CFPB Responds to ALTA — Promotes Scalable Risk-Management Program for Mortgage Lender Service Providers

WASHINGTON, DC—(Marketwired – October 31, 2016) – Following years of letters and in–person meetings with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and his staff, the Bureau has responded to ALTA by issuing an amendment to its guidance clarifying that mortgage lenders have flexibility in deciding the appropriate course of action for managing their risk.

In May, ALTA sent a letter to Director Cordray once again urging the Bureau to address the confusion surrounding third–party service provider oversight.

In the revised bulletin the Bureau states: “The Bureau expects that the depth and formality of the entity's risk management program for service providers may vary depending upon the service being performed — its size, scope, complexity, importance and potential for consumer harm. While due diligence does not provide a shield against liability for actions by the service provider, it could help reduce the risk that the service provider will commit violations for which the supervised bank or nonbank may be liable.”

“Encouraging lenders to be flexible when developing a risk–management program for their service providers is a great step to balance the need for lenders to oversee third–party vendors and retain consumer choice in selecting service providers,” said ALTA president Daniel D. Mennenoh ITP, NTP. “While the CFPB said it expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships, consumer choice should be a factor in the manner a lender develops its vendor management programs and introducing the scalability concept protects the interests of consumers and avoids consumer harm. We hope the CFPB continues to provide more clarity on the collision between consumer choice and vendor management.”

“ALTA will continue to connect with Director Cordray and CFPB staff to ensure our members and their mortgage lenders can effectively protect consumers and manage their risk appropriately,” Mennenoh continued.

About ALTA

The American Land Title Association, founded in 1907, is the national trade association representing more than 6,200 title insurance companies, title and settlement agents, independent abstracters, title searchers, and real estate attorneys. With offices throughout the United States, ALTA members conduct title searches, examinations, closings, and issue title insurance that helps protect the property rights of millions of American homebuyers every year.