put together a website with all kinds of resources at www.stewart.com/cfpb. You can use the title agency materials for your own educational and training needs – but feel free to use the realty, lender and consumer sections for marketing purposes, as well. The CFPB site is excellent but we feel that the stewart.com/cfpb site is probably easier for most of us to navigate as it only includes links relevant to our industry so you won’t have to navigate through information about auto loans, student loans, credit cards, etc. So, be sure to visit stewart.com/cfpb. Expanded (none)
Basic The Expanded The
Basic We are going to wrap up our talk today with Next Steps. First, you want to make sure you follow CFPB news and updates on our own Stewart.com/cfpb site. It’s a great resource and it’s easy to navigate. Second, leverage the Stewart Trusted Provider Policy Templates – or create your own. Either way, make sure you have your policies, procedures and internal controls in-place before some lender or regulator asks to see them. Also, make sure you attend the Stewart Agency Services webinars – and log your attendance as part of your overall training and education efforts. Next is to refine your consumer complaints process – since lenders are starting to focus on this area. And most importantly for our discussion today, implement the Stewart Trusted Provider CFPB Toolkit which includes everything you need to share your status as a Stewart Trusted Provider in your local marketplace. Finally, ensure your buyers and lenders are protected by a Stewart policy.
Now, I’ve been doing all of the talking to this point. Are there any questions on the topics I covered today? (any off-topic questions such as seller financing, Qualified Mortgage, etc. should be handled separately after the meeting)
Agency Services CFPB Toolkit
The complete resource that contains everything needed to establish
you and Stewart as the CFPB “go to” resource with our independent
The Toolkit includes everything needed for you to provide both group
and one-on-one presentations on the topic of CFPB requirements for
service providers. When giving those presentations, you will also be
able to share exciting news about the Stewart Trusted Provider CFPB
Toolkit for our independent agencies to use in marketing to both
Lenders and REALTORS® in their local markets.
Agency Services Associates
You recently received an email with the announcement shown at the right
providing highlights of this marketing program.
This effort is patterned after the successful “CFPB Seminar-in-a-Box” program
used by direct operations. With Stewart associates having presented at more
than 500 events – the success continues. Just like the effort in direct operations,
your events and success stories will soon be tracked in CRM with reports going
to the District Managers and George Houghton. The idea is to present to
agencies “one-on-one” in their offices during quarterly visits.
As you view this presentation, note that the slides shown as “Backstage” contain
information for you about the program and presentations that you will give to
the Stewart agencies. Portions of the presentation (slides 9 – 34) featuring
Stewart’s lighthouse theme contain the “script” that you will use when
presenting to your agencies. We’ve included speaker notes allowing flexibility in
length of presentation since both ‘basic’ and ‘extended’ information is included.
Longer presentation? No problem, just include the extended information
following the basic.
Finally, toward the end of the presentation (slides 35-52) will be a review of the
“private label” CFPB presentation that will be available to Stewart agencies for
providing CFPB updates and marketing their Trusted Provider status to
REALTORS® and Lenders in their local markets. These Powerpoint slides are easy
to spot as they are “private label” and include the Trusted Provider logo at the
Next Steps and Additional Information
1. Watch Video
a) View this complete video and take notes. Write down any questions or concerns you may have
b) NOTE: If you have not watched the video, do so today!!
2. Review Recorded Discussion WebEx Conference Call
a) On February 25th
, Marvin Stone and George Houghton hosted a Discussion WebEx Conference Call. Watch the recorded
version as a reminder of the information you need to remember when presenting to your agencies
b) Direct any questions you may have to your District Manager
3. Continue the Train-the-Trainer dialogue
a) The video and the recorded WebEx session will constitute most of the training
b) Your District Manager and Executive Management are fully aware of your time constraints
c) Continue to provide suggested improvements for the Toolkit and FAQ’s, CFPB Questions, See Escalation Path (below), etc
4. Escalation Path for Questions or Suggestions for Improvement
a) ASM/ASR > DM > Gloria Prinz > George Houghton/Pat Beall cc: Marvin Stone
5. Promote the Stewart Trusted Provider Presentation
a) The Trusted Provider CFPB Toolkit Presentation was created for your independent agencies to present to their REALTOR® and
Lender customers. It’s a locked-down PDF presentation with a place for your independent agencies to add their company logo
b) Have your agent present on their own or you can partner with your agent to present to their customers
6. TIPS/Agency Conference Mentions
a) News, current events, high-level info > call to action (workshop)
About the PowerPoint
The following PowerPoint presentation
has been designed to make it easy for
you, the Stewart Agency Services
associate, to give a CFPB update of
varying lengths depending upon the
audience and time allotted.
The speaker notes are provided in “Basic”
and “Expanded” sections. Cover the Basic
section in your own words in each
presentation – then continue talking
through the Expanded section if time is
available or if the subject matter is of
greater interest to your current audience.
Practice to understand the impact that
adding the Expanded notes will have
upon the length of the presentation.