The Title Report: New regulations change the game for signing agents
Industry News
Thursday, June 19, 2014
By: Amy Swinderman
The Consumer Financial Protection Bureau’s (CFPB) new and proposed regulations have everyone in a tizzy —
including notary signing agents whose roles and obligations are changing in the face of compliance concerns —
and at the National Notary Association’s (NNA) annual conference June 1 to 4 in Phoenix, notaries got a firsthand account of what’s really happening in the real estate and financial service industries.
During a session titled “How Regulation and Compliance Affect Signing Agents,” a panel educated notary signing
agents on the changes lenders and title companies are making to comply with new federal regulations. The
panel, moderated by Chris Sturdivant, director of business development for the NNA, included Ryan Flaherty,
vice president of Closing Agent Vendor Management for ServiceLink, a Black Knight company; Sally
Freudenberg, vice president and business systems consultant for Wells Fargo Home and Consumer Finance
Group; Shawn Murphy, executive vice president of ValuAmerica; Jim Sloan, vice president of Vendor
Management for JPMorgan Chase; and Sam Zaki, senior vice president of National Accounts for First American
Mortgage Services.
The nation’s title insurance and financial services industries are facing a growing wave of compliance issues, and
“these regulatory mandates have significant impact on signing professionals, because ever since the financial
crisis of 2008, mortgage lending operations have consolidated, and you, the notary signing agent, are often
times the only person who sees the consumer face to face,” Sturdivant said.
Much of the CFPB’s actions have been directed at lenders, and lenders in turn have been raising their
expectations for their settlement service partners, including signing agents, Wells Fargo’s Freudenberg noted.
“The reality is that today, regulators have made it clear that lenders are accountable for anything a third-party
provider does in any function they perform during the life of the loan process,” Freudenberg, who works with
her settlement agency strategy team to comply with new standards and regulations, said. “We all have to
partner together in order to succeed as an industry. This is not really unique, and we have had this relationship
for a long time. The spotlight has been turned up a little bit, and the expectations of us partnering to deliver
that quality product helps us to succeed with both customers and regulators.”
JPMorgan Chase’s Sloan said his company reviews the performance of its outside vendors on a weekly basis.
“We look at this from both an external and internal basis,” Sloan said. “We have feedback from mortgage
bankers and our branch personnel, but we also survey our borrowers. Depending on the nature of the response,
we direct more business to those signing agents who have positive results. In rare instances when we get
responses that aren't positive, we exclude those vendors.”
Flaherty said ServiceLink provides continuing education to its signing agents to keep them informed of the latest
compliance concerns.
“We maintain an error ratio performance with our customers,” he said. “Our vendor management division will
reach out to educate you and help prevent the same error from happening again so we can keep you an active
member of our network. We are also regularly trying to assist you in that by doing educational webinars. We
need signing agents to be a part of that process and interact with us. You are an extension of us and the lender.
In order for us all to succeed, we need your help.”
Most recently, the manner in which financial institutions collect, use and disclose the nonpublic personal
information (NPI) of their customers, and whether those customers have a say in how their information is shared
with third parties, has come to the attention of the CFPB.
On May 6, the bureau announced a new proposed rule impacting the privacy notice that all financial institutions
are already required to issue under the Gramm-Leach-Bliley (GLB) Act. The new proposed rules take those
requirements a step further by allowing financial institutions to meet the annual mailing requirement by
including a brief disclosure in a billing statement (or other communication) that the GLB Privacy Notice is
available online, and then posting that notice “in a clear and conspicuous manner” on the institution’s website.
In addition, financial institutions must inform consumers that they may request a paper version of the GLB
Privacy Notice by calling a toll-free number.
At the same time, in the wake of the Target Corp. data breach scandal, the financial and settlement services
industries are taking a serious look at the minimum standards that closing professionals take to prevent sensitive
customer data from falling into the wrong hands, said Freudenberg. Late last year, the retail giant announced
that 40 million customers who used their credit and debit cards to pay for Black Friday purchases had their
personal data stolen — and after suffering one of the largest consumer data breaches in our nation’s history,
Target is paying the price, she said.
“The devastation to that company has been enormous,” Freudenberg said. “They have leaders who have
resigned or stepped down. Their reputation for customer loyalty has taken its toll in terms of profit and revenue
to the company. While it certainly isn't the only incident in recent times, it’s a good example of where we are
moving from academic conversations about what might happen to seeing the reality of how a well-respected
and well-run — at least on the surface — company can be impacted so quickly and so harshly by an incident like
that. I think it’s been a real eye-opener for a lot of folks who were concerned about it, but it hadn't hit home
quite as much.”
The panel agreed that many companies already have many practices in place for collecting, delivering and
storing customers’ NPI in a safe manner, but while some of these standards may make common sense,
companies are developing new procedures to reassure lenders that NPI is always protected.
Murphy, who oversees day-to-day operations and compliance issues at ValuAmerica, said the company prefers
to work directly with notary signing agents “to help us control the transaction as much as possible.”
“Our preferred method is to send documents to you through our vendor portal via a secure download, and not
relying on an additional middleman to make sure a package gets to you timely and in a complete manner,”
Murphy said. “We have a lot of technology capabilities on our side to see when you access documents, when
you download documents and on the other side, when documents are completed, when you can and should
upload it directly back to our website. We do monitor that and have a dedicated vendor management team that
grades all the vendors on a transactional basis.
Flaherty pointed out that many companies have similar technology or practices in place, but he stressed that “it
is important for you to be cognizant of requirements for each business you deal with.”
“What might be OK for ValuAmerica might not be OK for ServiceLink, which might not be OK for First American,”
Flaherty noted. “If there is ever a question as to what is acceptable or not, certainly ask.”
Last November, the CFPB issued its final “Know Before You Owe” rule, which addresses some of what it calls
“pain points” for homebuyers. The rule, which takes effect in August 2015, requires the use of new mortgage
disclosure forms. A new Loan Estimate form will replace the current Good Faith Estimate of Settlement Costs
and initial Truth in Lending Disclosure. A new Closing Disclosure will replace the current HUD-1 Settlement
Statement and final Truth in Lending Statement. And most notably, the rule provides that all consumers must
receive their new Closing Disclosure form at least three business days before closing to provide them with more
time to review the terms of their loan.
“These changes are obviously going to be significant,” Freudenberg said. “We have had internal policies and
processes that have been on the books for a long time that have driven toward getting those documents into
the hands of the settlement agent at least three days before closing, but I think anyone in this room can say,
how often does that happen? I won’t kid you to say that we've got this one covered and that it’s a non-issue for
us, because it’s a very big issue for us.”
The new requirements represent “a very significant industry change that is not going to be a magic solution for
any of us,” Freudenberg cautioned.
“The difference between looking forward versus where we have been in the past is that while it’s been a desired
outcome to this point, it’s a non-negotiable, mandatory outcome as we look forward,” she said.
Wells Fargo’s attorneys have indicated that customers must receive the Closing Disclosure three days prior to
signing their note, which will significantly impact signing agents, Freudenberg said.
“We also have requirements for re-disclosing, so we also have an obligation when criteria change or fees change.
Some of those changes may require us to restart the three-day clock,” she noted. “We may have changes that
occur, and you may be the first ones who are detecting them. We need to make sure you are really plugged in
and aware so that if you do find yourselves being the ones who are the first ones aware of a change like that,
that you have a really solid communication line and let that change of information fall back to us.”
First American Mortgage Services’ Zaki added that some of the details for complying with the three-day rule
have yet to be worked out.
“Is it something that is delivered via Fed-X, or through a secure portal or secure link? Those details are still up
in the air in terms of finalization,” Zaki said. The key will be when you have an updated set of documents. The
first question in your mind should be, was the consumer provided with an updated set of documents? Those
are issues we are going to have to work on as an industry and maybe one of 100 questions that are still pending.”
The CFPB announced in April that it will launch a pilot eClosing program for the mortgage industry. The bureau
elected not to write any rules, but instead said its hopes that by working with technology and mortgage industry
stakeholders, the program will act as a catalyst for expanding the use of eClosing technology.
“I think this is something the industry has wanted and desired for a long time,” Murphy said. “There are some
significant investments from technology firms that have really cool technology that I am excited about. But I
think a lot of it will come down to coordinating with counties to accept the new technology.”
Sloan agreed that eClosings will present opportunities to increase customer satisfaction, but said that he
remains concerned about the lack of consistency among regulatory bodies.
“Whether it’s a national regulator or a state regulator, that may cause the most pain initially,” Sloan said.