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TO SEPARATE OR NOT TO SEPARATE, THAT IS THE QUESTION

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Now that TRID ("Truth­in­Lending Integrated Disclosure") has been implemented, all of us who are in the real estate/lending business are working to comply with the rules relating to TRID, the rules established by CFPB ("Consumer Finance Protection Bureau," the federal agency policing compliance, Bulletin 2013­2), and, for closing attorneys, the rules, policies, and procedures required in order to be compliant with ALTA Best Practices, which are the standards set for attorneys who wish to undertake the best methods, policies, andprocedures to protect the Borrowers’ (the "Consumers") privacy and to best represent their clients’ ("Lenders/Creditors") best interests. As all of you who are in the real estate business have been told at the many seminars you have attended, the closing attorney ("settlement agent") is a representative ("third party vendor") of the lender, and the lender is now responsible for all of the actions of the closing attorney/settlement agent. Because each lender has their own compliance officer(s) who interpret the new law and set their own company policies and procedures, there continues to be much confusion and inconsistencies in many areas of the closing ("consummation") process.

One of the most obvious inconsistencies is how best to protect the privacy of the Borrower/Buyer at the closing table, or "To separate or not to separate, that is the question."

In order to attempt to determine what other closingattorneys/settlement agents are doing throughout the country, I contacted local lenders and sources who deal with "closing issues" on a national level throughout the country. Some local lenders require that none of the Borrower’s private information ("NPI or Non­Public Information") be shared in any form, but do not specifically say that the parties are to be separated during the Borrower’s portion of the closing. Others say that the decision is up to the closing attorney/settlement agent, "as long as the Borrower’s private information (NPI) is kept confidential." In the Nashville, Tennessee area, many settlement agents have the Borrower and Seller in separate conference rooms, and others actually require that the Borrower and Seller have their own independent attorneys and close in their own attorney’s offices. This is overkill, in my humble opinion, but the practice does exist.

On the national level, a Compliance Counsel/Senior Underwriter in the legal department for one of the largest title insurance companies in the country was asked this question. In response she said:

"I am seeing the same inconsistency across the country.
Some settlement agents feel the only way they can
protect privacy is to separate the parties. Others feel
like they can do the closing with the parties on opposite
side of the table. CFPB and TRID provide no guidelines
on this. It really depends on how your closing business
operates, the way the physical space is set up, and what
you feel comfortable with because ultimately you and
the realtor are both responsible for protecting the
consumer’s personal information. You (McBrideRichardson, P.C.)
feel separate is necessary to protectthis privacy and these days
with all of the media attention to retail hacking you feel this
protection is priceless."

Therefore, the bottom line to the question "To separate or not to separate" is that we still do not know what the law requires. However, our firm, McBride Richardson, P.C., takes the firm position that the NPI or private information of the Borrower is of the utmost importance. Our position is that if Seller, the Seller’s agent, or any other third parties are present during the Borrower’s closing, they will hear all of the details relating to the Borrower’s closing and could easily see much of the Borrower’s private information, such as their social security number, their driver’s license number, their credit information, etc. To allow a Seller, agent, or any other third party to hear and observe this information would be contrary to the protection of the Borrower’s private information and would, in effect, be sharing that private information, even if unintentional. The Seller or others present in the room might never take advantage of this opportunity, but the opportunity is definitely there.

Our firm, McBride Richardson, P.C., is an ALTA Best Practices certified firm, based upon a review performed by Habif Arogeti & Wynne, LLP (HA&W) of Atlanta, Georgia. Every firm which qualifies as an ALTA Best Practices approved firm must have in place and follow a set of Policies and Procedures setting forth every action undertaken by the firm to protect the consumer and the lender. One of the policies which the firm must have in place and follow is a Non­Public Information Security and Disposal Policy. These policies and procedures MUST restrict access to NPI to authorized employees of the settlement agent who "need to know" in order to perform the service for which the firm was retained to perform (the closing), MUST restrict use of NPI for the purpose for which it was obtained, share NPI only with authorized service providers or persons authorized by the person to whom the NPI relates, by written authorization, MUST store NPI under lock and key and in areas which are inaccessible by the public, and those service providers who might have access to NPI MUST execute a Confidentiality and Non­Disclosure Agreement, have a background check, and/or provide proof that the service provider meets all of the requirements of the Gramm­Leach­Bliley Privacy Act, where applicable. The industry standard for closing attorneys/settlement agents is to have a "Privacy Policy," which should read in a form similar to the following:


USE OF INFORMATION

We request NPI from you for our own legitimate
business purposes and necessary to do our business.
Therefore, we will not release your NPI except: (1) as
necessary for us to provide the product or service you
have requested of us; or (2) as permitted by law. We
may however, store such NPI, including the period after
which any customer relationship has ceased. Such
information may be used for any internal purpose, such
as quality control efforts or customer analysis. We may
also provide all of the types of NPI listed above (an
extensive list of "Types of Information") to one or more
of our service providers. Such service providers
include financial service providers, such as title insurers,
property and casualty insurers, and trust and investment
advisory companies.....Even if you are no longer our
client/customer, our Privacy Policy will continue to
apply to you."

Therefore, the burden on the closing attorney/settlement agent to protect the private information of the Borrower is a great one. Because of the above burden, out of an abundance of caution and out of good old common sense our firm, McBride Richardson, P.C., has chosen to separate the Borrower from the Seller and the Seller’s agent at each TRID loan closing we conduct, thus eliminating any possibility that the Seller or the Seller’s agent will have access to any of the Borrower’s NPI or private information. After the Borrower’s portion of the closing is completed, we call the Seller into the room and complete the Seller’s portion of the closing, giving the parties an opportunity to share whatever information they so choose to share with one another. Because there are no definitive rules under TRID or CFPB, each closing attorney/settlement agent will continue to conduct closings in the manner they so choose; however, until the federal government establishes rules governing this process, our response to the question "To separate or not to separate" is to separate."

Note: All terms shown in parenthesis and enclosed with quotation marks are the terms used in TRID and CFPB Bulletin 2013­2.

J. Calvin McBride is a shareholder in the firm of McBride Richardson, P.C. and has been in the practice of law since 1981. The firm, which has offices in Decatur, Alabama, concentrates in the areas of real estate law, residential and commercial loan closings, title examinations, title insurance, and Probate law. In addition to these areas, Christy W. Richardson also handles elder law issues. Please visit www.mcbriderichardson.com for further information about the firm, answers to Frequently Asked Questions relating to real estate law, and more articles about important issues.

 

 


From our offices in Decatur, Alabama, we represent clients in Morgan, Madison, Cullman, Lawrence, and Limestone Counties, including the communities of Decatur, Huntsville, Madison, Hartselle, Cullman, and Athens.

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The information you obtain on this website is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Copyright © 2012 by J. Calvin McBride & Associates, PC. All rights reserved. You may reproduce materials available on this website for your own personal use and for non-commercial distribution. All copies must include this copyright statement.

McBride Richardson, P.C. was originally incorporated as J. Calvin McBride & Associates, P.C. and was formerly known as J. Calvin McBride & Associates, P.C.  Both of these names relate to the same corporate entity.