ALTA ALTA Risk Management 2

Question 1

What is the role of an ALTA Best Practices assessment in risk management?

Accepted Answer

It evaluates whether a title company's operations meet established standards for financial controls, data security, and consumer protection

Answer

An ALTA Best Practices assessment evaluates a title company's operational procedures against ALTA's seven pillars to identify risk gaps and demonstrate compliance to lender partners.

Question 2

Which ALTA Best Practices pillar addresses the proper receipt, management, and disbursement of settlement funds?

Accepted Answer

Pillar 2 – Escrow Trust Accounting

Answer

Pillar 2 of ALTA Best Practices requires title companies to maintain proper escrow accounting controls, including reconciliation of trust accounts, to protect settlement funds.

Question 3

What is 'forgery' risk in the context of title insurance?

Accepted Answer

Risk that a document in the chain of title, such as a deed, was signed by someone falsely claiming to be the owner

Answer

Forgery risk arises when a fraudulent party creates or signs a document — such as a deed — in someone else's name, potentially clouding the chain of title.

Question 4

What does errors and omissions (E&O) insurance cover for a title company?

Accepted Answer

Claims arising from professional mistakes or negligence in performing title services

Answer

E&O insurance covers a title company against claims resulting from professional errors or omissions in conducting title searches, issuing commitments, or other title services.

Question 5

Why is vendor management important under ALTA Best Practices?

Accepted Answer

Because title companies are responsible for ensuring their vendors also handle consumer data and closing functions in compliance with applicable standards

Answer

Title companies must vet and monitor vendors who handle consumer data or settlement services to ensure those vendors comply with privacy and operational standards, as the title company retains responsibility.

ALTA - American Land Title Association Practice Test

ALTA - American Land Title Association Practice Test

ALTA ALTA Risk Management 2