What Does “Certification” of ALTA Best Practices Mean? – Part One

Sometimes a simple question has a complex answer; this is one of them.

When I started preparing this blog post, I intended to cover all aspects of “certification” as it relates to the American Land Title Association’s suggested “Title Insurance and Settlement Company Best Practices” (ALTA Best Practices). I soon realized that the blog post would be several pages long, so I am breaking it down into bite-sized pieces which will be published in six installments. Part One of the series will explain the different types of ALTA Best Practices certifications.

Having a Best Practices Manual is the first (and biggest) step in demonstrating to a lender that your title agency or law complies with ALTA’s Best Practices. However, another key step is having a “certification” of compliance with the suggested Best Practices. There are currently three main types of certifications:

1. Underwriter Certification
2. Self-Certification
3. Third-Party Certification

The names are pretty self-explanatory, but let’s briefly look at each type of certification.

“Underwriter Certification” is a written certification by a title insurance underwriter that its agent (either a title agency or law firm) complies with ALTA’s Best Practices. Based on our experience, most title insurance underwriters are generously helping their agents implement the Best Practice initiative but are not willing to issue a formal certification of compliance. This will probably vary in different regions of the country, but it is anticpated that “Underwriter Certification” will be the least popular type of certification.

“Self-Certification” is a written certification by settlement agent that it is familiar with ALTA’s Best Practices initiative and that the agency or law firm complies with suggested Best Practices. Early indications are that most lenders will accept a self-certification. Every Best Practices Manual prepared by BPS includes a self-certification letter that can be reproduced on your letterhead and personalized to the lender requesting your Best Practices Manual.

“Third-Party Certification” is a written certification issued by an independent third party, typically an accounting firm. To-date, several lenders have issued statements requiring their settlement agents to provide a third party certification.  The next four posts in this series will discuss third-party certification issues.

Check back in a few days for Part Two in this series, but don’t wait until then to order your Best Practices Manual from BPS by clicking here.