THREE REASONS:
1. - In accordance with Consumer Financial Protection Bureau (CFPB) Bulletin 2012-03, mortgage lenders are expected to have an effective process in place for managing the risks of their third-party service providers, e.g. residential settlement agents and title companies. Mortgage lenders have always looked to CPA firms to give them assurance on third-party information as a way to meet their risk management guidelines.
2. - Mortgage lenders will conduct due diligence by requesting and reviewing the service provider’s documentation on their policies and procedures to support that they are in compliance with federal consumer financial laws. In response to the CFPB and to help mortgage bankers monitor their settlement attorneys and title companies’ compliance, the American Land Title Association (ALTA) developed its Best Practices Framework for title industry professionals to use as a guideline to meet these requirements.
3. - Pursuant to federal consumer financial laws, mortgage lenders may face fines and enforcement action from the CFPB if they cannot show that they are properly managing their third-party relationships. For settlement agents and title companies, lack of compliance will lead to severe/catastrophic business disruption, as mortgage lenders will do business only with compliant third parties to avoid penalties and reduce risk.
