ALTA Best Practices Pillar 2, explained for escrow accounts

Short answer: Pillar 2 of ALTA Best Practices v5.0 (effective October 8, 2026) covers escrow trust accounting. It calls for bank activity to be reconciled to the escrow books at least daily, a three-way reconciliation at least monthly, reconciliation by someone with no signing or disbursing authority, and monthly results reviewed by management and made available to the title insurer.

Pillar 2 of the ALTA Title Insurance and Settlement Company Best Practices covers escrow trust accounting: keeping escrow money separate, reconciling it, and controlling who can move it.

What Pillar 2 asks for

The best practice itself: "Adopt and maintain appropriate written procedures and controls for Escrow Trust Accounts allowing for electronic verification of reconciliation."

On reconciliation, version 5.0 (effective October 8, 2026) says all escrow trust accounts are reconciled:

1. "On at least a daily basis, reconcile the Escrow Trust Account activities in the bank’s records to the activities in the Escrow Trust Account books, identifying and investigating any discrepancies. This activity may be performed electronically or manually depending on volume of items clearing the bank."
2. "On at least a monthly basis, a Three-Way Reconciliation is performed."
3. "Segregation of duties is in place to help ensure the reliability of the reconciliation and reconciliations are conducted by someone who does not have signing or disbursing authority."
4. "Shortly after the monthly Three-Way Reconciliation of each fiduciary account is completed, results are reviewed and approved by Company’s management and are made available to Company’s contracted Title Insurer(s)."

It also says "Balances older than six months require management approval of activity."

Source: ALTA Best Practices, Version 5.0, Pillar 2.

Who may do the reconciliation

Pillar 2 states that "Settlement companies may engage outside contractors to conduct Escrow Trust Accounting duties," and that the daily reconciliation "may be performed electronically or manually." What it requires of whoever does it is independence from the money: the reconciliation is conducted by someone who does not have signing or disbursing authority. A properly segregated internal process, software, or an outside firm can each meet that.

The part an audit reads

Pillar 2 ends with the results being reviewed by management and made available to the title insurer. That record, month after month, is what an underwriter’s auditor reads.

Where AER fits

AER reconciles your escrow from outside your system of record, your bank and your underwriter, and documents it for the people who audit you. Independence is the product.

See how AER works · Get a Free Snapshot

Questions

How often does Pillar 2 say to reconcile?

Bank activity to books on at least a daily basis, and a three-way reconciliation on at least a monthly basis.

Can an outside firm do it?

Yes. Pillar 2 says settlement companies may engage outside contractors to conduct escrow trust accounting duties.

Is Pillar 2 a law?

No. It is an industry best practice. Underwriters and lenders may require it by agreement; check yours.

This page is general information, not legal advice.