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WITH NEW REGS, DEMONSTRATING COMPLIANCE AND CONTROLS IS KEY The mortgage servicing business is fielding a spate of new rules and regulations. According to the Washington, D.C.-based law firm Davis Polk & Wardwell LLP, which specializes in regulatory matters and other complex issues facing the financial services industry, there are 49 required rulemakings under the Dodd-Frank Act that address mortgage reforms and 63 related to consumer protection. The first big test of the servicing sector's preparedness and compliance with the new rules of the road comes January 10 with the implementation deadline for the Consumer Financial Protection Bureau's (CFPB) Ability-to-Repay rule, Qualified Mortgage definition, and new mortgage servicing standards related to foreclosure processing, borrower communication, and a number of other default-specific functions. With the regulatory intervention the industry is experiencing today, there is an increased and immediate need for system controls, certification of compliance, and information management controls—for both servicers and their outsourcing partners. Equally as important is the ability to provide clear evidence demonstrating compliant operations and essential controls. A number of companies have been providing the marketplace with this type of assurance for years now. ProVest LLC recently announced that it received the Service Organization Control (SOC) Type 2 attestation for the fourth year in a row. "This level of reporting sets ProVest apart from other service of process organizations," said Vic Draper, ProVest COO. Draper explained that the SOC Type 2 offers clients a "level of assurance that ProVest is in compliance with all applicable regulations." The SOC Type 2 provides information on ProVest's controls over its systems relevant to security, availability, processing integrity, confidentiality, or privacy. These five disciplines are the "Trust Service Principles" on which SOC 2 is based, and each principle has predefined criteria that demonstrate adherence: Security: The system is protected, both logically and physically, against unauthorized access. Availability: The system is available for operation and use as committed or agreed to. Processing Integrity: System processing is complete, accurate, timely, and authorized. 14 Confidentiality: Information that is designated "confidential" is protected as committed or agreed. Privacy: Personal information is collected, used, retained, and disclosed in conformity with the commitments in the entity's privacy notice and with the privacy principles put forth by the American Institute of Certified Public Accountants (AICPA) and the Canadian Institute of Chartered Accountants (CICA). SOC 2 also requires a written statement of assertion and a description of the service organization's system from management, which is said to be more comprehensive and detailed than previous audit standards that require a description of controls instead of the system itself, such as the Statement on Auditing Standards 70 (SAS 70). "This acknowledgement affirms our commitment to providing a stable, sound, and secure environment through financial strength and investments in compliance, legal, audit, technology, and vendor management practices," Draper said. Servicers and their partners—from valuation providers to foreclosure attorneys—are both service organizations themselves and outsource tasks to other service providers that collect, process, store, and dispose of information or handle business transactions on behalf of customers. SOC reports are designed to help service organizations build trust and confidence in their service delivery and controls over information and data with a report prepared by an independent certified public accounting firm. The American Institute of Certified Public Accountants (AICPA) established the SOC Reports (Types 1-3) to effectively replace Standards for Attestation Engagements No. 16 (SSAE 16) and SAS 70 as the official auditing standard for service organizations to demonstrate they have adequate internal processes and controls in place. According to compliance insiders that actually perform the independent audits for service organizations' certification, SOC 2, in particular, is gaining traction among technology-based service organizations. SOC 2 audits are utilized to report on the controls in place by IT-related organizations such as cloud computing, software as a service (SaaS), managed services, and data centers, among others. TITLE INSURANCE PREMIUMS RISE 14% Title insurance premium volume rose 14 percent during the third quarter of 2013 when compared to the same period a year earlier, according to the American Land Title Association (ALTA). Based on the national trade group's market share analysis for Q 3, the title insurance industry generated $3.4 billion in premiums over the July-to-September period, compared to $3.0 billion in the third quarter of 2012. Michelle Korsmo, ALTA's CEO, said the title industry's "strength and stability continues to improve as the housing economy recovery maintains a steady pace." Forty-five states, plus the District of Columbia, saw written premiums increase during the 12-month period ending in October, Korsmo explained. The states generating the most title insurance premiums during the third-quarter period of 2013 were Texas with $477.9 million, up 25.1 percent compared to the third quarter of 2012; California at $413.3 million, down 6.2 percent; and Florida's $314.2 million, up 29.9 percent. Nine states experienced a 25 percent or more annual increase in title insurance premiums during the third quarter, including South Dakota (up 54.7 percent), Delaware (up 37.8 percent), and Minnesota (up 31.2 percent). The breakdown of market share was led by the Fidelity family of title insurance underwriters with 32.2 percent of the market in Q 3. The First American family captured 26.6 percent market share, Old Republic companies recorded 15.2 percent, and Stewart garnered 12.8 percent. Meanwhile, regional underwriters held 13.1 percent of the market during the third quarter, down from 13.3 percent during the same period of 2012.

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