Posted by Bear900/CA on 12/6/13 5:27pm
Msg #495353

Third-Party Relationships

I was unaware that the NNA was pointing to the OCC Bulletin 2013-29 to build their requirements around.

In short: The OCC mandate does NOT apply to notary loan signers!

It was a big stretch for the NNA to post this:

“Officially called the OCC Bulletin 2013-29, the updated guidance is largely focused on the development of a well-documented oversight program and clear reporting strategies. Organizations will be required to show they have created a risk management plan that ensures the ongoing monitoring and reporting of all of their providers’ activities and performance, as well as a contingency plan for terminating third party relationships.

The OCC guidance applies to all banks and organizations that conduct business using third parties, including community banks and smaller institutions. The guidance also states that the OCC expects more stringent oversight procedures to be in place for providers serving a critical function in certain “high-risk” activities.

For more information, the OCC has released a detailed description of its Risk Management Guidance.”

The OCC is addressing third party relationships of a totally different nature. Here are some key points from their bulletin:

“Therefore, the OCC expects more comprehensive and rigorous oversight and management of third-party relationships that involve critical activities—significant bank functions (e.g., payments, clearing, settlements, custody) or significant shared services (e.g., information technology), or other activities that

• could cause a bank to face significant risk4 if the third party fails to meet expectations.
• could have significant customer impacts.
• require significant investment in resources to implement the third-party relationship and manage the risk.
• could have a major impact on bank operations if the bank has to find an alternate third party or if the outsourced activity has to be brought in-house.”
“The bank should consider the following during due diligence:
• Strategies and Goals
• Legal and Regulatory Compliance
• Financial Condition
• Business Experience and Reputation
• Fee Structure and Incentives
• Qualifications, Backgrounds, and Reputations of Company Principals
• Risk Management
• Information Security
• Management of Information Systems
• Resilience
• Incident-Reporting and Management Programs
• Human Resource Management
• Reliance on Subcontractors
• Insurance Coverage
• Conflicting Contractual Arrangements With Other Parties
• Contract Negotiation”

Here is the specific background the OCC provides.

“Background:

Banks continue to increase the number and complexity of relationships with both foreign and domestic third parties, such as:

• outsourcing entire bank functions to third parties, such as tax, legal, audit, or information technology operations.
• outsourcing lines of business or products.
• relying on a single third party to perform multiple activities, often to such an extent that the third party becomes an integral component of the bank’s operations.
• working with third parties that engage directly with customers.
• contracting with third parties that subcontract activities to other foreign and domestic providers.
• contracting with third parties whose employees, facilities, and subcontractors may be geographically concentrated.
• working with a third party to address deficiencies in bank operations or compliance with laws or regulations.”

The NNA has made an attempt to make application of the OCC’s directive to notaries. This attempt may be rebutted by anyone knowledgeable in compliance that banks and title companies outsource to. Compliance experts of this nature are far too expensive to sit on the SPW. Bank and title reps harken.

The CFPB requirement is for lenders to supervise third party providers (I.E. TITLE COMPANIES) and their “agents”.

ONLY the CFPB bulletin uses the word ‘agent’ to the third party provider.

This drastically changes the role of an NSA from a Third Party Provider to an *AGENT* of such.

INTENT: The CFPB’s intent from inception was for lenders to supervise the likes of appraisers and title companies via their compliance policies.

Appraiser supervision is conducted through the appraiser’s AMC (Appraisal Management Company) not the individual appraiser. The appraiser contracts with the AMC. In similar fashion the Notary contracts with the Title Company.

This doesn’t remove supervision requirements of title companies used by lenders and in turn agents by the title company per the CFPB’s requirement.

It would best for the NNA to reduce NSAs to AGENTS for title companies and remove any inference to the OCC which does not apply. NSAs are not third party service providers to banks under the latest CFPB bulletin. It would take quite an imag

Reply by CarolF/NC on 12/6/13 6:46pm
Msg #495362

Wait...

Isn't that was I said somewhere back around Nov 2, when you convinced me I was wrong. Only I think I said this is BS and another money grab by the NNA who does nothing to represent notaries and someone needs to find an attorney and sue them for false advertising and a host of other issues.

Or did I fall asleep reading this post and forgot what you were saying?

Reply by jba/fl on 12/6/13 7:11pm
Msg #495370

Re: Wait...

To which message are you referring around Nov. 2? Please link.

Reply by Bear900/CA on 12/7/13 2:15am
Msg #495397

Not at all Carol

It took an hour on the phone to convince you, after which you conceded that you finally understood me, that lenders have a mandate from the CFPB to supervise third party service providers.

That was the biggest hurdle for most in this forum, to acknowledge that this mandate exists.

I purposely stopped posting until I saw enough people understand this mandate so we can proceed from there.

The OCC mandate takes in a different and much larger scope of third party providers, such as foreign entities. On second thought, that just may fit some.

I don't read NNA's site. I came across their OCC reference while Googling something else.

They are way off in their knowledge of compliance. I will speak more to that later.

I agree with you about the money grab by the NNA. There is a concurrent contention very similar to ours between the NAILTA and Settlement Servicers, Inc that I have been following. See link below.

The CFPB stepped out of the fray and just told lenders to get it done. This has to do with vetting contract title agents that in structure (size) are similar to us. They are considered 3rd party providers however because they are doing the same job as the title company and may work for more than one company.

Some underwriters are contractors, especially FHA Direct Endorsement (DE) UW's and would be be third party service providers to the lender. These third party providers are the moon to us.

I am trying to paint a distinction.

WSJ:

http://www.washingtonpost.com/realestate/title-agents-are-wary-of-third-party-vetting-firms/2012/11/07/59ecdefc-1d50-11e2-b647-bb1668e64058_story_1.html

Reply by MAC/WA on 12/7/13 12:25pm
Msg #495446

The first comment to the article is interesting.....

Just some snip-its from the TC's exec:

"Title Company Executive
11/13/2012 9:16 AM PST
Speaking as an owner of an established title company, I am in support of these vetting companies spawned by the CFPB's Bulletin 2012-03. First, as Mr. Jacobs and others note, we will simply pass along the costs to the consumer (yes, the consumer will pay more). Second, since we are a well-established company, these new requirements will serve to heighten the barrier to marketplace entry for our prospective competitors; hence, limiting the number of competitors such that we will be able to extract an un-challenged premium from our clientele..."

"You will never "regulate out" bad actors in any industry. "

"These new requirements are a mere act of redundancy. The quality control processes contemplated by these vetting companies are already being performed... They serve no useful purpose other than to squeeze more money out of the transaction at the expense to the consumer and at the risk of stifling competition in the marketplace. A healthy marketplace encourages competition and competition encourages more transparency and innovation. CFPB should immediately issue further guidance to its bulletin to address the redundancy and unnecessary nature of these budding third-party vetting companies."

My, my, my, sounds alot like what we are complaining about and, yes, what a lot of NSAs are saying to themselves about crushing the competition and seeing the business opportunities that this law may spawn in the NSA business.

Its also interesting, that the CFPB, established by the Dodd-Frank Act passed in July 2010, is getting pounded by those affected by the D-F Act. Do ya think they will ever get to our complaints????

Reply by Bear900/CA on 12/7/13 5:24pm
Msg #495458

Notice the Scoring methodology on page 1

Sound familiar?

"For a fee, these “vetters” purport to conduct a due diligence investigation into the settlement service providers’ practices and procedures and generate a low-, medium- or high-risk index score that they then make available to lenders and others in the mortgage-lending industry.

These lenders then can withhold business from settlement agents receiving a high-risk score."

My link went to page page two and is hard to tell there is a page one. Here is page one:

http://www.washingtonpost.com/realestate/title-agents-are-wary-of-third-party-vetting-firms/2012/11/07/59ecdefc-1d50-11e2-b647-bb1668e64058_story.html

It's interesting to note this battle is still going on and there is a real association involved.