Key items to include in a closing attorney SLA.
Vendor management is increasingly top of mind among financial institutions. With mortgage lenders, that especially includes closing attorneys.
We see many lenders taking a closer look at vendor management of closing attorneys. Certainly, closing attorneys are significant vendors - they access confidential customer data on a regular basis, affect the transfer of large sums of money, and occasionally get us in hot water with the feds. See for example the notorious Duplicate Discharge issue.
Most institutions have taken the most basic step of simply developing and maintaining a list of approved closing attorneys. Another fundamental piece is to have a written agreement in place. Those "in the biz" will refer to this as a Service Level Agreement (SLA) because it identifies the minimum service levels expected.
So, if you're writing an SLA for closing attorneys, here are a few things to get you started (not meant as an exhaustive list, but just a few key components):
1)How do they get paid?
If you're going to use a Flat Fee (something we often think makes a heck of a lot of sense), the perfect place to clarify this is in your SLA. Take care to specifically say what is included, and what is excluded, from this amount. Even if you're not flat feeing, you'll want to lock down a standard set of fees - otherwise it will be difficult to accurately disclose the Loan Estimate.
2)ALTA Best Practices
Many lenders require closing attorneys to follow ALTA best practices. This can be included as a requirement in the SLA. Require attorneys to submit their updated ALTA procedures as proof.
Note: Becoming ALTA best practices "certified" is a relatively expensive and time-consuming endeavor. While it might not always be reasonable to require closing attorneys be "certified," it is certifiably reasonable to require that they "follow" those guidelines.
3)Complaints
Think complaints just come in to employees? No way! Regulators expect you to gather complaints from social media and vendors, too. Include this in your SLA with closing attorneys and describe how complaints should be submitted. Piggyback off your complaint policy and include things such as your definition of "complaint" (e.g., how terrible the new paint job is at the branch is not an actionable complaint).
4)Timelines
Should your attorneys wait for clear-to-close to schedule a closing (I think no). How quickly will the attorney get the Loan Estimate and title request? How long before closing do you expect the information needed to complete the Closing Disclosure? How soon do you want to hear about a changed circumstance (hint: immediately)? How quickly do we expect them to return trailing docs?
We can't complain about attorneys being slow to act if we don't clearly tell them when we need things. And on the opposite foot - if you want to have a good working relationship with them, we should be clear about our own obligations here, too.
5)Some TRID stuff
If you are updating your SLA for the post-TRID world, here are a few things you might consider addressing:
Expectations for Seller's CD. Do you expect to receive a copy to review pre-closing, or is post-closing sufficient? Are you requiring it to be signed? Are you requiring it to be "accurate" (a bigger issue than we might have anticipated months ago).
Delivery of Borrower's CD. Your SLA might say "Attorney is never permitted to deliver a Closing Disclosure to the Borrower." Or " Attorney is only permitted to deliver a Closing Disclosure to the Borrower if the Bank expressly permits it." I think most of us can agree on - "Attorney is never permitted to deliver a Closing Disclosure to the Borrower that was prepared by the Attorney and not the Bank."
Attestation before closing. For lenders using attorneys to deliver a final Closing Disclosure for signature at Closing - "Attorney is required to disclose the Closing Disclosure to borrower before the Borrower reviews or signs any other documentation at closing."
These are just a few ideas, I'm sure you'll all think of a lot more, and a lot better ones. Hope that was helpful!
In Other News:
Rockland Trust making a splash and acquiring the Bank of Cape Cod
Very interesting to see where all those mortgage penalties went...WSJ article tracked them down.
Origination cost jumps to $7,747 per loan??
Since it seems relevant ... have you heard of the Bork Rule? Robert Bork was almost on the U.S. Supreme Court. He was nominated by President Reagan in 1987. Bork's nomination was shot down after congressional hearings where he gave real-life answers to direct questions on substantive matters.
Since Bork's failed attempt to be added to the Court, candidates for justice have refused to answer any substantive questions. They refuse to do so and argue that taking a position on actual issues is inappropriate before the case is actually presented to them - taking a position prematurely is inappropriate and biases them towards past public statements.
So what does that leave us with? It leaves us with confirmation hearings where candidates for one of the most powerful positions in the U.S. government escape many direct questions, making it harder for us to assess them as a candidate. Candidates follow the "Bork Rule" and refuse to answer those questions.
"Dog does not eat dog."
- Proverb
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