Entrust Offers Centralized Disbursing Option to Help Preserve Role of Agents

November 14, 2013

Entrust Solutions, a title insurance servicing company, has started initial discussions with lenders regarding centralized disbursing programs. Due to guidance from the Consumer Financial Protection Bureau (CFPB) about being responsible for the acts of third-party service providers and recent enforcement actions, lenders are becoming more concerned about the companies that close their real estate transactions.

“The lenders are fully aware of the burden placed on them and are actively seeking ways to maintain compliance,” said Jonathan Yasko, founder and managing member of Entrust Solutions.

Each day, lenders send billions of dollars through thousands of transactions to escrow and trust accounts all across the United States. The risk of defalcation is substantial and the losses continue to mount for lenders, according to Yasko. Now with the added new regulations from CFPB placing lenders on the “hook” for the real estate transaction, this perfect storm creates a tremendous amount of pressure pushing down on them.

“Lenders are looking for ways to protect themselves and their only option used to be direct operations from title insurance underwriters or the large, multi-state agents,” Yasko said. “The small to mid-size independent agent, which make up the majority of the title industry, have a large bull’s-eye on their back and are being pushed out.”

Traditionally, the reliance on the Closing Protection Letter (CPL) or Insured Closing Service Letter (ICSL) by the underwriter would be enough assurance to the lender that their funds were safe when dealing with an independent agent. This, however, is no longer the case as underwriters continue to close their doors and claims on the CPL or ICSL go unpaid. Yasko said lenders are now focusing on what underwriter the agent writes on and if their paper is acceptable. Entrust enters the market offering options to lenders through its Centralized Disbursing Program.

“The ultimate purpose is to provide lenders a centralized point of contact regarding the security and handling of funds, meanwhile preserving the role of the independent agent,” Yasko stated. “The independent agent would still act in their regular capacity in facilitating and handling of the real estate transaction, however they will not have the regular headaches of dealing with an escrow/trust account.”

Lenders can rely on one source for the handling of funds in a fiduciary capacity, but also have the flexibility of using local, independent attorneys or agents to close the loan. Entrust, acting as an independent third party, allows them to work with any agent or attorney, as well as most title insurance underwriters, according to Yasko. This ability gives lenders more options and creates a safe environment for them and the consumer.

“Our goal from day one is to aid and assist the title insurance industry, and now this same goal crosses over to help lenders by creating a safe, secure and reliable option for them,” Yasko said.

The second pillar of ALTA’s "Title Insurance and Settlement Company Best Practices” offers guidance for adopting and maintaining appropriate written procedures and controls for escrow trust accounts. Following the second pillar of the Best Practices help ensure accuracy and minimize the exposure to loss of client funds. Settlement companies may engage outside contractors to conduct segregation of trust accounting duties.

“Compliance is the new hot word that everyone is using lately and we are proud to be able to bring the lenders, underwriters and agents together in a safe, reliable arena,” Yasko said.

Contact ALTA at 202-296-3671 or [email protected].