RESPA: The Chicago Title Case
There's a new major enforcement case involving RESPA and for once the enforcee is not a financial institution: it's Chicago Title, the nationwide settlement company. The enforcement action is a joint effort of the OCC, OTS, HUD and several state attorneys general.
Chicago Title provides settlement services for mortgage lenders all across the nation. In this role, Chicago Title is often the last party to have responsibility for settlement documents, including the HUD-1. Lenders have often complained that what comes back from settlement doesn't match what they sent. The changes have implications for Truth in Lending as well as for RESPA. The enforcement action should put an end to these problems - at least with Chicago Title. Hopefully other settlement agents will take note.
The agencies found that Chicago Title engaged in a pattern of violating Section 4 of RESPA and the related regulations. When a pattern of violations are found, the occurrences far exceed errors that could be considered clerical.
The pattern involved providing inaccurate HUD-1 Settlement Statements to lenders and to borrowers. The HUD-1s provided by Chicago Title did not reflect all the actual charges and adjustments and were inaccurate. The agencies found this to be the case for federally related mortgage loans (those covered by RESPA) and for non-federally related mortgage loans which, strictly speaking, are not subject to RESPA.
The agencies further found that Chicago Title fails to deliver corrected HUD-1s to the lender. The corrections could involve changes or amendments that occur at settlement. The company's policies and procedures were deemed insufficient.
The required remedies are instructive. Chicago Title must take aggressive remedial action in three areas: policies and procedures, training, and auditing. Within 120 days of the order, Chicago Title must take decisive action on all three fronts.
Step one will be to develop and put into place a "consistent framework of internal controls" to ensure accuracy of documents as well as fraud controls and compliance with all applicable laws and regulations. This includes preparation of complete and accurate HUD-1s. Moreover, it means following the instructions provided by the lender.
After settlement, Chicago Title must provide the final, executed Settlement Sheets to the lender "as soon as practicable." Prior to this consent order, some lenders waited months to get settlement documents returned.
The order also addresses the fiduciary responsibilities of the settlement agent. The order thus sets a standard to which lenders may hold other settlement agents. There is now something official to point to.
On the training front, Chicago Title must provide training for all current and prospective employees and officers that conduct settlements for insured depository institution lenders.
Training must teach staff how to conduct settlement in compliance with federal laws and with policies and procedures developed under the order.
Finally, the order requires Chicago Title to establish a thorough audit process to evaluate compliance with the order and with applicable laws. The audits must include enough testing in branches or offices to provide a statistically sound evaluation of the company's performance.
No consent order would be quite complete without requirements placed on management and this one is no exception. Management is held squarely responsible for implementation of the order and for continued compliance. The order remains in effect for five years.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 4, 4/05
First published on 04/01/2005