Agency Today – A Magazine About Growth and Prosperity™ by First American Title - Agency Division

AGENCY

TODAY A M AGA ZIN E A BOUT GROW TH A N D PROSPER IT Y

Issue 1

5 QUESTIONS TO GROW YOUR AGENCY DEMOGRAPHICS: THE CUSTOMERS OF TOMORROW A VIEW FROM CAPITOL HILL AGENT SPOTLIGHT: HILLSBOROUGH TITLE

AGENCY

TODAY Welcome to AGENCY TODAY - A MAGAZINE ABOUT GROWTH AND PROSPERITYâ&#x201E;˘, published by First American Title Insurance Company. Agency Today is a publication covering a broad range of topics focused exclusively on growing and strengthening your title business. First American Title is committed to providing you valuable content, new ideas and access to the brightest minds in our business. It is our hope this magazine finds a home in your collection of reference materials. We commit to not only help you resolve everyday challenges but to help you achieve new levels of success in your business.

AGENCY TODAY STAFF EDITORIAL Louis Pontani EDITOR IN CHIEF VP, SALES AND MARKETING

Lynn Lewis EDITOR/CONTRIBUTING WRITER

ART AND DESIGN Sheli Cordero DIRECTOR, MARKETING & COMMUNICATIONS

Agency Today | Fall 2014

CONTENTS 4-5

MEET THE DIVISION PRESIDENT, EVAN ZANIC

6-7

5 QUESTIONS TO GROW YOUR AGENCY

8-10 11 12-14 14 16-17 18 20-23 25

Evan Zanic has his eye on the ball and outlines his vision for the future of the First American Title Agency Division. By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

As a leader charged with growing revenue, the answers to these questions will create the foundation to focus your activities and produce results.

A VIEW FROM CAPITOL HILL

By: Kurt Pfotenhauer, Vice Chairman, First American Title

Our Nation’s housing finance system continues to be a focal point for debate in Washington D.C. even as the pending mid-term elections later this year are starting to shift the attention of Congress away from legislating and toward campaigning.

FIRST AMERICAN: FINANCIAL POSITION OF AN INDUSTRY LEADER

As we celebrate First American’s 125th anniversary, we’re proud to continue to serve our customers with the financial strength you’d expect of an industry leader.

BEST PRACTICES: A RECIPE FOR SUCCESS

By: John M. Hollenbeck, Executive Vice President, First American Title

It is time to make lemonade; our agents need a recipe to embrace ALTA Best Practices and drive business growth in tumultuous regulatory times.

SALES EXERCISE

An exercise you can use with individuals, or in a group setting, to design talk tracks for your agency.

CONSUMER COMPLAINT MANAGEMENT

By: Krista Arce, Business Development Manager, Rizolv Complaint Management System

When customers have great experiences, they are more likely to tell their friends or associates about them. But what if something didn’t go as well as they expected? You still have an opportunity to build trust and keep your customer happy by the way you handle the complaint.

AGENT SPOTLIGHT: HILLSBOROUGH TITLE

An interview with Aaron M. Davis, CEO/Owner, Hillsborough Title.

POOF

By: John M. Hollenbeck, Executive Vice President, First American Title

How a small, locally owned title agency serving a mid-size town and rural communities lost it all and how it could have been avoided.

EMOTIONAL INTELLIGENCE

By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

Natural born sales people and how they instinctively read the emotions of their buyers.

26-27

SPEAKING OF SUCCESS

28-29

DEMOGRAPHICS: THE CUSTOMER OF TOMORROW

30-31

GETTING THE CLICK

By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

Develop the skills and confidence necessary to deliver a presentation that is memorable to both you and your audience.

AGENCY

TODAY

By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

Recently, The Joint Center for Housing Studies of Harvard University published their annual report, The State of the Nation’s Housing 2014. The report is packed with excellent data and interpretations that are akin to looking into a crystal ball. By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

We all receive and send lots of emails. Managing them is an endless task of prioritization. The language used in email is paramount in determining which communications are opened first, understood the easiest and acted on the fastest. Agency Today | Fall 2014

MEET THE DIVISION PRESIDENT

EVAN ZANIC Little League Baseball® has been the foundation for developing leadership skills such as the value good sportsmanship, teamwork and a winning attitude; but few can cite the experience as a catalyst for pursuing a career in the title insurance industry. Evan Zanic, the Agency Division President of First American Title Insurance Company, recently took time out of his busy schedule to answer some questions covering a few of the bases regarding his personal and professional background, leadership style, and the opportunities and challenges in the ever-changing landscape of the title industry.

WHO’S ON FIRST How did you get into the title business? I was born and raised in Pittsburgh, Pennsylvania and my fondest childhood memory is playing catch in the backyard with my dad and brother. My Little League baseball team was coached by my dad and his friend, a senior partner in a law firm. As I was finishing my freshman year at the University of Pittsburgh, my mother ran into him and asked if he had any openings at the law firm. He called a few days later and hired me as a messenger. I worked for the law firm throughout college, predominately summers and as my studies would permit, searching titles, clerking, and performing residential closings. Upon earning my law degree, I was hired and eventually became a partner in the firm and was heavily involved in the title agency. This experience proved to be a real asset in my career because I developed an understanding of the industry from many perspectives, which gave me a familiarity with what people go through on a daily basis. Who is your role model, and why? Obviously my father, but professionally it would be Robert Hauser, Northeast Division President, who retired five years ago. Bob joined First American Title Insurance Company in 1997 after having tremendous success at another company. I have great admiration for him because he was more interested in finding and developing talent than he was in promoting his own self-interest. We have a solid base of knowledgeable professionals and strategies in place for recruiting talented individuals; my role is to develop their skills and competencies to ensure the future success of our company.

STEP UP TO THE PLATE How would you describe your leadership style? My leadership style is open and collaborative. No one person has all the answers and in many cases, all the right questions. 4

Agency Today | Fall 2014

As a customer-focused company, we are actively engaged in bringing our employees and agents together in collaborative events to allow voices from different knowledge bases and perspectives to be heard. This enables us to implement ideas, plan strategies, strengthen relationships and move forward together. How do you measure success? Our corporate objectives are to develop our people, grow the Company and enhance the customer experience. I’d consider meeting those objectives, and having fun while doing it, a success. What song best describes your work ethic? Bachman Turner Overdrive: Taking Care of Business.

GO THE DISTANCE A leader must be equipped with a set of competences necessary to perform his role. Which would you say are the most important abilities? Knowing the business and having good management skills are certainly critical components, but having good employee and customer relationships are equally as important. My new position did not require me to leave Pittsburgh and relocate to our Corporate Headquarters in Santa Ana, California. It does require an extraordinary amount of travel which gives me face-to-face opportunities all over the country. I’ve been in the trenches throughout my career and it’s important to me to remain accessible. Customers may enjoy meeting the senior leadership of our Company; it can enhance the relationship, and it also lets them know that from the top down, we care about our customers and are interested in knowing more about their business. With the intense scheduling demands of your new position, what tools or habits do you use to keep organized?

Anyone in a leadership position will attest to the fact that massive amounts of information and communication can at times be overwhelming. I make it a priority to respond to emails and phone calls promptly, keep my calendar current and take a lot of notes, otherwise things will be out of control. It’s not a question of how you do it, you must do it. I received over 250 congratulatory messages the day my promotion announcement went out and I responded to each one with a personalized message. It would have been easy to reply with a simple “Thank You”, but it mattered to me that people took the time to write. At the end of the day, it comes down to common courtesy, principles and how you were raised. There is always that voice in my head that sounds suspiciously like my mother.

HOME FIELD ADVANTAGE Every day is game day in the title insurance industry. What offensive strategies does First American Title have in place to help our agents succeed? We are in the relationship business and the success of our agents is a top priority. In baseball and in business, the strength of the team can be a

compliance three times because I feel it is that important, I included Service Levels because compliance coupled with maintaining and improving the level of customer service will give agents a competitive advantage. The industry landscape is ever-changing and the ability to remain compliant with federal regulations is critical. In challenging markets, agents need tangible advice and innovative tools that will help them in their everyday business environment. I am proud of our Best Practices, Simplified program because it helps agents create the policies and procedures needed to implement the ALTA Best Practices Framework and also provides access to vendors offering solutions for each of the 7 Best Practices pillars.

KNOCK IT OUT OF THE PARK In five years how will the Agency Division look? I am not sure exactly how it will look, but I know we will be #1 in the marketplace. I believe the most significant growth in the Company will occur in the Agency Channel because we have tremendous opportunities in the top four markets that control 43% of the business. Our consistent and relentless focus on enhancing the customer experience will help us achieve our goal.

“We are in the relationship business and the success of our agents is a top priority.” game-winning advantage that leads to success. First American Title Insurance Company has all the bases covered with its title insurance protection, underwriting expertise, streamlined processes, and unparalleled service delivered by knowledgeable professionals. We have the best people, work for the best company, and provide the best support to enable our customers to become successful. If you were a small title agent, what three things would you focus on? Compliance. Service Levels. Compliance. Although I wanted to list

What accomplishment do you consider to be the most significant in your career? When I started with the Company in 2001, market share in Pennsylvania was approximately 16%. At the end of the first quarter in 2014, market share was 42.5%. Even though I have held numerous leadership positions throughout my career, I remain uncomfortable with the concept of people “working for me”; they “work with me.” It took a village to make it happen. The collective efforts of committed individuals led to our success.

SAFE AT HOME If you could have an uninterrupted dinner conversation with one person, who would it be? My grandfather…to let him know how well his family has done in America. He arrived in America from Greece with $20.00 in his pocket and a belief that anything was possible. Our family’s success is clearly a result of the values and work ethic he instilled in us. My entire family lives here in Pittsburgh, and I am blessed to have my mother and father still with me. My wife, Dorothea, and I celebrated our 31st wedding anniversary on July 3rd. My oldest son, Michael, graduated from medical school in June and started his residency in a local hospital. My daughter, Christina, is a practicing attorney at a Pittsburgh law firm. My youngest son, George, graduated from my Alma Mater, the University of Pittsburgh, with a degree in environmental studies and is completing an internship in that field. What might someone be surprised to know about you? Throughout four generations, the male children in our family have rotated three names that are used in one form or another for the first and middle name. Grandfather: Dad: Dad’s Brother: Evan: Brother: Oldest Son: Youngest Son:

Evan Michael Michael Evan George Evan Evan Michael Michael George Michael Evan George Nicholas

What is the best piece of advice you were ever given and who gave it to you? My dad, Michael, gave me this advice, “Your ultimate ability to succeed in your chosen profession will depend on your ability to get along with people. If you are able to do that, people will forgive you when you make mistakes… and Lord knows, you are going to make mistakes.”

Agency Today | Fall 2014

QUESTIONS TO

GROW YOUR

AGENCY

By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

Large or small, every business needs answers to five basic questions. These questions are the starting point to plan your growth. As a leader charged with growing revenue, the answers to these questions will create the foundation to focus your activities and produce results. Results in any market condition you can often count on. Donâ&#x20AC;&#x2122;t be fooled though, just because the questions sound easy doesnâ&#x20AC;&#x2122;t mean the answers are. In fact, companies large and small struggle with these questions every day. Companies committed to answering these questions to the fullest are the companies that will be in the best position to win and beat the market. 6

Agency Today | Fall 2014

GROWTH STARTS WITH LEADERSHIP Congratulations you weathered the storm; you outlasted and outperformed some of your competition. You survived the great recession! Now is your time. General consensus is that the next 5 to 7 years are growing years. How much you grow and how your company performs in the market’s ups and downs is up to you. You are your company’s leader. As a leader you need a plan and that plan begins with questions. This article is designed to guide you through those questions and help you take more control of your company’s growth. Many title agents both large and small struggle with strategic planning. Month-end transaction volume and the high dependency of outside parties to complete transactions make strategic planning and execution of a revenue plan difficult. However, in order to grow organically and exceed the overall market, title companies need to adopt some form of strategic planning. The questions below are a starting point. They are designed to keep a revenue growth plan simple and straightforward. Simple and straightforward keeps your growth plan executable. The best organic growth plans start with questions, such as; 1. 2. 3. 4. 5.

Where and who does our business come from today? Who has more business to offer me (us)? Who should I (we) be working with that I am not? What do I (we) need to be doing to get the business? How is success measured?

EXPLORING THESE QUESTIONS Where and who does my business come from today? A legitimate question every business should be able to answer. This question will establish a starting point for a growth plan. Who are my customers, are they lenders or real estate professionals? How many transactions did they send last year? What are the average sales prices and loan amounts for the transactions they sent? Who has more business to offer? This question requires some digging. The point of the question, when answered well, is to provide you with a specific target list of referral sources you should concentrate the most effort on. For (Exhibit 1)

Growth Type Sales Person Target Name

Referral Source

Wallet Share Wallet Share Wallet Share New Client New Client New Client

Agent Lender Builder Lender Agent Commercial Attorney

Lou Pontani Lou Pontani Lou Pontani Lou Pontani Lou Pontani Lou Pontani

Martin McHill Roxanne Gill Jim Durham Hugh Grant Bob Leaveck Don Smith

example, if Jane Doe real estate professional sends you all her transactions then she might not be at the top of your business development plan. That does not mean she gets ignored either. Addressing Jane Doe becomes more of a client maintenance function and less of a growing your business function. Who should I be working with that I am not? A logical answer to this question may be, “Every agent and lender that I am not.” However, your business may not be best served with that response. You don’t want to work with every referral source. Resources are not unlimited, so who do you focus your new-client sales activities on? You want to work with the most-profitable, most-volume-producing, going-to-be-inthe-business-forever referral sources. More questions and some research are needed to get to a meaningful answer. Answers to questions like these will bring more focus and yield larger results in the long run. For example; who are the top agents and loan officers in my service area? Who are they doing business with currently? What type of business do they concentrate on? Residential? What type of residential—second home, luxury, first-time home buyer? These are the answers that help you become relevant and in sync with your target. What do I (we) need to be doing to get the business? So let’s consider you have answers to the first three questions. Your results at this point should look like a target list with names and sales data. What highly effective and compliant sales activities can you incorporate to begin or advance the relationships on your target list? Pick activities that you do well. If you have a sales force, are the best practices for that activity documented and communicated? If your sales people are hosting a seminar (where local regulations permit such activities), are they all following the same procedures outlined in the plan? If you have something that works, continue on that course. Consistency is the key. How is success measured? At this point you have lots of answers and lots of “to-dos.” How success is measured is where accountability is built. What you select to be success criteria and how far into your plan you place metrics should be based on what you feel you can manage realistically, the experience of your sales team and what you can easily pull data for. At a minimum, each target should have an annual forecast of transaction units. (See exhibit 1)

20% ACTUALS Total Transactions Transactions Year 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Plan Total Available Received Available Capture Actuals Transactions 2013 Goal 60 15 45 9 2 5 6 8 5 24 26 50 25 25 5 3 3 3 5 5 30 19 50 30 20 4 7 8 8 9 10 34 42 65 0 65 13 0 0 0 0 5 13 5 75 0 75 15 0 0 0 0 6 15 6 45 0 45 9 0 0 0 0 4 9 4

Lou Pontani

125

Plan Delta

102

2 -11 8 -8 -9 -5

-23

Whether you are leading yourself or a national sales team, growth starts with you, the leader, and every leader needs a plan. Before you start developing your plan, you need to get answers. It does not matter how large or small the company, the five questions are always the same. Yearly, quarterly, monthly or weekly these questions and answers bring consistency to your sales leadership. They key now is your time. These answers are tough for even the largest companies with the most advanced technology. Taking the time to answer the right questions first will pay big dividends in the future. Agency Today | Fall 2014

Agency Today | Fall 2014

A View From

CAPITOL HILL Our Nation’s housing finance system continues to be a focal point for debate in Washington D.C. even as the pending mid-term By: Kurt Pfotenhauer Vice Chairman elections First American Title later this year are starting to shift the attention of Congress away from legislating and toward campaigning. The specter of elections, particularly mid-terms, tends to drain the Congress of its legislative capacity and political willingness to address large, complicated issues. A telltale sign that we’ve shifted into campaign season is the increased willingness on the part of legislators to quickly put down the pen and go silent on legislation that is, or could become, complicated technically and politically. We saw this occur on May 15th in the Senate Banking Committee after a group of Democratic senators pulled their support for the bi-partisan Johnson-Crapo GSE reform bill primarily over an inability to reconcile issues with the bill’s affordable housing goals, causing it to pass out of committee by a relatively weak vote of 13 to 9. While Senate Majority Leader Harry Reid (D-NV) has the prerogative to schedule a ﬂoor vote on the Johnson-Crapo GSE reform package, we’ve heard almost nothing about any aspect of the bill since it slid out of Committee, nor do we anticipate any action. From Reid’s perspective,

why would he make members of his caucus go on record on a reasonably controversial piece of legislation in an election year? Hence, the odds of GSE Reform passing before Congress adjourns at the end of the year diminish by the week. Another important housing measure now stalled in the Senate is the “Mortgage Extenders Package.” Fifty popular tax breaks expired this past New Year’s Day. Among them was a one- year extension of the Mortgage Forgiveness Debt Relief Act, which allows underwater borrowers to short sell their homes without being taxed on the principal written off by the lender. Many industries rely on the extenders package to pass year after year, even setting their business plans on the assumption of passage. It’s normally considered “must pass” legislation. For the title industry, and particularly for agents focused on short sale business, passage of the mortgage debt relief extender has been a top priority. The extenders package is already more than late this year. Typically, it would have passed in December of last year – this past January at the latest. So to have the bill delayed until late spring when the Senate was set to pass it with retroactive language was itself an anomaly. However, on May 15th, when leadership tried to bring the bill to the ﬂoor, a partisan dispute broke out over the right to offer amendments, necessitating the need to gather 60 votes just to proceed. Senate Majority Leader was not bashful about confirming the stalemate. On June 5th, after being asked whether

the tax extender package is hopelessly deadlocked until after the mid-term elections, the Nevada Democrat said “I guess the answer is yes.” The Senate’s fiscal year 2015 Transportation, Housing and Urban Development (THUD) bill also fell victim to politics just before the 4th of July Congressional recess when Senate Majority Leader Reid pulled the $180 billion spending measure from the Senate ﬂoor after dispute began—yet again—over the Majority Leaders’ procedural plan for passage—a plan which would have prevented Republicans from offering amendments to the massive funding bill, just like on the tax extenders measure. The “minibus” spending bill would fund the Departments of Agriculture, Commerce, Justice, Transportation, and Housing and Urban Development, including the FHA, for the 2015 budget year beginning October 1. If the Senate fails to pass its THUD bill, which is likely, Congress will need to pass a sort of band-aid funding bill or “continuing resolution” to fund these and other agencies until after the elections. Why are election politics exerting even more inﬂuence over the action of the legislature than usual, to the point of preventing the passage of popular tax breaks? Well, for one thing, control of the Senate is truly up for grabs in November 2014, and that creates a greater incentive to avoid tough votes than to pass even popular programs like the extenders bill. So let’s take a look a look at what’s happening in those key Senate Agency Today | Fall 2014

A View From

CAPITOL HILL Continued races. Although it can vary pundit-topundit, most everyone agrees that the Democrat’s majority margin is at risk this fall. For Republicans to win control of the Senate, they must achieve a net gain of six Senate seats. Several factors improve their chances for such a result. Of the 36 Senate seats up for election in 2014, 21 are held by Democrats and 15 are held by Republicans. Of those 21 democratic seats, seven are in states that Mitt Romney won in the 2012 presidential campaign. Add to the mix, an unpopular President and a mid-term election in which conservative seniors vote more reliably than liberal Millennials, and you have the makings of a long night for the majority party. With the caveat that elections can always produce surprises—just ask former House Majority Leader, Eric Cantor—of the Democratically controlled seats in play, you can stick a fork in three of them. They’re done. Those would be South Dakota, West Virginia and Montana. All three states will almost certainly elect Republicans to the Senate. Beyond that, there are an additional seven Democratic seats in play, meaning that there is somewhere between a 40%-60% chance of the Republicans picking up a Democratic seat. Those are Michigan, Iowa, Colorado, Alaska, Arkansas, North Carolina and Louisiana. Of those seven, Republicans have to ﬂip three in order to gain control. However, they also have to defend two vulnerable seats; Georgia and Kentucky. While Georgia is still a red state, Democrats there have shrewdly recruited the daughter of the iconic Senator Sam Nunn to run for her late father’s seat. Never mind that Senator Nunn might today be mistaken for a member of the tea party; his name is still known and beloved. In Kentucky, Republican Minority Leader Mitch McConnell, is being hunted by 10

Agency Today | Fall 2014

so-called Democratic “dark money” interests as a trophy. It may turn out to be the most expensive Senate race in the history of the country, with as much as $100 million spent before the outcome is known. When $100 million is spent on a single election in a state of 4 million, the outcome is hard to predict, though most informed observers, including this one, are predicting that McConnell will hold the seat. There are three additional seats in play where Republicans have a 15% -30% chance of a pick up: Oregon, Minnesota and New Hampshire (where former Senator and real estate attorney, Scott Brown, is running), though arguably, these states go Republican only if the election turns into an angry rebuke of the Democrats and their policies. Things haven’t gone that far south yet for the Democrats, though there is plenty of time left for the dynamics of this election to further evolve. Given that the Republicans have a legitimate shot at controlling the Senate in the next session, what does it mean for the issues of concern to our industry? On Government-Sponsored Enterprise (GSE) Reform, it means that Senator Richard Shelby is the likely Chairman of the Senate Banking Committee and in charge of crafting and shepherding a bill through the Senate. An argument can be made that the chances of passage for GSE Reform improve with Republican control of the Senate. But the real issue determining the long-term health of the housing industry is jobs. There, it is hard to see any real change growing out of the 2014 elections in what has become a status quo of the most ponderous, tepid growth. Real change would mean tax and entitlement reform and a clearing out of the underbrush of well-intentioned but overgrown regulatory weeds choking productive growth. For that ... well ... there’s always another election.

Best Practices:

A Recipe for Success

By: John M. Hollenbeck Executive Vice President First American Title

It is time to make lemonade; our agents need a recipe to embrace ALTA Best Practices and drive business growth in tumultuous regulatory times.

Over the last 18 months I have traveled across the United States discussing ALTA Best Practices. Our customers are in need of new material, something fresh that helps them leverage this new environment. To accomplish this mission, we gathered some questions from a random group of agents to prime the conversation. Last year you tried to scare us to death with all this Best Practices mumbo jumbo. Could you please do so again, but in five minutes or less? We all remember The Great Recession of 2008. The financial system in this country was stressed to the point of nearly breaking. Banks too big to fail almost failed and some in fact did. The auto industry was in near collapse. Major corporations like General Electric (GE) and American International Group (AIG) had their problems as did other sectors of the US economy. Mortgage defaults soared as unemployment rates rose. As foreclosures increased, property values decreased. Even as banks wrote down billions on their balance sheets, politicians, regulators, the press, and attorneys general demonized lenders for making loans, or at least some loans—loans to people that couldn’t afford to repay, and so forth. Then the unthinkable happened. So called “robosigning”—the 12

Agency Today | Fall 2014

rubber-stamping of foreclosure documents—missing notes and assignments, allegations against MERS, and similar problems fueled public animosity with the mortgage finance system. Along the way, Congress acted. It passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as simply “Dodd-Frank”, which in turn, created the Consumer Finance Protection Bureau (CFPB), a new government watchdog to regulate a wide swath of consumer finance, and enforce a long list of federal consumer protection laws. Soon, the CFPB reminded banks of their obligation to manage third-party relationships. “Reminded” is the right word here, because the requirement of banks to manage third-party relationships is nothing new. It’s been around since time immemorial. Owing to safety and soundness concerns, bank regulators such as the OCC and the Federal Reserve have required banks to manage third-party relationships for years. This much is new. Dodd-Frank added a new filter—consumer protection. The CFPB requirement of third-party oversight centers on consumer protection. Banks are affirmatively obligated to ensure that third-party vendors do not violate consumer protection laws. If banks fail to meet this requirement, enormous fines may be levied. How can a bank manage up to 30,000 third-party relationships with title agencies? It’s pretty tough. Several made noises about severely cutting back the number of title agencies with whom they’d do business. This vacuum—how to manage so many third-party relationships with thousands of settlement service providers—is the reason for the ALTA Best Practices. The idea is to provide a benchmark against which title agencies can demonstrate business practices that protect consumers. Certification adds independence to the process, and can help banks demonstrate adequate oversight to the CFPB and their other regulators. Wells Fargo sent out a letter recently. Could you give us the highlights? ®

On March 6, 2014, Wells Fargo issued its quarterly settlement agent newsletter. Focus on these three excerpts quoted directly from the newsletter:

•

Our goal is to continue to support the customer’s choice for their title and settlement service provider, so long as that choice is one able to consistently meet all applicable requirements. (emphasis added)

•

Wells Fargo will also continue to expand and enhance third-party oversight capabilities for title and settlement companies in order to monitor and measure performance.

•

Wells Fargo supports ALTA Best Practices, and considers them to be guidelines for sound business practices that should ideally already be in place for businesses providing title and closing services for our customers. We understand that - for some - there will be transition time needed to enhance current practices and fully implement the Best Practices. If your company is not yet following the ALTA Best Practices - do you have a plan in place for adoption? If your company is already following the ALTA Best Practices

- do you have written policies and procedures in place to document it and inspection processes to validate it? Is there any doubt where the ALTA Best Practices are going? Is there any doubt that title agencies need to comply? As a side note, the Wells Fargo newsletter also addresses the importance of timely and accurate recording of mortgage documents, title policy delivery, fee accuracy and refunds, and careful implementation of the new Integrate Mortgage Disclosure Rule effective in late summer, 2015. What’s going on with certification? Who will certify? When? What’s the cost? To our knowledge, no lender has a hard and firm requirement today for ALTA Best Practices certification. So we cannot say with certainty that certification will be required. We cannot specify with certainty a timeline. We cannot say with certainty, from whom will a lender accept a certification, if and when certification is required. We just don’t know. That is a short and accurate answer. Now, I’ll give you some predictions. How things may develop is foreseeable. The fact that we don’t have precise answers for these excellent questions should not be greeted with a sigh of relief. Don’t be lulled to sleep by lack of clarity on these very appropriate questions. Operate on an assumption that certification will be required. Focus attention today on documentation and implementation. Get ready. Get things done. Prepare for certification. The best among you will follow through with certification before it’s required, and use it as a competitive advantage to win more business. Now, here is my best view of it: Who will certify? CPA firms. I think that’s the answer. CPA firms will provide either an “attestation report,” or an SSAE-16 audit report—similar to the old SAS 70. CPAs provide a level of independence necessary to make a certification process work. CPAs operate under a set of ethical standards that provide a bit of cachet to their work product. When? The hard and firm requirement will be gradual and almost imperceptible. For those that wait until the requirement is as clear as a bright line, it will be too late. By then, title agencies that failed to act will find their business has slowly dwindled, as lenders develop approved lists of settlement service providers. Prevent the slow erosion of your business. Act now. At least two but probably several CPA firms are prepared today to help title agencies work through the ALTA certification process. What is the cost? I don’t know for sure—probably more than you want to pay but ultimately affordable. Tell us about CAP? I keep hearing that it’s some sort of magic pill. CAP stands for Competitive Advantage Platform. CAP is a fabulous tool, but not a magic pill. I’ll get to that in a minute. Agency Today | Fall 2014

Best Practices: A Recipe for Success Continued The role of CAP is to help title agencies prepare the minimum documentation—policies and procedures—required under the ALTA Best Practices framework. Think of it as you might think of Turbo Tax or other tax preparation software. By working through the questions, the system will produce a set of policies and procedures that meet the minimum requirements of the ALTA Best Practices. You may, of course, decide to strengthen the policy and procedures, as appropriate. CAP also enables a title agency to upload documents that pertain to the ALTA Best Practices. This helps a title agency remain organized, and may ultimately simplify the certification process. CAP became available for all agents on May 5, 2014. Ask your agency rep about getting signed up. Why did I say that CAP is not a magic pill? CAP helps title agencies create policies and procedures required under the ALTA Best Practices Framework, and to organize documents that will be required in the certification process. But, CAP does nothing in respect to implementation. Documentation without implementation is hollow. Title agencies must actually implement the policies and procedures in order to become best practices compliant. Let me take a moment here and mention AgentNet ®. On April 1, 2014, First American Title added a Best Practices Resource Center on AgentNet. For those that don’t want to use CAP, a full set of policy and procedure templates are available on AgentNet in Microsoft ® Word® format. There is a host of other helpful material available in the Best Practices Resource Center at the click of the mouse.

What is most important: documentation, implementation or certification? Documentation and implementation go together. Implementation cannot truly exist without documentation. And, implementation is the centerpiece of the ALTA Best Practices framework. It’s implementation that protects consumers. Protecting consumers is the goal of the ALTA Best Practices. The best title agencies will get certified. At this point, it’s not required, per se. But, certification is the best way to demonstrate to your lender customers that your title agency implements the sorts of protections that mortgage lenders are obligated to ensure exist. Certification is the best way to earn a spot on a mortgage lender’s “approved list” of settlement service providers. How is lemonade made? Here is the lemonade recipe: One Part Documentation One Part Implementation One Part Certification Once lemonade is complete, make it part of your marketing plan:

•

Train mortgage lenders on their regulatory obligations. This demonstrates that you fully understand the regulatory environment. It will give your customer a level of confidence in your organization.

•

Become the experts and don’t be shy of transparency, for example, your website is a perfect place to discuss your implementation of ALTA Best Practices.

SALES EXERCISE What makes a person buy? The decision to buy or switch providers is as simple as this: The pain of a problem and the desire to solve it has outweighed the cost of a solution and the inconvenience of implementing it. With this in mind, here is an exercise you can use with individuals, or in a group setting, to design talk tracks for your agency. Directions: For each product or service you offer, think of at least five problems it solves for your client (lender, real estate agent, or attorney). Hint: the less obvious the problem, the more powerful the statement becomes. Your Service or Product

Agency Today | Fall 2014

Problem it Solves

Agency Today | Fall 2014

CO N SU M E R CO M PL A I N T M A N AG E M E N T M A K I N G

Y O U R

B U S I N E S S

B E T T E R

By: Krista Arce, Business Development Manager, Rizolv Complaint Management System

“Feedback is the food of champions” Ken Blanchard, American author and management expert

People do business with people they know and trust, so every interaction with a customer presents an opportunity to earn repeat business. When customers have great experiences, they are more likely to tell their friends or associates about them. But what if something didn’t go as well as they expected? You still have an opportunity to build trust and keep your customer happy by the way you handle the complaint. The act of building and reinforcing positive customer relationships is at the very heart of the title industry, where all eyes are on consumers and their experiences with settlement service providers. These experiences are affected by the manner in which a company captures, manages, and resolves complaints. What was once just a good business practice has now become an important compliance metric as well. Title agents are part of consumer financial services and a third-party provider to lenders in the mortgage industry. Agents can better serve their lender customers 16

Agency Today | Fall 2014

if they help them meet their third-party oversight requirements—including the handling of consumer complaints. In 2013, the American Land Title Association (ALTA) released the ALTA Best Practices Framework to help its members highlight the policies and procedures the industry uses to protect lenders and consumers. Part of that framework includes guidelines for ensuring a positive and compliant real estate settlement experience for all parties to the transaction. ALTA Best Practice #7 specifically encourages agents to adopt and maintain written procedures for consumer complaint intake, documentation and tracking. EFFECTIVE COMPLAINT MANAGEMENT IS JUST GOOD BUSINESS Until recently, the title and settlement industry has not had guidelines in place for effective complaint management. Most title agents quickly resolve customer issues without documenting the actual complaint, the steps taken to resolve it or the final outcome. Often, companies notify customers that their complaints have been resolved, but do not verify that they are satisfied with the resolution. Companies that fail to formally manage their complaints are missing an important opportunity to strengthen their business. When asked what it really takes to improve a customer’s experience, Paul Martin, Director of Compliance and Strategic Initiatives, United Lender Services Corp, said, “Consumer

complaints should be seen as an opportunity for free and pointed process improvement advice. The best way to improve a consumer’s experience using a complaint management process is to ensure genuine issues are quickly identified and properly handled. A speedy response to a complaint with a positive approach, and where possible, a demonstration that the issue provided process improvement is invaluable. Individuals like to be part of an improvement process; they feel their experience and opinion matter. In the rare instances where we have had a complaint reported to us; the consumer sentiment after the matter has been resolved has generally been positive. Mobile phone companies learned this years ago; to great effect.” By listening to your customers, you will gain valuable insight into their motivations, which can help you deliver better service. Customers like to feel they are part of the overall business improvement process. A successful complaint management system allows you to analyze important information and apply lessons you’ve learned in the process, resulting in a more efficient and successful business operation. ACTIVELY SOLICIT FEEDBACK FROM YOUR CUSTOMERS In order to receive feedback from your customers you should ask specific questions. Posting a feedback form on

your website is a great place to start. Let your customers know that you would like their honest feedback on the service your company provided. With the wide use of social media, managing customer complaints quickly becomes more important. It also becomes more difficult. Social media complaints appear in an instant and require immediate response. Any negative public comments put your reputation at risk, but those that appear on social media platforms can also negatively impact your search engine optimization. Not to mention that they are often the first thing a customer will see when they search for your company. It’s important to think about how your customers might use social media to voice concerns. Questions to ask yourself when implementing an overall customer complaint strategy include: Do you have a process in place to review and respond in real time to comments on your social media platforms? Are you actively engaged with customers when communicating your complaint management process to them? “Client awareness via our website and each delivered product regarding a robust and effective escalation management process is essential to Harmony Title Agency in keeping potentially negative feedback out of the social media world.” —Victor Hutchins, Harmony Title Agency

Online rating sites, such as Yelp®, provide additional channels for customers to review their business relationships. A poor review can be difficult to overcome. Reputation management is often overlooked because it is so difficult to predict and control what others say

about your company. As a result, social engagement suffers. By not addressing a negative post or a critical comment, you run the risk of endorsing the statement by staying silent. THE NEED FOR A COMPLAINT MANAGEMENT SYSTEM Business productivity author H. James Harrington said, “Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.” While he may not have specifically referred to customer interactions, this principle applies to an effective complaint management program. You need a system that captures, tracks, measures and understands what is happening when a customer brings a complaint to your company. An effective complaint management system allows you to better track your own business while looking for ways to improve processes, customer service and overall efficiency. Without such a system, complaint resolution is left to chance and manual record keeping. By analyzing the data created through a centralized complaint management system, you can better determine your organizations’ strengths and weaknesses. This valuable information allows you to identify key opportunities to improve your business practices as well as overall customer service. PUTTING IT ALL TOGETHER The ALTA Best Practices were developed to help establish baseline business practice expectations for agents. These

guidelines also provide agents with an opportunity to stand out among their peers by adopting a higher standard of service. In an industry where quality of service is a primary differentiator, it is essential for agents to establish procedures and systems that measure the quality of their service from their customers’ viewpoint. An effective complaint management system can help agents measure success, identify ways to improve their business and help their lender customers meet their compliance requirements. When asked about Best Practices CFPB Director, Richard Cordray, focused his response on effective consumer complaint management saying, “It builds excellent customer service and helps retain customers, which is always the cheapest way to build a business. It helps minimize legal risk, regulatory risk and reputational risk. That’s a very positive development and we are strongly encouraging and applauding that wherever we see it.” The entire real estate finance industry has become intensely focused on the consumer. Title agents that intend to succeed in this new environment need to make complaint management a priority for their business. Not only is this important from a compliance perspective, but it also helps agents provide a level of service that distinguishes them from their peers. The rules of engagement with the consumer have changed. Each company in the industry food chain is required to provide its customers with better service. This elevated standard of consumer care gives all firms an opportunity to improve their business.

ALTA Best Practice #7

Adopt and maintain written procedures for resolving consumer complaints. Purpose: A process for receiving and addressing consumer complaints helps ensure reported instances of poor service or non-compliance do not go undiscovered. Procedures to meet this best practice:

• •

•

Develop a consumer complaint intake, documentation and tracking process. Create standard procedures for logging and resolving consumer complaints helps to ensure consumers provide the company with sufficient information to understand the nature and scope of the complaint. Develop a standard consumer complaint form that

• • •

identifies information that connects the complaint to a specific transaction. Set a single point of contact for consumer complaints. Establish procedures for forwarding complaints to appropriate personnel. Maintain a log of consumer complaints that includes whether and how the complaint was resolved. Agency Today | Fall 2014

We Do Good Deeds

AARON M. DAVIS CEO/Owner HILLSBOROUGH TITLE www.htitle.com

How did you get started in the title business? Like most of us in the industry, I didn’t exactly grow up dreaming to be a title agent. Could you imagine the twisted dreams of that six year old? "Mommy, Daddy, when I grow up I either want to be a football player, a doctor, or a title agent." I was born into the business; my mother Gail Calhoun founded our company over 30 years ago, so at nine years old, I was picking staples out of carpets, refilling staplers, and filing microfiche. At 13, I was moving boxes of files from one storage area to another, at 16, I was the company courier, at 18 warehousing, and so on. I had a brief time away from the title industry while getting my education and working in financial services for a local retirement planning firm. In 2002, I returned to the industry, by closing, managing, and operating, then in 2008, I purchased the company from my mother. At that time we had two offices and a staff of about ten. Today, we are in 15 locations and growing with a total operations staff of over 120. What is the number one goal your company is looking to achieve for the remainder of the year? This year, our number one goal is to prepare for the changes and challenges heading our way in 2015. We are gearing up for the Dodd-Frank changes and challenges: software implementation, systems, procedures and facility improvements, training staff for the new dawn of title, lender and potential CFPB audits, ALTA Best Practices implementation, and more. I would say THAT is number one; however a close number two is growth, expansion, mergers and acquisition opportunities, and marketing. We have a solid footprint in seven counties and are continuing our expansion through acquisition, roll-ins, strategic alliances, and new business.

Agency Today | Fall 2014

What words does a client think of when they hear your company’s name? Top-notch service, local decision making and ownership, true full-service title agency from title plant to legal counsel on staff. Our clients know they are working with a company who truly cares about the customer and the transaction. Reputation matters; our clients know our word means something and we are here for the long haul. We live up to our slogan, WE DO GOOD DEEDS™. What area of your company would you like to improve? We are looking to continue our diversification of different lines of business including: commercial, residential, institutional investor platforms, builder/developer, lender, REO, etc. by implementing a stronger marketing strategy. And as always, continue to improve systems and work-ﬂow to deliver better service and customer satisfaction. In ten years how do you think the title and settlement business look? I think the heavy burden of client data protection, increased IT security threats, email, virus, etc., and the skyrocketing cost of doing business, will certainly have a narrowing effect as lenders will now be 100% responsible for the actions of all third-party vendors. It is clear from recent legislation and regulators the process needs improving and better oversight. We are the accountants, preparers, insurers and orchestrators of the largest transaction of most people's lives. I think through the changes in the process, we as an industry will deliver a better product and smoother transaction to our client by working together more seamlessly. There will no doubt be some bumps in the road, but I think in ten years, we are looking at a much smoother paperless process, less risk to clients and insurers, and a happier consumer closing experience.

Insurance Solutions for The Business Professional E&O | Bonds | Property Office Liability/Business Business Auto | Workers Compensation

(877) 848-6147 WWW.FAPCIA.COM

Agency Today | Fall 2014

By: John M. Hollenbeck Executive Vice President First American Title

I remember like it was yesterday, although it was 45 years ago. My brother stuck his foot under a lawnmower. POOF—his little toe disappeared. It was gone, never to be seen again. Thank goodness the injury was not worse. My brother learned something that day. He learned not to put his foot under a running lawnmower. I learned the same lesson. Learning from other’s experience is just as important in business as in all areas of life. Let’s learn from the experience of a Missouri title agency. It’s revealed in a recent Eighth Circuit Court of Appeal’s opinion.1 The story below is fictional; I changed the geography, the names and the facts. But, the lessons are consistent with the true account. Acme Title Agency is a small, locally owned title agency serving a midsize town and rural communities in a Midwestern state. It’s been in business more than 65 years. Jack Smith worked in the business since he was 16 years old and then took it over when his dad retired 20 years ago. Although small, this agency does a great job and is well-respected in its community. It maintains excellent records, employs experienced people, and provides outstanding service. The company is not only Jack’s pride and joy, it’s his

Agency Today | Fall 2014

livelihood, and his nest egg for the future. Little does Jack know that everything is about to change. His company is going to vanish in an instant. He is about to lose everything. Poof! His life’s work, and his father’s gift and legacy, is about to disappear. Like most title agencies, Acme Title Agency provides closing services. It handles the paperwork, secures signatures on deeds and mortgages, conducts real estate settlements, and handles funds. To accomplish this, it maintains an escrow trust account with Burton Community Bank, located right there in Jack’s home town. Jack’s dad set up the relationship with Burton Community Bank more than 30 years ago. It made sense then, and now, because, like Acme Title Agency, Burton Community Bank is a very well respected institution. What’s more, it’s an excellent source of business for Acme Title Agency. In fact, about 15% of Acme’s business is sourced through Burton Community Bank. Four years ago, Acme Title Agency started using Burton’s new online banking system, accessible over the Internet. The system is very user friendly, and allowed Jack’s two escrow closers to conveniently track incoming deposits, and send wire transfers with

a few clicks of the button. The system was well designed, and password protected. About 18 months ago, Jack started hearing noise about Dodd-Frank, CFPB, third-party oversight requirements, and all that jazz. He ignored it at first, but the constant drumbeat ultimately got his attention. He started seeing communications from the American Land Title Association, and eventually attended a seminar put on by one of his underwriters, for which he received dearly needed continuing education credit. The underwriter’s seminar seemed to Jack like one gigantic lecture. The speaker’s basic point was that the entire mortgage finance system in the United States is being reengineered following the Great Recession of 2008, the passage of Dodd-Frank and the formation of the Consumer Financial Protection Bureau, and that the settlement services provided by title agencies are being swept into the process. Title agencies needed to make improvements, the speaker droned on, to protect consumers, or risk becoming irrelevant in the new world order. ALTA Best Practices was a big part of the discussion, but it came across as lots of work and expense. As a small title agency, Jack wondered how he could even begin to comply with all the new

rigmarole. It was a lot to take in, and scary. Jack left the seminar a little bewildered. The stuff he heard made sense, he supposed, but he’d never heard about any of this from his friends at Burton Community Bank. Maybe it wouldn’t really affect him, he thought, or at least he hoped. He decided to take a “wait and see” approach. Then one day, a communication arrived from one of Jack’s top underwriters. It warned of computer viruses, phishing expeditions and cybercrimes.2 Still a little dubious over the whole thing, Jack remembered discussion at the now distant seminar, about ALTA Best Practices 2 and 3, which deal with escrow trust accounts and information security. Jack’s level of concern was elevated just enough to set a meeting with Geoffrey Jones, a high school friend, and president of Burton Community Bank. After extending pleasantries in the lobby, Geoffrey and Jack sat down in a private conference room, and got straight to work. “Geoff,” Jack started, “I am a little concerned.” Now sliding a copy of the memorandum across the table, Jack continued. “My title insurance underwriter sent me this the other day. It warns that my systems could be compromised by an Internet hacker, and my escrow accounts could be drained. One of things they recommend is that foreign wire blocks be put on my escrow account. This is on top of information coming out the American Land Title Association. Besides foreign wire blocks, ALTA is urging title agencies like mine to implement daily trust account reconciliation, something called Positive Pay, ACH blocks, all sorts of virus protections and other stuff to protect my computer network. I can’t afford half of what they suggest, but, at a minimum, I need you to block foreign wire transfers.” “Jack, I can’t do it. I’m sorry. Our systems don’t support foreign wire blocks, ACH blocks or any other blocks for that matter. I’ve heard of Positive Pay, but we don’t offer it here. We are just a small bank and have limited resources. But, we can help you, Jack,” Geoffrey continued. “This phishing scam that your underwriter discussed in the memo—it is real. It works like this: a key logging virus infects your computer, and then sends a record of all of your employees’ key strokes to the bad guys. The bad guys study the key strokes, and figure out the user

name and password for various websites accessed by your employees. They then hack your network, take control of your computer, and access just about anything they want, including your online banking software.” “Although we don’t support foreign wire blocks, we do have another solution. We call it dual control. It’s a feature in our online banking software that requires two people with separate usernames and passwords to authorize wire transfers. We offered this to you, Jack, four years ago when you first implemented the system. You decided against it then, but perhaps now is the time to reconsider. This reduces the risk of login credentials being lost through a phishing scam. This is because at least two people must authorize the wires; losing two sets of credentials through a phishing scam is less likely than losing just one set of user name and password. You turned down a second feature that reduces risk. We could set up a daily limit on the amount of funds that could be transferred out of the account. This would help limit the damage if a theft does occur.” “All that stuff makes sense, Geoff, but it’s not practical for my small title agency. I only have two closers. Setting up the dual controls, or even the daily limit, is just too inconvenient and will slow things down too much.” Jack and Geoff continued on for another 15 minutes before Jack finally wrapped it up. “Geoff, I appreciate you and Burton Community Bank. I’ll need to think about this for a while.” The two men exchanged final regards. Jack headed back to the office, and promptly buried his head back into the sand. Then the unthinkable happened... Six months to the day after leaving the meeting with his friend and banker, Geoffrey Jones, Jack’s cell phone rang while driving to a customer meeting across town. It was Irene Baker, Jack’s top closer and office manager. “Jack, there is some sort of a problem,” Irene blurted out so quickly as to be nearly incoherent.

“The money is gone. Somebody made an $823,000 disbursement yesterday, but nobody knows who did it.”

“Slow down,” Jack said, “what is going on?” “It’s the bank, Jack. They just called. Something bad happened to our escrow trust account. It’s overdrawn. The money is gone. Somebody made an $823,000 disbursement yesterday, but nobody knows who did it. We need to figure this out quickly because we have deals that need to close this afternoon,” Irene continued, now somewhat calmer. “You’ve got to be kidding me, you’ve got to be kidding me,” Jack said twice, with an urgency suggesting the onset of mild panic. A million things were running through Jack’s mind simultaneously, including the hope that this was all just a big mistake. Things could be corrected, Jack hoped, then he was sure to implement the recommendations of his title underwriter and the bank, he promised himself, and he was sure to implement the ALTA Best Practices. “Call Skidleberry,” Jack demanded of Irene. “He is the agency representative at our underwriter. Skidleberry will know what to do. Meanwhile, I’ll get Geoff Jones on the phone and get this thing straightened out.” Over the next days and weeks, the facts would become uncovered. Lawsuits

Agency Today | Fall 2014

Continued would follow, as would a tedious albeit fruitless criminal investigation. The process was slow and the outcome unfortunate. More immediately, however, Jack faced a stark reality. His bank account was short over $800,000. He had no way to respond to this sudden event. He was forced to close Acme Title Agency. It went permanently out of business. What exactly happened to cause this loss? A forensic investigation revealed that Irene Baker’s computer was infected by a malicious key logging virus. The malware recorded each keystroke on Irene’s computer keyboard, and then transferred the information over the Internet to the bad guys. The bad guys, in turn, analyzed the sea of keystrokes, plucking out the keys to their crime—Irene’s user name and password for the Burton Community Bank online banking application. A second virus was detected as well. This virus permitted the hackers to remotely take control over Irene’s desktop. Combining the login credentials with remote control, the cyber thieves caused an $823,000 wire transfer to be sent from Acme Title Agency’s trust account to the criminal’s bank account in Eastern Europe. Next came the lawsuit, styled Acme Title Agency v. Burton Community Bank. The heart of the complaint alleged that Burton Community Bank’s negligence and lack of security permitted this loss to occur; Acme Title Agency sought reimbursement of its damages. In some respects, the outcome of the lawsuit is secondary. Even if Acme Title Agency wins in court and recovers the lost money, the company is mortally wounded. The recovery of lost funds will not restore its reputation. Jack won’t get his employees back. All the customers have established relationships with other providers. And, winning the lawsuit, even if he does, will not restore a destroyed relationship with Jack’s high school friend, nor breathe life back into his pride and joy, Acme Title Agency. How a court battle like this one ends depends upon a wide range of facts not set forth in this fictional tale, and on the state law that governs the dispute. In other words, it’s hard to predict the actual outcome. With this caveat, I am sorry to report that Acme Title Agency lost its court case, and must suffer the loss. The outcome turned on Section 4A-202 of the Uniform Commercial Code.

Agency Today | Fall 2014

Among other purposes, Article 4A of the Uniform Commercial Code allocates the risk of loss for a fraudulent payment order (wire transfer instruction, for example) between a bank and its customer. As you might expect, Article 4A-202(a) permits a bank to rely on payment orders that are authorized by the bank customer. Article 4A-202(b) deals with the authenticity of payment orders. It says a payment order “is effective as the order of the customer, whether or not authorized,” if the bank and its customer agreed upon commercially reasonable security measures that guard against unauthorized payment orders. There are other requirements of good faith, and so forth, not discussed here. Okay, let’s take a moment to let this soak in. Taking the two sections together:

•

A bank is authorized to rely on an authentic payment order of its customer.

•

A bank is generally liable if it relies upon a payment order that is not authentic.

•

However, a bank and a customer may agree that its bank may rely on a payment order, whether or not it is authentic, provided commercially reasonable security measures are in place.

•

If such an agreement exists, the customer bears the risk of loss in the event a fraudulent payment order eludes commercially reasonable security measures.

Ah, but there is more. Article 4A-202(c) provides that if a customer refuses a commercially reasonable security measure offered by the bank, the security procedures actually employed will nevertheless be deemed commercially reasonable. In Acme Title Agency’s situation, a computer hacker accessed Irene Baker’s desktop computer, then sent wiring instructions (a payment order) to Burton Community Bank, using her login credentials. It was only necessary to use one employee’s login information because Jack declined Burton Community Bank’s repeated offers to implement a dual control procedure. If a dual control procedure were implemented, the theft may not have occurred unless the thief also stole a second employee’s user name and password. After a lengthy trial, the judge held that Burton Community

Bank’s security, including the dual control procedure not implemented by Acme Title Agency, was commercially reasonable. It held that the online banking contract signed by Acme Title Agency constituted an agreement to permit Burton Community Bank to rely on the payment order to wire out $823,000 to Eastern Europe, even though that instruction was not authentic. This is a sad story of the demise of Acme Title Agency—Jack’s pride and joy, and his father’s gift and legacy. What is the moral? Jack should have paid attention to things outside his comfort zone. He was very interested in providing quality customer service, and bringing in more business—both good goals—but ignored excellent advice coming at him from every whichaway. He simply did not want to deal with it. Ironically, the customer service Jack provided wasn’t that great, was it? He did not do enough to protect his client’s money. Consequently, the customers lost their money and Jack lost his company.

What could Jack have done to prevent this loss? In general, Jack should have listened to the advice of his bank, his title underwriter and the American Land Title Association. Think about that—three sources of good information that Jack chose to ignore because he was in some form of denial. That is, he failed to appreciate the extent to which his title agency was exposed to a variety of risks. If he faced the facts, it would potentially require inconvenient changes in his operations, and additional investments in his business. 1. Jack should have implemented the ALTA Best Practices. Besides protecting consumers—the main goal—the best practices are simply a responsible baseline for running a good title agency. 2. Jack should have implemented the dual control procedure recommended by Burton Community Bank. 3. Burton Community Bank said that it could neither provide international wire blocks, nor the other protections required by the ALTA Best Practices. Jack should have switched banks. 4. Jack could have implemented quality virus protection and anti-spy software on his computer network. 5. Jack could have set up a separate computer in his office dedicated to online banking transactions. By limiting the activity on this computer, the risk of being infected by the deadly virus is significantly reduced. 6. Jack could have required his employees to frequently change their login credentials. As much as we all hate it, changing passwords on a regular basis helps prevent these types of losses. 7. Jack could have purchased cyber liability insurance. 8. Jack could have installed firewalls on his computer network that prevent employees from accessing certain non-work related websites, such as social media websites. The sites blocked by this type of software are notorious for malicious software.

Thank you for following this fictitious account providing valuable lessons in a world unfortunately burdened by cyber-crime.

See Choice Escrow and Land Title, LLC v. BancorpSouth Bank, Eighth Circuit Court of Appeals, No. 13-1931 (2014

Quoting Patco Constr. Co. v. People’s United Bank, 684 F.3d 197, 204 (1st Cir. 2012), the Choice Escrow court describes “phishing” this way: Phishing involves an attempt to acquire information such as usernames, passwords, or financial data by a perpetrator masquerading as a legitimate enterprise. Typically, the perpetrator will provide an e-mail or link that directs the victim to enter or update personal information at a phony website that mimics an established, legitimate website which the victim either has used before or perceives to be a safe place to enter information. 2

Agency Today | Fall 2014

Simplify. AgentNet®, the First American Title web portal for title agents, provides valuable business resources, solutions, and innovative products and services necessary to simplify and streamline your processes. Best Practice Resources  Sample policy and procedure templates  Training material  Links to vendors providing solutions for each of the 7

pillars of the ALTA Best Practices

Easy Access  Closing Protection Letters (CPLs)  Policy-issuing agent verification letters  eJackets  Rate and fee calculator  Transaction-based entry design  Electronic invoices and statements with remittance

and payment tools  Linking Files feature enables the coordination of file

processes and responsibilities between two First American Title agents  Integration with leading title production systems

minimizes the need to re-key data

Research  Back title search

(where available)

 Extensive library of state-specific underwriting

bulletins, forms, and other real-estate related materials  Specially Designated Nationals (SDN) search

Ask for a demo today!

First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates. AMD: 10/2014

Agency Today | Fall 2014

Emotional INTELLIGENCE

By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

ver my 18-year career in sales and sales management I have often wondered how to hire the best sales people. Of particular interest was a person who might not have a reputation in our business or who may be transitioning from another sector of the real estate industry. My initial reaction was to always gravitate toward the extrovert; the person with the biggest grin and gregarious charisma. What I have learned, the hard way I might add, is that the extrovert and those qualities might not be the right attributes to measure. Today, I submit to a more scientific thought process - emotional intelligence. Emotional intelligence can be defined as the ability to monitor one’s own and other people’s emotions; to discriminate between different emotions and label them appropriately as well as use emotional information to guide thinking and behavior. Buying is an emotional event. However, those emotions often manifest themselves in different ways. We often call the people who can instinctively read those emotions “natural born sales people.” What are they doing subliminally with their customers? The answer lies in the actions they take which address the unspoken questions every buyer is asking. Do I like you? Do you listen to me?

Do you make me feel important? Do you get me and my problems?

Do I trust you and believe you? Are you responsive?

As I look back on my sales career, I think these questions would have been a great place to logically start a sales conversation. I dare to think I was focusing on adding value, overcoming objections and closing a client before I had the bare bone basics in place to begin that conversation. I believe if you attempt to sell something without first getting a positive response to these questions, you will end up competing on price or losing the sale altogether.

Agency Today | Fall 2014

Speaking of

SUCCESS Whether you are speaking to one person or a crowd of one thousand, the ability to transmit ideas in a coherent and compelling fashion is one of the most important skills you can develop. Delivering a memorable presentation to consumers or real estate and lending professionals offers the added benefit of giving By: Lou Pontani VP, Sales and Marketing, you an opportunity to convert Agency Division audience members into customers. First American Title The goal of this article is to help you become more comfortable delivering presentations and provide you with the tools necessary to present yourself in a convincing, credible and confident manner. Many novice and seasoned presenters have two fears about delivering a presentation: 1) They will forget what they intend to say and 2) The audience won’t remember what they said. Both of these fears can be greatly reduced by utilizing specific methods and techniques, resulting in a presentation that both the audience and the presenter will remember.

BE PREPARED

•

Organizing your material into categories that have a clear structure will help both you and the audience follow your presentation. A few commonly used organizational patterns are cause and effect, problem and solution, chronological order and

Agency Today | Fall 2014

•

numerical lists. Rehearsing your delivery will increase the chances of a successful presentation and allow you to appear more relaxed. Your audience deserves your best, so never make the mistake of “winging it.” Avoiding sugar and caffeine will assist in providing a more constant energy level throughout your delivery. Protein and complex carbohydrates are a better choice as they increase memory retention. Getting a good night’s sleep will enhance your ability to recall information and help to overcome nervousness and anxiety.

MAKE IT MEMORABLE The most interesting and compelling factor of any presentation is YOU! Delivering your ideas in a knowledgeable and entertaining fashion will stimulate enthusiasm and help to establish a personal relationship with your audience. The primary link between you and your audience is your voice. A good speaker is loud enough to be heard, clear enough to be understood, expressive enough to be interesting and pleasing enough to be enjoyable. Nonverbal communication can account for as much as 93% of your message so remember to smile, stand up straight and effectively use gestures to create rapport. Audience members typically walk into a room or attend online presentations thinking, “Don’t tell me everything you know. Just give me one new idea and make it something I can use tomorrow.” No matter what topic you choose, you will always be able to find more than enough material than you will have time to discuss. The

The most interesting and compelling factor of any presentation is you!

real secret is deciding what not to use. PowerPoint ® slides filled with excessive verbiage will cause audience members to become distracted and lose their ability to focus on the message being delivered. More importantly, people have a limit to how much material they can process and retain. Memorable presentations should have no more than three or four main points that are expressed using a combination of both logical and emotional appeals. Some people think with their heads, others think with their heart. For example, technical presentations covering the latest legal or regulatory requirements will have a greater impact if infused with emotional content that explains the benefits or implications. Supporting main ideas with a variety of statistics, testimonials, definitions and personal stories will cover all the bases and provide the audience with multiple opportunities to connect with your ideas.

TAILOR YOUR MESSAGE The success of your presentation ultimately lies in your ability to reach your audience. The words you choose should make it easy for them to understand, but equally as important, the content should be relevant to the audience. This requires a little time spent researching the group you are speaking to and gaining information about their knowledge, attitudes and expectations. Begin your presentation by making it clear that you are here to address their concerns, propose a solution to their problems, or answer their questions. This will greatly enhance your ability to establish an instant connection and make it easier to make a smooth transition into

the body of your presentation. Using analogies makes it easier for the audience to understand concepts with which they are unfamiliar. Analogies should illustrate the idea you are trying to get across, and not confuse the issue, so keep them short and to the point.

CLOSING TIME No matter how brilliant or entertaining you are, people have a tendency to drift and think of other things they need to do. Ideally, you’ll be done delivering your presentation about five minutes before the audience is done listening. Summarize your talk, showing how all the points related to each other, and help your audience retain key information by winding down with phrases such as:

• • •

If you learn nothing else from me today … If you had just one more space left to fill in your brain, please remember this … When you leave here today, let me tell you what you will remember about my talk …

Whenever possible, as part of your conclusion, give your audience a call to action. This gives your listeners directions regarding what to do with all the information you’ve just presented and gives them incentive to think about you and your presentation later. Utilizing these methods and techniques will help you develop the skills and confidence necessary to deliver a presentation that is memorable to both you and your audience.

Memorable presentations should have no more than three or four main points

Agency Today | Fall 2014

DEMOGRAPHICS:

The Customers of Tomorrow By: Lou Pontani, VP, Sales and Marketing, Agency Division, First American Title

Recently, The Joint Center for Housing Studies of Harvard University (JCHS) published their annual report, The State of the Nation’s Housing 2014. The report is packed with excellent data and interpretations that are akin to looking into a crystal ball. Most interesting is the demographic study of household formation. Household formation is important and is measured when an individual establishes a residence. That residence can be a rental or it can be a purchased home. According to the JCHS and their tabulations of US Census Bureau data, household formations have languished for the last three years at 600,000 – 800,000, well below previous annual averages. The lack of household formation has been caused by two significant trends born out of the Great Recession of 2008. First: Millennials are staying at home with their parents longer. This is delaying the formation of households because of; 1. Higher unemployment rates of Millennials. 2. Increased student loan debt 3. Lower incomes Second: immigration trends. In 2009 and 2010 the number of foreign-born households fell in the wake of the Great Recession. Historically, immigration has accounted for a significant share of household formations, contributing to 35% of the population growth seen in the 2000s. It is believed that these two groups, Millennials and foreign-born citizens, represent significant pent-up demand and will be the driving force of new households for the decade 2015–2025. The Center has reached three significant conclusions that will greatly impact the housing market and our customers. 1. Immigrants will fill the gap created by the baby-bust of Generation-X to the point where Generation-X will be larger than the Baby Boom population. 2. Millennials over the next decade will reach the over-30 mark; prime age for household formation. 3. The number of households aged 65–70 will increase significantly. For a time, many will “age in place,” choosing to stay in their current principal residences. However, over time they will seek other housing arrangements which could bolster new residency demands.

What does this mean for you? There are a few implications on the horizon that, as a title agent, you may want to start thinking about. 1. What do the demographics of my communities look like today? 2. Since minorities will account for 75% of household growth, how can I prepare to best service the diversity of this growing community? 3. How will my agency handle the generational differences to attract Millennials? 4. Am I positioned to differentiate my agency and capitalize on development opportunities for senior housing? Am I positioned to handle the senior purchases of those homes? 5. If the consumer shift is not your focus, how about the real estate agents that will probably mimic the demographic of their homebuyers. How does my agency appeal to them? Like it or not, times are changing and the diversity of our customers is much like our economy … global.

Agency Today | Fall 2014

use Facebook as a listening aide

Getting

the

CLICK

FOLLOWING THESE SIMPLE RULES CAN HELP YOU ACHIEVE OPTIMAL RESULTS IN NOT ONLY YOUR EMAIL CAMPAIGNS, BUT IN YOUR DAILY EMAIL INTERACTIONS. PLANNING: Before you begin writing, take a moment to think about how you want the recipients to respond. What is the call to action? Rather than starting to write out the body of your email, begin by writing the conclusion of your email first and then work on the body content.

SUBJECT LINE: This is the single most important part of your email. It’s what is seen first, so think of it in terms of “first impressions are lasting impressions.” Your subject line should evoke as many of the following items as possible: Curiosity Urgency

Emotion Value

Action

Revised subject line example: Before Questions on Transaction File 010101010 After Transaction 010101010 - Three things needed for the finishing touches

CONTENT: The body of your email is an expansion on your desired outcome. Your goal, which many writers struggle with, is clearly and concisely stating your message. Whatever you said in five words, go back and attempt to say it in three. Less is more. Utilize this three-part framework to increase your chances of getting clicked on first, understood more easily and acted on faster than the hundreds of other emails out there vying for your recipient’s attention.

Agency Today | Fall 2014

LEADING

Not all courses are approved for state CE/CLE and NALA credit. See individual course descriptions for details.

Agency Today | Fall 2014

THE WAY

First American Title brings you quality products and innovative solutions to maximize productivity so you can stay ahead in the game. AgentNet速

The First American Title web portal for title agents, provides valuable business resources, solutions, and innovative products and services necessary to simplify and streamline your processes.

First American Eagle Academy速 State and NALA-approved online CE and CLE courses covering important and timely topics that will benefit you and your business.* Each course developed by subject-matter experts from across the nation in collaboration with the professionals at First American Title.

discownts.com

Allows you to obtain immediate savings from name brand suppliers on office supplies, overnight delivery, computers, printing, event tickets and much more.

www.firstam.com

First American Title has been at the forefront of providing peace of mind, valuable protection, and accurate information to our agents and their customers. We understand that homeownership is the American dream and we are sincere in our commitment to protect the integrity of the title industry and provide our customers an unparalleled level of service.