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CEO & PublisherErica Meyer
Editorial & PublishingEditorial DirectorChris Freeman
EditorsTara Quinn, The Title ReportKatherine Bercik, Esq., Dodd Frank UpdateAndrea Golby, The Legal DescriptionMike Holzheimer, Valuation ReviewJustine Jones, Esq., RESPA News
Seminars and WebinarsNathan Marinchick, Director
eCommerceRick Harris, eCommerce DirectorDaniel Kearsey, Graphic Designer
Sales & MarketingCody Hypes, Account Executive
SupportKathy Hurley, Customer ServiceChristine Horvath, Accounting
Business Offi cesSam Warwar, Esq.
The Title Report is a production of October Research, LLC specializing in business news and analysis for the settlement services industry and is published 24 times a year.
Contact information:October Research, LLCATTN: The Title Report3046 Brecksville Road, Suite DRichfi eld, OH 44286Tel: (330) 659-6101Fax: (330) 659-6102Email: [email protected]
Copyright © 1999-2016October Research, LLCAll Rights Reserved.
Any copying or republication without the express written or verbal consent of the publisher is a violation of federal copyright laws and the publisher will enforce its rights in federal court. The publisher offers a $500 reward for information proving a federal copyright violation with regard to this publication. To obtain permission to redistribute material, obtain reprints or to report a violation of federal copyright laws, please call 330-659-6101, or email: [email protected].
April 18, 2016Volume 17, Number 12ISSN: 1937-3899 (print) 1397-3902 (online)
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ABOUT US EDITOR'S NOTEAnnual VOTA survey, report brings view of industry from those on the ground
Dear Readers,
In every issue of The Title Report, I invite you to share your thoughts with us and you have. Allow me to present the 2016 Voice of the Title Agent. For weeks, we asked you participate in our annual survey to share your opinions on the industry. We wanted to know if TRID implementation was behind you, how you were being vetted, your adoption of technology and your thoughts on many other topics. We reviewed your answers and invite you to take a look.
Many of you that participated were independent agents from the South and Midwest who have been in business for more than 20 years. For most of you, 2015 was a strong year, even with the implementation of the regulations. Only 8 percent of you claimed business had gotten worse 2014 to 2015.
In 2015, many of you spent a lot of time and capital on compliance training, implementation and said you are looking forward to getting back to running your title business. Some said they were going to market more; others are going to stop and focus purely on business development. Some are increasing their efforts to market directly to the consumer.
A lot of you have had to beef up your cybersecurity stance either through an E&O requirement or to appease your lender customers. Some are hiring third-party auditors to come into their offi ce to test their vulnerabilities, and others are working on meeting the American Land Title Association’s Best Practices or the SSAE SOC audit standards.
You spoke and we listened. We hope you will continue to share your thoughts and ideas with us throughout the year either by tweet, LinkedIn post, a visit to NS3 in Charlotte, N.C., this year or by simply picking up the phone.
I also want to thank Data Trace and Adeptive for making this report available to all the professionals in the industry. This wouldn’t be possible without your support.
We are your independent news source for the industry and want to know what matters to you.
Thank you again for your participation.
Tara [email protected]
Welcome back to our annual report on what title agents are thinking about and facing in the industry. This year, many of our participants reported growth in their business, although they were less optimistic about the future than in 2015. Perhaps this is because of the new regulatory climate or the cost to comply. Our agents had a variety of answers.
When asked “Is the title industry in better shape than when I entered the business” we received a similar response to last year, as 41.7 percent of our agents said it had not and 34.5 percent said it had. In our 2015 edition, 34.1 percent said that the industry was in better shape while 43.1 percent said it was not.
However, more than three-quarters of the agents said their business improved from 2014 to 2015 with almost a third of those respondents saying it improved a lot. Fourteen percent said it stayed the same and only 8.5 percent said the business was worse during that time period.
Although some are still cautious and feel it should be better, the improving economy was cited several times as the reason for their business growth. One agent said he had a slightly better jobs picture, low interest rates,
a hot commercial market and expansion. Another said the overall market and slow and steady economic improvement were responsible.
“Buyers are looking for bargain prices from sellers who need to move, short-sale purchases and bank-owned property purchases,” one agent said. “Interest rates helped as well. We have a large second-home market in our area, and second homebuyers became more active.”
“Marketing and the economy improved,” said another. “Also, a lot of money seems to be coming out of the stock market to purchase investment property with cash.”
Of those who reported their business had not improved from 2014 to 2015, one agent said it was because of the regulatory climate for the banks.
“They were too busy with compliance to make loans,” the agent said. “TRID (the TILA-RESPA Integrated Disclosure rule) tanked the last quarter of 2015.”
Others credited a bad real estate market, requirements to qualify for a loan, and the fi nancial impact of upgraded
Title agents report business growth in 2015, cautious about 2016 opportunities
4
Did your business improve last year from the year before?
Yes, a lot
2012
2012
2012
2012
2013
2013
2013
2013
2014
2014
2014
2014
2015
2015
2015
2015
2016
2016
2016
2016
Yes, a little No, stayed the same No, it got worse
19.1
%
49.3
%
15.8
%
15.8
%
41.8
%
46.6
%
6.5%
5.2%
27.9
%
39.2
%
17.4
%
15.5
%
16.6
%
41.3
%
20.7
%
21.4
%
31.6
%
46.0
%
13.9
%
software to adhere to industry standards and requirements. One respondent said the presidential election had an effect.
“Business was up last year, but this year is not starting very good,” the agent said. “I think that many people are waiting to see what is going to happen in the presidential race.”
Looking forward, 70.6 percent of the respondents said they are expecting some growth over 2015 and 21.2 percent think business will be fl at. Last year nearly 80 percent said they were expecting some growth over the previous year.
That shouldn’t come as too much of a surprise. At the start of 2015, projections for a strong housing market and continued improving economy were in place, and the real-life impacts from TRID were still unknowns. As agents responded to the survey in the fi rst quarter of 2016, the housing market forecasts were tempered by expected increases in interest rates by the Federal Reserve, and a bumpy start to TRID implementation left many industry participants still working out the kinks.
Some agents said they will be increasing their marketing efforts in 2016, plan to expand their footprint, reach multiple market segments and increase new sales.
One agent said, “I am hoping for more business, but will be happy if we can maintain the same number as in 2015.”
Another credited his optimism to a change in direction
from marketing to sales.
“I don’t have a business development person,” the agent said. “As manager, I wear that hat, but have been doing a bad job of it. So, I am going to focus a ton more energy into getting new solid clients to close in my shop.”
Other agents, meanwhile, said training and market factors will play in their favor:
• “Spending a ton of time, money and energy on training our processors and sales reps. Our customer service is truly what separates us from the pack.”
• “Cheap money. A return to 100+% fi nancing and an increase in cash buyers looking to invest in places other than stock markets.”
• “More stability within the real estate market and less foreclosures and short sales.”
5
How do you feel about business in 2016?
Anticipating substantial growth
2012
2012
2012
2012
2013
2013
2013
2013
2014
2014
2014
2014
2015
2015
2015
2015
2016
2016
2016
2016
Expecting some growth over last year
Business will be fl at Worse, orders will be down in our market
22.8
%
62.0
%
13.4
%
1.8%
21.7
%
63.3
%
10.9
%
4.2%
11.2
%
49.8
%
27.1
%
11.8
%
16.2
%
63.2
%
17.0
%
3.6%
10.0
%
60.6
%
21.3
%
8.1%
8.5%
In the next 12 months a majority of our respondents said renewed sales/marketing approach is their best opportunity for growing their businesses. This was also the favored answer in 2015 but by slightly less. The next best opportunity, respondents said, was geographic expansion, with 23.8 percent this year compared with 18 percent in 2015.
Slightly more emphasis was put on cost reduction as well, with 22.7 percent naming it as their best opportunity compared with 20.4 percent in 2015.
Agents also “wrote in” several options. One agent said they were “holding on and riding the waves until they calm and give direction to the marketplace. (And going to) continue implementing paperless closing fi le.”
Another mentioned the For Sale by Owner segment of the business is “exploding.”
“To combat suppressed prices sellers are in larger numbers avoiding listing their properties to save the commission and cushion their proceeds,” they said.
Concerns over the next 12 months range from compliance issues to operating costs, data and escrow security, vetting and the economy. Most of our agents named the economy
and the mortgage market as their top concern, followed by compliance issues. This is not surprising when the economy is being viewed so widely as either improving or stagnant by agents. Some have credited the improving economy for the growth of their business, while others said it has been a hindrance to homebuying in their market.
“The ‘market’ gets a little more ruthless every day, and I get a little older every day also,” one agent said. “Not a good combination for my personal success in this business.”
“The regulations have become so burdensome, and in Florida there are additional compliance requirements with state Data Call,” another said. “We are being bombarded with regulations and additional compliance requirements, it seems, every day. The continued additional costs for training and time consuming practices continue to be a concern, particularly since in reality there is no real signifi cant benefi t to the ultimate consumer.”
“We are compliant in all areas and are ALTA certifi ed,” said one of our respondents. “I know we can maintain the standard. Operating costs are staggering.”
These concerns have led some in the industry to consider partnerships, mergers and acquisitions in the market. Our headlines often are announcing the newest arrangement
What concerns you the most in thenext 12 months?
Have you merged, acquired or sold a business
in the past 12 months?
Business opportunities and concerns
The economy / mortgage market
Yes NoNot meeting remittance requirements
E&O insurance costs
Data / escrow security
Lack of customers
Staffi ng
Third-party vetting
Operating costs
Compliance issues
52.1%
44.9%14.6%
85.4%24.0%
20.9%
40.7%
22.1%
19.8%
3.8%
32.3%
6
What do you see as your best opportunity in the next 12 months?
Have you joined an agency network orpartnered with other agencies?
Given the recent CFPB guidance, if independent, have you considered exploring any affi liated
relationships going forward?
between agencies; however, 93.1 percent of our respondents said they have not joined an agency network or partnered with other agencies. A little more than 85 percent said they have not merged, acquired or sold a business in the past 12 months.
Many agents had Marketing Services Agreements (MSAs) and affi liated relationships that have gone away since the Consumer Financial Protection Bureau (CFPB) released its compliance bulletin late last year. It said the bureau’s offi ce of enforcement had identifi ed violations of RESPA Section 8(a) in the course of its investigations, including cases that involved the use of oral or written MSAs. Some were used to disguise kickbacks and referral fees.
Specifi cally, the bureau cited a title insurance company entering MSAs as a quid pro quo for referral of business. The fees were based, in part, on how many referrals the title insurance company received and the revenue generated from those referrals according to the bulletin.
In another instance a settlement services company didn’t disclose an affi liated relationship with an appraisal management company and did not tell consumers they had the option of shopping for services before directing them to the affi liate. The steering incentives that are inherent in many MSAs, the bulletin stated, are clear enough to create tangible legal and regulatory risks for the monitoring and administrations of such agreements.
Ren
ewed
sal
es/m
arke
ting
appr
oach
YesYes
Depending on how the industry evolves over the next few yearsNo
No
53.5
%
6.9% 16.7%
93.1%
52.4%
30.9%
Geo
grap
hic
expa
nsio
n23
.8%
Cos
t red
uctio
n22
.7%
New
bus
ines
s ni
che
22.7
%N
ew te
chno
logy
22.3
%
Mer
ger o
r acq
uisi
tion
18.4
%O
ther
9.8%
Exiti
ng th
e bu
sine
ss8.
6%
7
In light of this news, we asked our agents whether they still would consider exploring an MSA. More than two-thirds of our respondents said they would not; others said it depends on how the industry evolves over the next few years.
When we asked the same about exploring any affi liated relationships going forward, more than half said no and others said it depends on how the industry evolves.
We also asked our respondents if they were marketing directly to consumers. Last year it was split, with 46 percent saying yes and 44 percent saying they were not. This year the margin has widened, but not by much, as 47.3 percent said they were not, 41.5 percent said they were and the rest saying they intend to do so soon.
Those who are said they are marketing using newspaper ads, radio ads, social media and word of mouth. One agent said not only were they heavy on social media, but also offer a free YouTube webinar series and a weekly email newsletter. Another said the agency is offering help to For Sale By Owners by offering a fi rst-time homeowner seminar.
“I belong to and am active in various non-real estate industry organizations,” one agent said. “I have my 30-second elevator pitch and tell everyone I meet who I am and what I do and why they should keep in touch with me.”
“Trying via website, social media and blogging, but time constraints along with limited budget practically eliminates any full-scale push,” said another agent.
ALTA recently launched a Homebuyer Outreach Program to help its members easily communicate the benefi ts of owner’s title insurance with homebuyers, and one agent said he was beginning to utilize that program.
The survey also asked our respondents “What is the hardest job in the title business?” (see chart, page 20) Once again the winner was residential loan closers. This year’s runners-up included sales and compliance manager.
“No question, it is residential closer,” one agent said.
“All have their issues,” said another, “but the processors, of which I am not, are on the front lines with both the lenders and the consumers. CFPB has slowed the process, but now customers desire to have everything faster.”
“Just getting a deal closed, with the new rules that the lenders are all doing different ways, and we are trying to adapt,” one respondent said. “I have been in this business for 30 years, and all my girlfriends are getting out.”
Given recent CFPB guidance, have you considered exlporing a marketing services agreement?
Do you market to consumers?
8
Yes Yes
Depending on how the industry evolves over the next few years Not yet, but soon
No No
7.7%
41.5%
21.2%11.2%
47.3%
71.1%
Last year, more than half of our respondents said their lenders had made changes to their closing instructions ahead of the TRID compliance. This year, that number has shot up to almost 80 percent. Another 11 percent said they were preparing for the lenders to change their instructions.
These changes can be from a change in process, establishing credentials or, in many cases, a shift in liability.
The latest regulations have placed the liability for the transaction squarely on the lender. No matter who in the food chain the lender may have worked with, it is the one ultimately responsible to the federal government. To address this, some have asked title agents to sign a clause essentially transferring liability for closing to the agent.
“Lenders are attempting to shift the responsibility of the contents of the Closing Disclosure to the title agents by placing hold-harmless language in their closing instructions,” one agent said.
This was the most common change, according to our respondents, reinforcing concerns settlement agents have been discussing since October. Another change mentioned was the mandatory encryption of non-public, private information. One agent said their biggest concern “is who is getting our personal information and what will they do with it.”
When asked how nervous they were regarding agent vetting and the increase in lender oversight of third-party service providers, the majority of respondents said they had some concerns. Because lenders are responsible for each part of the transaction, they have stepped up the screening process for their vendors. It is not enough just to have a positive history with a lender anymore, it also is necessary to provide credentials such as up-to-date licensing, E&O insurance coverage, cybersecurity precautions and various third-party certifi cations.
Some agents expressed frustration that various lenders have different criteria.
“There is no consistency for what lenders require,” one agent said. “Almost every compliance package is unique.”
Others are concerned lenders are overreaching in their requests, asking for private company documents or information about the buyer or seller that are unnecessary to the transaction. There already have been lenders who have rethought what they are requesting from agents and decreased their requirements to the necessary information.
Small banks and credit unions, in particular, are receiving criticism for not asking enough of their vendors who will be handling private information.
Lenders and TRID
Have you experienced any new form of agent “vetting” in the last year?
Have you seen your lender contracts or instructions change in the last year?
9
Yes
Not yet, preparing for them to
No
48.5% 79.8%
21.4% 26.0% 32.9% 42.1%
18.5%13.0%
19.2%
16.6%9.9% 13.0%
12.7%
12.7%
50.2% 48.0% 35.2% 28.6%
16.6%
34.9%
10.7%
9.5%
2013 2014 2015
2015
2016
2016
No Yes, from a third-party service
Yes, from our underwriter Yes, directly from a lender
Third-party vetting companies also are receiving some criticism. One agent said they are another link in the chain and could prove be a weak one.
“Who really knows these people?” the agent asked. “So many providing vetting services or central portals for coordination are popping up and the numbers will explode as these fee-based systems are promoted and required.”
“I don’t think a vetting company can make their website secure, and hackers will identify vetting companies as a target,” another said.
With TRID now in place, we asked our agents how comfortable they felt with the new rule. In 2015, months before implementation was mandated, only 9.8 percent of respondents said they were perfectly comfortable with the rule. This year 32.7 percent said they were. Last year 31.4 percent said they were still unsure on a few things, and only 26.2 percent said the same this year. Those who are still struggling dropped from 3.3 percent to 2.3 percent.
Many of our respondents said, although they understand the rule, they feel that their lender customers do not.
“I don’t know if I would say I was comfortable, as there are
so many lenders who are interpreting things differently,” one agent said, “but I understand the rule.”
“There are too many portals,” one agent said. “Banks are all over the place. They require us to sign up, but they still communicate through email.”
“It seems that different companies within our market are all doing things differently from title premium disclosures to reviewing the CD with customers,” one respondent said. “There is too broad of an interpretation of how and what is to be done.”
Agents discussed other confusion over TRID as well:
• “I have noticed that everyone’s technology does not calculate the same, which sometimes can be a problem. Also, I don’t understand the necessity to match numbers with a loan company before they will send us closing docs. It seems to me that if the loan company has our fi nal fees, they should be able to issue a CD and send us docs without us balancing fi rst.”
• “Every lender has a different opinion on where items will be shown on TRID and still making changes last minute.”
10
On a scale of 1-5, rate your current level of comfort with TRID:
1
Perfectly comfortable I’m still unsure on a few things
I’m struggling
5332.7% 32.3% 26.3% 6.5% 2.3%
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According to our agents, most of the new vetting is coming directly from their lender customers with some from their underwriters, and others saying they experienced vetting from a third-party service. Almost a third of our agents said they hadn’t experienced any new form of agent vetting in the last year.
Among the concerns from those who have undergone the vetting process is the compliance toll that it takes on the company.
“Lenders are asking us to complete additional paperwork verifying our standards,” one agent said. “Some are using third-party services, so we need to complete additional forms/online applications. Underwriter now wants monthly eRecording reconciliation submitted in addition to monthly trust account reconciliations.”
One agent said his lender customers weren’t storing their compliance information, so the agent had to resubmit the information to the lender for each transaction. Another said he is asked for proof of his E&O insurance almost daily now.
Some, though, said the process hasn’t been too bad.
“Only one underwriter has pushed ‘Best Practices,’ and a couple of lenders have asked for a copy of our best
practices manual, but no one is pushing super hard,” the agent said.
The American Land Title Association’s (ALTA) Best Practices were created as guidelines for the title insurance industry in anticipation of the higher scrutiny that was going to be placed on the industry. Its seven pillars provide instructions on how to compliantly run a title agency and keep non-public, private information safe. They require the agent to document its processes and procedures so they can be audited by lenders, the government or third-party fi rms.
In 2014, 47.1 percent of our respondents said they had completed all of the ALTA Best Practices. That number increased slightly in 2015 to 49.6 percent, but jumpedto 82.6 percent of our respondents in 2016.
Some agents said once they implemented the ALTA Best Practices they saw business improving between 2014 and 2015. One felt optimistic going forward because lenders knew who they were and that they were Best Practices-certifi ed.
Surprisingly, the number of respondents that stated they had implemented the Statement of Standards for Attestation Engagements (SSAE No. 16) and Service Organizational Control (SOC) reports decreased from 57.6 percent of
Vetting
12
Do you think the ALTA Best Practices go far enough?
Have you implemented the ALTA Best Practices?
17.1%4.0%
11.0%3.6%
7.9%1.1%
5.0%
1.8%1.9%
14.6%
48.9%
35.8%
46.6%
26.8%
16.3%
6.8%
3.5%
6.4%
56.5%47.1% 47.9%49.6% 57.0%82.6%
20142014 20152015 20162016
YesYes, all of them NoSome of them
Too farNo
Unsure
Not far enough
respondents in 2015 to 47.1 percent in 2016. These reports are designed to meet the needs of user entities’ management and auditors as they evaluate the effect of a service organization’s controls on a user entity’s fi nancial statement assertions.
One agent said their employer would never “spring for” SOC audits or anything similar. Another had never heard of them.
“We have appropriate controls and systems to protect our data, information and customers,” an agent said. “We have outside audits conducted regularly. There is only so much a small agent can do.”
Yet another respondent said, “Our underwriters audit us on average twice a year; that is six audits a year, from a brief escrow review to a deep audit of all policies, procedures and activity. We found, and heard from others, that many of the auditing fi rms were so unfamiliar with real estate closing business that the effort was more in vain than helpful.”
Instead of participating in an SSAE 16 or SOC audit, one respondent said they did an NIST Cybersecurity Maturity Assessment.
To help agents better understand the vetting process, October Research, LLC recently released its Third-Party Compliance Special Report, a “Lender Oversight Confi dential” webinar and will be hosting Lender Oversight
PACE Lap Sessions at the National Settlement Services Summit (NS3) featuring four sessions. The sessions are designed to educate title and settlement industry professionals on third-party compliance, with expert speakers and fi rst-hand accounts. Attendees will hear directly from bank and non-bank mortgage professionals who are on the front lines of vendor management within their organizations.
Agents also said that although they saw benefi ts from standards such as Best Practices, they hoped to see progress to either strengthen standards or tailor them for smaller agents:
• “I commend ALTA for the Best Practices initiative. They need to go further. I have yet to see ALTA recognize agencies that have implemented and then become third- party certifi ed by one of their Elite providers. If you want to drive this initiative, you need to highlight those that have adopted, just like they do with individuals who attain title certifi cations.”
• “Generally speaking, Best Practices did not introduce any new procedures and policies to our company, BP did prompt us to review and amend our policies and to update certain procedures, all of which are matters each title agent should have been doing all along.”
• “Some of the requirements are not realistic as they cannot be applied across the board to title companies (i.e. small, independent vs. large, national, affi liated).”
Have you implemented SSAE 16 or SOC standards or do you intend to within the next year?
On a scale of 1-5, how nervous are you about agent vetting and increased lender oversight or
third-party service providers?
1 53
13
Yes No23.5% 16.9% 43.1% 6.9% 9.6%
47.1%52.9%
Perfectly calm Very concernedI have some concerns
With the implementation of TRID, technology has been on the forefront, whether it’s the doc-prep systems, the collaboration portals, encrypted communications or data security. Everyone has had to change their technology stance in the past year.
Our respondents said the tools they could not live without this past year were escrow account security technology and title production systems.
“I really enjoy where things are going,” one agent said about industry technology. “Many of these things are making business and communication much easier.”
Collaboration portals used for secure communication between the parties in a transaction are not working as well as hoped just yet, according to our agents.
“I want to say on portals, we were originally led to believe there would be three or four; everyone has their own,” an agent said, “That is kind of a nightmare but it is getting easier. We have had a lot of trouble with (a vendor) changing our system after we had our stuff put in, so we are
kind of hesitant on using it now.”
We also asked how prepared agents are to handle eClosings. Although almost a third said they weren’t even close, a quarter said they would be ready in the next 12 months and nearly the same said they already were conducting them. Approximately 19 percent said they were pretty close to being ready. Most of them aren’t seeing an increase in eClosings, however. A vast majority of the agents said they are doing the same amount they did the previous year, despite the push from the CFPB.
In 2015, the bureau conducted a pilot study to test the effi ciency and effectiveness of eClosings as part of its Know Before You Owe initiative. The results indicated those who closed their mortgage using an electronic platform were generally better off on measures of understanding, effi ciency and feeling more empowered than borrowers who used just paper forms.
“While technology alone will not address all consumer concerns in the closing process, our study showed that eClosings do offer the potential to make the process less
Technology
How prepared are you to handle eClosings?
How often do you conduct eClosings?
14
I’m already doing eClosings More than last year
I’ll be ready in the next 12 months Same as last year
Pretty close to being ready Less than last year
Not even close
24.7%
10.0%
31.4%
73.6%
16.4%
25.1%
18.8%
complex,” CFPB Director Richard Cordray said at the time.
Some agents said they wouldn’t mind offering the service to the consumers, but they aren’t being requested in their area.
“I’m confi dent we could be ready,” said one agent. “However, no one in this area is currently doing them.”
Another agent said they did more eClosings fi ve years ago than they do now. Others are concerned about fraud, or that the title agent would be unnecessary at the closing table if eClosings were to be adopted.
“They could destroy the need for local closing agents if the borrower could close a loan from their bedroom in their PJs,” an agent said.
“A lot depends on when lenders will accept eSignatures on notes and mortgages,” another agent said.
Plenty of other opinions on technology and the eClosing
process were offered as well:
• “Never been asked to perform (an eClosing), but will be ready.”
• “The eSigning technology needs to be more secure.”
• “Wish the portal integrations were better.”
• “Most of the portals and methods are very cumbersome and confusing at this point.”
• “The biggest void in the industry that remains is the inability for production software to integrate with a CRM.”
• “The specifi c state we operate in does not support eClosings for real estate”
• “I refuse to do (eClosings) because of increased chance of fraud.”
• “I’ll probably leave the industry when they (eClosings) become standard.”
15
Rate your attitude about these title technology attributes/solutions
eRecording capabilities
Escrow account security technology
My title production system
Cloud hosting
Integrations with providers / customers
Auto-fi lling of forms
Lien release / document retrieval
eMarketing solutions
Paperless storage
Portals
Don’t have it
Don’t need it
NeutralWould like to have this
Can’t live without it
15.9%
3.1%
3.1%
17.4%
8.2%
8.2%
7.4%
12.3%
3.6%
5.4%
12.1%
3.1%
1.9%
10.0%
3.9%
5.9%
8.6%
9.1%
3.9%
5.8%
20.5%
25.8%
33.0%
42.5%
44.5%
32.8%
35.6%
50.0%
25.3%
54.6%
36.7%
59.2%
55.6%
19.7%
20.7%
33.6%
25.0%
8.3%
53.4%
21.9%
14.8%
8.8%
6.1%
10.4%
22.7%
19.5%
23.4%
20.3%
13.8%
12.4%
Last year, our agents said fraud was getting too much hype as an industry concern. This year almost half disagree with that statement. But when asked whether enough is being done in the industry to prevent fraud and ensure escrow security, approximately the same amount said yes.
“I think the industry is doing a good job getting info out, but I think agents are too slow to react,” one agent said.
Many agents are hiring third-party auditors to come in and check their cybersecurity stance so they can tell their lender and Realtor customers their consumer’s data is secure at their agency. Professionals have performed penetration tests seeking security vulnerabilities. Some even have walked inside the offi ce building and grabbed pieces of private information laying around to show how easily the information could be stolen.
And it’s not enough just to say the information is secure. The lenders and the federal government want proof that it is, and will punish those who are deceitful. In March, the CFPB took its fi rst data security enforcement action against online payment platform Dwolla for alleged violations of the Dodd-Frank Act’s prohibition of unfair, deceptive or abusive acts or practices. It had claimed to have more cybersecurity than it actually did. The CFPB’s press release accompanying the enforcement stated that the CFPB’s fi rst data security action “builds off advances made by several other agencies.”
Cybersecurity has become an increasingly important topic for regulators.
“At the macro level, banks (and) lenders are trying to use more secure systems but most failure is at the bottom of the food chain. There is insuffi cient awareness of how we can all be careless in not following procedure and the consequences,” an agent said. “The lender and title agents are required to follow all of the new procedures but the Realtor is not trained or alerted like we are about scams. They are not being required to have encrypted email to send NPI, so that is the break in the food chain!”
“I believe there are many things that can still be done, but we are protecting our consumers the best we can at this point,” an agent said. “As new scams arise, new security rules will be continually changing.”
Even some agents’ E&O insurance has changed to adopt cybersecurity coverage (see chart, page 20). Most of our respondents haven’t seen the change yet, but some were required to add cybersecurity to their coverage.
SecurityWhich type of deals does your
company handle?
Is enough being done in the industry to prevent fraud and ensure escrow security?
16
47.5%
24.2%
28.3%
Yes
Unsure
No
Purchase Refi nance
Commercial New construction
Short sales Foreclosure / REO
Reverse mortgage Mortgage modifi cations
Deeds-in-lieu
97.7%
95.1%
78.5%
72.1%
62.6%
54.3%
49.1%
43.4%
38.1%
Agents have a variety of underwriters to choose from, but they say they prefer to work those that aren’t competing against them.
“With national underwriters, you have direct operations competition, especially for the profi table commercial deals,” an agent said. “Small underwriters won’t always get approved by various lenders without signifi cant hoop-jumping.”
Still, most of our respondents said they would prefer to work with a big and national underwriter as opposed to small and regional. Others would work with any of them.
“I don’t care what size the underwriter is or whether its national or regional, so long as it is acceptable to my clients and so long as it has experienced underwriting staff,” an agent said.
Asked whether the industry needs more regional underwriters, more than a quarter of respondents agreed and 20.8 percent disagreed, with the rest saying they were neutral. Regional underwriters will be featured at the NS3 conference in June, with a panel titled “Rise of the Mid-Cap Underwriters.”
UnderwritersWhat type of underwriter do you prefer
to work with?
17
Big and national
Something in the middle
Small and regional
All of the above
None of the above
40.6%
9.6%12.6%
36.4%
0.8%
Please rate your level of agreement/disagreement with the following statements:
The title industry is in better shape than when I entered the business
Our industry needs to do a better job communicating with consumers
Lenders hold too much power over us
Fraud gets too much hype as a concern in the industry
We need more regional underwriters
Agree Disagree Neutral
34.5%
57.6%
61.2%
18.9%
26.5%
23.8%
30.6%
31.6%
34.2%
52.7%
41.7%
11.8%
7.2%
46.8%
20.8%
The Voice of the Title Agent 2016 survey once again was completed mostly by independent agents. Some were affi liated with real estate brokers, mortgage lenders and hombuilders. Respondents were mostly from the South and Midwest but there were agents from around the country.
The majority of agencies they represented have been in business for more than 20 years, with only 27 respondents in business two to fi ve years. Slightly more than half had one title offi ce, and a quarter had two to fi ve offi ces. Only 13 percent of our respondents had more than 20 offi ces. Commercial, purchase and residential were still the most popular services with new construction coming in fourth place.
When asked what was trending in their market they said:
“New construction and commercial are trending up.”
“Purchases and refi nances remain steady.”
“Purchases up, refi nances down”
“Up purchase, new construction, reverse mortgages; down – foreclosures, short sales, modifi cations and deeds in lieu”
“Vacation homes and relocations trends up. Foreclosures and REOS trending down.”
DemographicsHow would you describe your agency?
Where are you located?If affi liated, with what type of companies?
18
Independent
Affi liated
Direct
75.5%
23.6%
9.0%
27.7%
38.2%
10.5%
15.5%
Northeast Midwest
South West
Other Real estate broker
Mortgage lender Real estate agent
Homebuilder Mortgage broker
37.4%
28.9%
22.9%
21.7%
15.7%
9.6%
19
How many years has your company been in business?
20+ 11 to 20
6 to 10 2 to 5
1
51.1%
24.6%
16.0%
7.2%
1.1%
How many offi ces does your title company operate?
1 2 to 5
20+ 6 to 10
11 to 20
50.1%
25.5%
13.0%
8.0%
3.4%
What do you think is the hardest job in the title business?
How often are you pressured by customers to insure over certain items you normally
would not?
Has your E&O insurance policy changed in the last 12 months?
39.9%
8.8%
19.4%
10.9%
31.4% 7.1%
5.7%
9.5%
20.6%
46.7% 23.8%
2.0%
20.9%
13.1%
40.2%
Residential loan closers
Very often Yes, considerably more expensive
Title searchers
Yes, more exclusions than beforeSometimes
Underwriting counsel
Yes to both!
Never
Sales
No, actually, it is cheaper
Rarely
Auditing
No change
Compliance manager
20
