Is the Solution to Today’s Title Challenges Hiding in Plain Sight?
October 12, 2021
By Prashant Kothari
In Joel and Ethan Coen’s 2000 comedy-drama, "O Brother, Where Art Thou?" there’s a scene in which the three protagonists escape from a chain gang and find refuge in a barn, only to be awakened by lawmen who announce they have them surrounded. As the lawmen first shoot at them and light the barn on fire, the leader of the gang, Ulysses, hilariously repeats the line, “D---, we're in a tight spot!”
While not nearly as comical, many title professionals today have probably uttered something similar, and more than once. That’s because they face multiple, intensifying challenges—from staffing shortages to volatile revenues to processes that are riddled with manual labor. But there is relief available if they know where to look.
Stuck in the Past?
In recent years, automation has erupted throughout the mortgage industry, especially at the front end of the loan transaction. From point-of-sale technologies to automated income and asset verifications, it has become increasingly faster and easier for lenders to price and originate loans. Yet the title industry has not seen anywhere near the same level of innovation. On the whole, title production, search and curative work remains a very labor-intensive business.
Title is also a very gray industry experiencing a major shortage in talent. Title may be an essential business, but it’s by no means sexy or glamorous, which means few young people even consider title work as a career. The vast majority of title processors and underwriters are in their 50s. I know of one title agency in California that has gone as far as visiting local community college campuses to look for recruits. Yet they are competing with manufacturing and technology companies that can offer work that’s far more exciting to someone coming out of school.
Both the lack of automation and staff shortages are exacerbating the typical issues that hold up title processes. Title production and curative work is performed in an assembly-line fashion that involves many different activities. One obstacle can create bottlenecks that not only stall other title activities but the mortgage transaction as well. And the current demand for both refinances and purchase loans has led to a lot of bottlenecks.
It doesn’t help that the costs of title work are fixed, yet revenues are both cyclical and volatile. This makes it nearly impossible for title companies to maintain the proper staffing levels. In fact, in a typical month, the average title company is either understaffed or overstaffed for most of the time and perhaps optimally staffed one day in a month.
These Are Not Yesterday’s Outsourcers
Title challenges reached a fever pitch during the pandemic and have continued ever since. When COVID hit in March 2020, initially there was a bit of a freeze in the housing market. Within a month, however, mortgage refinancing volumes went through the roof. So did the volume of title work. As companies struggled with capacity, more work was outsourced—and yet even some of the biggest outsourcers couldn't handle the additional volume.
The good news is that, over the past several years, a new breed of outsourced title vendor has quietly emerged that is better equipped to address all the challenges title companies currently face. By combining deep benches of offshore and onshore title production, search and curative expertise with new technologies, it’s now possible to outsource as much as to 80% of the behind-the-scenes title work while easily scaling resources to account for any volume of work clients require.
With such help at their disposal, title companies can focus their attention on acquiring new business without worrying about whether their teams can handle the additional workloads.
Ten years ago, most offshore vendors were mostly capable of only handling additional refi volume, as purchase loans were viewed as being a little too complex to outsource. However, firms have invested significant time and money in providing specialized training for their teams to handle purchase loans as well, with special focus on state-and-local intricacies. There are specialized desks to handle title work in states where originating purchase loans is particularly complicated (California, New York, Florida and Pennsylvania, among others) and full-fledged title curative teams working both offshore and onshore. Because curative work generally requires specialized knowledge, being able to access curative expertise in stateside locations ensures all work is done effectively and efficiently.
Leveraging the Advantages of Technology and Time
While technology innovation and adoption have moved at a snail’s pace within the title industry, there are title vendors that have developed their own proprietary technologies to improve title production efficiency. Very few title outsourcers have done so, but those that have also typically built compliance and quality control tools into their systems that ensure all work meets current regulatory requirements as well as each client’s specifications and unique business rules.
These tools are particularly useful for clearing up the type of bottlenecks I mentioned earlier. Every obstacle in the title process creates a domino effect that can affect everything downstream, including closing dates. By integrating compliance and quality control tools into the different activities attached to a title search order, for example, these obstacles can be identified and cleared almost instantly.
The key benefit behind utilizing a title vendor with all the above traits—specialized training, a combination of offshore and onshore teams and proprietary technology—is the ability to significantly shorten cycle times. With the right title vendor, title orders can be sent over at the end of the day and be sitting completed in the client’s inbox when they return to work in the morning. Shorter cycle times not only create a better customer experience, but they enable title agencies to focus the bulk of their efforts on customer acquisition and growing business.
The bottom line is that title work will continue to be very labor-intensive for the foreseeable future. Unlike other sectors of the housing economy, there are certain hurdles to automating and standardizing title work that make it difficult for title companies to be more productive while lowering costs. This means title companies still need people to do the work.
But while title challenges have grown over the past several years, so too have the capabilities of outsourcers that were able to make the key investments in people and technologies that most title companies could not. Getting out of the “tight spot” title companies currently find themselves in only takes rethinking what today’s vendors are truly capable of—and using them.
Prashant Kothari, managing Director of SitusAMC Title Production Services, has been associated with the mortgage industry for more than three decades. In 2005, he launched String Real Estate Information Services, which was acquired in 2019 by SitusAMC.
Contact ALTA at 202-296-3671 or [email protected].