NAILTA Adopts Enforceable Code of Ethics for Members; Becomes the Lone National Land Title Organization to Offer One
The National Association of Independent Land Title Agents (NAILTA) has adopted the Professional Ethical Standards of Conduct for NAILTA members. The Professional Ethical Standards of Conduct works as a Code of Ethics for the organization and is the only enforceable code of ethics that exists at the national level.
"This is a significant accomplishment for our national land title association and the title insurance industry as a whole," said Rob Holman, president of NAILTA. "Professional ethics is an aspirational pursuit that raises the bar for the entire title insurance industry. It is good for business and especially good for our reputation with the public."
NAILTA's Professional Ethical Standards of Conduct currently contain ten (10) separate articles of conduct that all NAILTA members must adhere to as part of their membership in the organization. Among the standards, the ethics rules include a duty to avoid conflicts of interest among parties in real estate transactions, a duty to cooperate in resolving clouds on title with other title professionals and an assurance that NAILTA members will promote the interests of their customer while treating all parties to the transaction honestly.
A copy of the NAILTA Professional Ethical Standards of Conduct can be found by clicking here.
"It is amazing to think that this code is currently the only one of its kind at the national level, but we look at this project as an incredible opportunity to give land title agents a professional guide and a marketing tool they can point to in order to separate their good work from their peers who, for whatever reason, cannot," said Holman. "It is critically important to make these provisions enforceable and to build trust with the public by showing them that we, as an industry, believe doing things the 'right way' is also synonymous with doing things the 'ethical way'. This endeavor is more than basic industry best practices. It is the professional pledge our members make to their customers and to the public. It is long overdue."
The Recent Background on Ethics in the Title Insurance Industry:
In 2000, the American Land Title Association (ALTA) formally abolished its Code of Ethics for the land title insurance industry citing a never-used grievance process considered ineffective and problematic at the time.
"That code had been written many years ago and did not reflect current market practices effectively," said James R. Maher, ALTA's executive vice president in 2007 when interviewed by the Title Report.
Maher continued, "[G]iven the fact that ours is a regulated industry, it was felt at the time that consumers and competitors, alike, would be better served by an empowered regulator governing market conduct -- as opposed to a voluntary membership organization trying to 'enforce' a set of high-sounding principles."
ALTA replaced the Code of Ethics with a set of non-binding and voluntary guidelines called the Principles of Fair Conduct in 2008. Those guidelines were adopted by over 40 separate state land title associations and over 118 individual title insurance agencies. Current data on all who adopted the guidelines is unavailable. There is no direct link to the Principles of Fair Conduct available on ALTA's current website and its home-buyer outreach website -- known as www.homeclosing101.org -- no longer contains a reference to the program.
In 2012, the Consumer Financial Protection Bureau (CFPB) began enforcing federal laws relating to the real estate settlement services industry, including title insurance service providers. Despite its previous calls for "empowering a regulator to govern market conduct," ALTA now opposes the structure, funding mechanisms and enforcement reach of the CFPB.
It should be noted that the CFPB was never charged with the responsibility of creating rules for professional conduct in the settlement services industry when the Dodd-Frank Act was first passed by Congress in 2010. The idea that regulators or legislators should be in the position of establishing rules for professional conduct negates the importance of ethics in our industry.
Why We Need Enforceable Ethics in Our Industry?
The law is the relative "floor" of professional conduct. The law is what is minimally required to avoid criminal sanction. Unfortunately, there are many examples of where following the "law" was not in sync with ethical conduct. For instance, federal law permits certain financial advisors in the retirement advisory space to avoid fiduciary obligations to their clients while serving their own financial interests first. Following that path is presently legal, but certainly unethical.
Ethics is far greater than minimal compliance. Ethical conduct is the aspirational objective of any true professional. Having regulators or legislators set the "floor" as the highest standard of professional conduct in an industry is an abrogation of that industry's duty to its members. Yet, that is what the land title insurance industry currently offers.
We can and must do better.
Colleagues in other parts of the settlement services industry understand the CFPB's limitations on governing market conduct and ethics. The Mortgage Bankers Association (MBA), the National Association of Mortgage Bankers (NAMB), the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) each have a code of ethics or professional conduct program that establishes important benchmarks for professionalism. Those organizations manage their own members' professionalism and ethical standards with consistency and each has had a fair degree of success getting regulators and legislators to understand the important relationship of ethics to compliance.
NAR, in particular, has led the way in proving the merits of an enforceable ethics program. Despite changing market conditions in the real estate industry, the NAR Canons of Ethics survive, flourish and serve as a model for similar industries like the land title insurance industry to follow.
When NAILTA members began work on establishing a Code of Ethics in 2014, it was stressed that the process result in a product that was enforceable by the organization. After all, the land title industry is in the best position to know what constitutes professional conduct, not regulators or legislators who likely have never searched a land title nor closed or escrowed a real estate consumer's purchase money mortgage loan. The result of NAILTA's multi-year organizational labor is now on full display and is a beginning point for future conversations on the subject. We invite members, the public and our industry colleagues to join in the discussion. Help us continue to raise this bar.
This is an important value proposition for current NAILTA members. We urge you to promote your membership in NAILTA with the Professional Ethical Standards of Conduct. As a NAILTA member, you are a part of the highest professional standards available for ANY national land title association, independent or otherwise, anywhere in the United States.
For more information on NAILTA, please visit our website at www.nailta.org.