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EDITOR'S NOTE
The Title Report is a production of October Research, LLC specializing in business news and analysis for the settlement services industry and is published 24 times a year.
Through our annual survey, your voice is coming through loud and clear
Contact information: October Research, LLC ATTN: The Title Report 3046 Brecksville Road, Suite D Richfield, OH 44286 Tel: (330) 659-6101 Fax: (330) 659-6102 Email: contactus@octoberresearch.com
CEO & Publisher Erica Meyer
Editorial & Publishing Editorial Director Chris Freeman
Editors Mark Lowery, The Title Report Katherine Bercik, Esq., RESPA News Andrea Golby, The Legal Description Mike Holzheimer, Valuation Review Robert Rozboril, Dodd Frank Update
Seminars and Webinars Tara Quinn, Director
Dear Readers, Thank you to everyone who participated in the 2017 Voice of the Title Agent. The Title Report could not annually compile one of the most comprehensive gauges of opinions and concerns within the title industry without your help – and that of our sponsors, Data Trace and Adeptive. At its best, an open door policy encourages honest, yet professional communication and feedback about matters of importance. That feedback then should be used to spur positive change that creates a better working environment for all involved. That’s exactly what The Title Report strives to create for our readers – various channels through which you can share your experiences and offer feedback and suggestions that can benefit the entire industry. Two of our biggest channels are the National Settlement Services Summit (San Antonio, Texas, June 7-9) and our annual survey. While I look forward to speaking with as many of you as possible in Texas, I’m already digesting much of what you’ve told us through the survey.
eCommerce Rick Harris, eCommerce Director
One survey respondent told us “the back and forth with the lender to complete the upfront fees and final CD has created hours of extra work on our part. TRID has changed how the disclosure is delivered.”
Sales & Marketing Frank Carson, Senior Account Executive Sarah Harrington, Marketing Manager Jake Dean, Sales Support
Another title agent suggested we compare regulatory environments in different states. “How does it affect competition? How does it affect the number of independent agents?” that agent asked.
Circulation / Customer Service Kathy Hurley
Good question. Let’s plan on discussing it in Texas, and thank you again for your participation.
Business Offices Sam Warwar, Esq. Michelle Easter, Accounting
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April 3, 2017 Volume 18, Number 11 ISSN: 1937-3899 (print) 1397-3902 (online)
Mark Lowery Editor mlowery@octoberresearch.com
What a year to be a title agent! The title insurance industry entered 2016 in a cautious and uncertain place. The real estate industry as a whole was dealing with the overhaul of mortgage disclosure forms, and an entirely new way of doing business. There were questions over how closely regulators would hold participants accountable for small mistakes, and those concerns echoed as far downstream as the secondary market, where nervous investors often rejected loans for minor defects on the new forms. The presidential election threw more uncertainty into the mix, and the housing market could have seized up under the weight of it all. Instead, however, it was sunshine and rainbows in 2016. The housing market had its best showing in a decade, as global and domestic events kept the Federal Reserve from raising rates until the final month of the year. In turn, the title industry posted its highest volume of premiums written since 2006, with business up nearly 9 percent despite the compliance concerns with the TILA-RESPA Integrated Disclosure rule. All of that is reflected in the responses to our 2017 Voice of the Title Agent Survey, as more than eight out of 10 agents
who participated told us their business improved year-overyear, either by a little or a lot. A total of 82 percent of respondents said their business either improved a little or a lot versus the previous year, up from 77 percent of respondents in 2016 and 57 percent in 2015. Fewer than 10 percent of agents said their business got worse from a year ago, down slightly from the 2016 survey results. In attempting to explain business growth during 2016, agents provided a myriad of reasons, including low interest rates, a strengthening economy, fewer foreclosures, acquisitions and consumers who were tired of waiting for the perfect time to buy. “In the Washington, D.C., metro area, we gained sizeable market share due to attrition of smaller title firms,” one agent said, noting the trend of larger title companies acquiring smaller ones. Many agents suggested that consumers were looking to refinance before interest rates rose, helping to drive 2016’s success. “Low interest rates, higher volume of intake
Did your business improve last year from the year before? Did your business improve from the year before?
46.6% 41.8%
46.0% 41.3%
40.0%
42.0% 2013 2014 2015 2016 2017
37.7% 31.6%
22.6%
21.4%
20.8% 20.7%
18.9%
16.6% 13.9% 10.7% 8.5% 6.5%
Yes - A lot
4
Yes - A little
7.3%
5.2%
No - Stayed the same
No - It got worse
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said so a year ago. In this year’s survey, just over half expected some growth during 2017, with 14 percent predicting substantial growth.
refinance business,” one agent said. “Great interest rates and a lot of jobs that are bringing people into the area to buy homes,” another added.
“Through our direct marketing and experience of our team, we are already experiencing growth,” one agent told us.
One agent suggested a growing share of commercial business versus residential helped boost business.
About a fifth of those surveyed predicted business would be flat, down slightly from a year ago.
“Our business is mainly mid-priced residential, but we occasionally have a large commercial case that boosts profits,” the agent offered. “This occurred in 2016.” Perhaps the success that many title companies enjoyed last year can be explained apart from metrics. “People tired of sitting on the sidelines. Decided to take their losses/lumps with the slumped real estate values and move on to another deal,” one agent explained. “Don’t seem happy, just seem relieved and determined.” For a variety of reasons, however, survey respondents were not more optimistic about 2017 than they were about 2016. When asked about business prospects this year, the percentage of respondents anticipating either “some” or “substantial” growth remained the same compared with last year’s survey. A total of 70 percent said they expected either some or substantial growth, the same amount of respondents who
“Higher interest rates equals lower volume for refinance business, and economy still on edge as too many unknowns with deregulation concerns,” one agent said, “and home values still not rising enough to create the necessary equity to allow for strong future refi business with higher interest rates.” Many agents believe expected interest rate increases will slow the refinance market. The Federal Reserve approved its first 2017 increase of interest rates in March, the second time in three months it raised rates, after only raising rates once in the previous eight years. Agents were split on whether they believe other market factors would compensate for a predicted decrease in refinances. “Say goodbye to refinances and hello to a strong purchase market. I’m typing this in February, so let’s hope my prediction holds true once this is printed,” one agent said.
How do you feel about business in 2017? How do you feel about business in 2017?
63.3%
63.2% 58.9%
60.6% 55.6%
2013 2014 2015 2016 2017
32.1% 21.7%
21.3% 21.1% 16.2%
17.0%
14.4%
10.9%
10.0%
8.1% 8.9%
5.4%
Anticipating substantial growth
4.2% 3.6% 3.6% Expecting some growth over 2016
www.TheTitleReport.com
Business will be flat
Worse - Orders will be down in our market
5
Business opportunities and concerns As they have in the past three surveys, a majority of respondents (51.5 percent) said a renewed sales/marketing approach would be the most important factor for growing their businesses in the next 12 months. The responses come on the heels of three consecutive years of growth in title premium volume, the first time that’s happened for the industry since it posted four consecutive years of growth from 2000-2003.
More than one quarter of those surveyed saw geographic expansion as the best opportunity to grow. That was higher than the percentage (23.8 percent) who last year called this a vital factor.
As 2017 begins in an environment of rising interest rates – the Federal Reserve raised rates twice in three months after raising them once in eight years – and an expected pullback in the market from the housing industry’s best year in a decade, our survey also found that title agents were most concerned about the economy, cyberthreats, compliance issues and operating costs.
One agent said “adding more real estate agent connections” would be needed to grow in 2017. Another suggested that growth would be spurred by providing employees “leadership training for personal and professional growth.”
Cost reductions, new technology and mergers/acquisitions also were seen by many as the best opportunity to grow in 2017.
Last year, 53.5 percent of those surveyed saw improved sales and marketing approaches as key to growing. This year, however, survey respondents said creating a new business niche would be their second-best opportunity for growing, after geographic expansion took the second spot in the 2016 survey.
So what concerns agents most about 2017? The economy/ mortgage market (55 percent), with many uncertain early in the year about how the new administration and Congress would handle the economy, dovetailing with the rising interest rate atmosphere to once again be the biggest concern. Cyberthreats (41 percent), which was a new option for agents to choose this year, received the second-highest total among concerns.
“Hopeful [the] new administration will provide assistance and relief to title industry with the requirements so I can devote more time to my business,” one agent told us.
Compliance issues (38 percent), which was second last year, was third this time around, followed by operating costs and staffing.
Have you merged, acquired or sold a business in the past 12 months?
What concerns you the most in the next 12 months? What concerns you most in the next 12 months?
The economy / mortgage market
55.1% 41.0%
Cyberthreats
38.0%
Compliance issues
31.2%
Staffing
21.0%
Data/escrow security
18.5%
Third-party vetting
18.0%
Lack of customers
16.6%
Underwriter competition Lender competition
14.6%
E&O insurance costs
14.6% 10.7%
Other
6
12.6%
35.6%
Operating costs
Not meeting remittance requirements
Have you merged, acquired or sold a business in the past 12 months?
87.4%
Yes
No
2.4%
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Although respondents identified numerous other concerns in this year’s survey, some were off the board answers, with the federal government earning a wary eye.
51.5%
What do you see as your best What do you see as your best opportunity in the next 12 months? (Check all that apply) opportunity in the next 12 months?
“Dysfunctional president and Congress. Concerned that both will mess up the economy,” one agent said. Another agent feared “staffing to deal with ridiculous [TILARESPA Integrated Disclosure] regs.” Although it feels like we’re constantly reading and reporting about acquisitions and mergers, nearly nine out of 10 agents surveyed said they had not merged, acquired or sold a business in the past 12 months. That’s up about 2 percent from last year’s survey.
27.2%
And although 2016 brought change to our country, there was little job mobility or change for most in the title industry. Nearly 90 percent said they had not joined an agency network or partnered with other agencies last year, down about 4 percent from the 2016 survey results.
25.7%
24.8%
23.8%
If independent, have you considered exploring any affiliated relationships going forward?
11.9% 9.4%
Agents appear to be coming off the fence about whether to look into affiliations within the industry, whether in affiliated relationships or marketing service agreements.
Have you joined an agency network or partnered with other agencies?
Exiting the business
Other
Merger or acquisition
New technology
Cost reduction
Geographic expansion
New business niche
Renewed sales/marketing approach
When we conducted the 2016 survey, the Consumer Financial Protection Bureau had issued a compliance
7.4%
If independent, have you considered exploring any affiliated relationships going forward?
Have you joined an agency network or partnered with other agencies?
10.8% 20.6% 37.2%
42.2%
89.2% Yes
Yes
No
No Depends on how the industry evolves over the next few years
www.TheTitleReport.com
7
bulletin on marketing services agreements, warning of their compliance dangers, while major lenders had announced they were getting out of their agreements. The uncertainty of the time led more than half of 2016 respondents to say they would consider affiliated relationships only depending on how the industry evolves over the next few years.
and more comfortable, marketing their services directly to consumers.
Fast forward a year to 2017. The CFPB has lost a highprofile court battle over RESPA compliance, a case which is ongoing under appeal, with little enforcement activity or guidance among arrangements in the past year.
The practice of finding consumers and crafting a message through marketing to reach them was one of the focuses of The Title Report’s Marketing Your Title Company special report, which was released in March.
Agents this year were much more decisive on affiliated relationships. Just over 42 percent said they were not interested in exploring affiliated relationships, and the total still unsure dropped to just more than one-third of respondents.
The use of social media also appears to be growing in popularity. “[We target consumers] only by way of social media. We do not see that as a good ROI for business in Michigan, since sellers purchase owner’s title insurance policy per purchase contract,” one agent explained.
The responses were similar, although not as dramatically different, when asked whether they considered exploring marketing services agreements. The number who said they were doubled from a year ago to nearly 15 percent, while the uncertain group stayed about the same at one-fifth of responses.
Another agent said his firm uses “ads in grocery stores (shopping carts). Still not sure if that is going to pay off.”
Among the other major shifts in business is coming in marketing, where title agents are becoming more aware,
Another added, “As an affiliated business most marketing is directed toward the real estate agent.”
Have you considered exploring a marketing Have you considered exploring a marketing services agreement? services agreement?
An increasing percentage of agents this year said they are marketing directly to consumers – 49 percent versus 41.5 percent a year ago.
Still others said they have not yet begun the shift to market to consumers. “My great rep and services provide me with 98 percent of new business,” one agent offered.
Do you market to consumers? Do you market to consumers?
11.9% 21.8%
14.8%
49.0% 39.1% 63.4%
Yes
Yes
No
Not yet, but soon
No Depends on how the industry evolves over the next few years
8
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Lenders and TRID One of the biggest concerns for the title industry at the start of 2016 was the relationship between agents and lenders in light of the new TILA-RESPA Integrated Disclosure (TRID) rule. With lenders now ultimately responsible for errors that occurred in the mortgage process, how much would they pressure agents to indemnify lenders for errors at closing, how strict of standards would lenders hold their third parties to, and what would TRID transactions look like by the end of the year?
California that most lenders do not understand.”
Perhaps surprisingly, agents told us they experienced fewer new forms of vetting in 2016 than a year earlier, possibly because of the extra vetting that lenders, underwriters and third-party services put in place leading up to TRID.
Clearly, some title agents are frustrated with the process. One complained of having to start over because the lender adopted a new system while another quipped: “What isn’t being asked of us?”
This year nearly 62 percent of respondents said they experienced some form of new vetting, down from 71 percent a year earlier. The number who said the new vetting came from lenders fell as well, down to 38 percent from 42 percent a year ago.
Changes continue to occur in lender contracts and instructions, agents said. In the run up to TRID implementation, nearly 80 percent of agents last year said they saw changes to instructions. But in this year’s survey, even after the TRID rule was in effect all year, nearly 70 percent of agents said changes in lender contracts and instructions continued. Just over 20 percent said they did not see changes, with the rest preparing for changes soon.
“This is a moving target especially with the fate of the CFPB (Consumer Financial Protection Bureau) in question,” one agent said. “We do not consider ourselves to be vendors of the lender. Some lenders think we are. This causes many problems in
Have you experienced any new form of agent vetting in the last year? Have you experienced any new form of agent "vetting" in the last year?
21.4%
26.0%
18.5%
13.0%
9.9%
13.0%
32.9%
42.1%
38.3%
At least one agent said there’s too much duplication in providing the same information to several sources. “(I’m required) to provide the same thing I provided to my underwriter for Best Practices certificates,” the agent pointed out. “Seems many lenders won’t/don’t honor underwriter’s Best Practices certificates.”
“Lenders want more evidence that agents protect two things that don’t belong to us: Other people’s information and other people’s money,” one agent said.
Have you seen your lender contracts or instructions change in the last year?
Have you seen your lender contracts or instructions change in the last year?
Have you seen your lender contracts or instructions change in the last year?
9.5%
19.2% 16.6%
14.4%
10.7% 9.5%
21.5%
9.0%
12.7% 12.7%
69.0%
79.8%
50.2%
48.0% 35.2%
2013
2014
2015
28.6%
2016
38.3%
2017
No
Yes - From our underwriter
Yes - From a third-party service
Yes - Directly from a lender
www.TheTitleReport.com
2016
2017
Yes
No
Not yet, preparing for them to
9
Another agent added: “More liability [is] being placed on the settlement agent, more broad escape clauses for the lender.”
“We are comfortable with it, but it is much harder to explain to customers and many understand the old method better,” one agent said.
One agent called the constant changes time-consuming and complex.
The learning process continues, though, and some agents said there are still steps that need to be taken with the TRID rule to make the mortgage process run more smoothly.
“(I) can’t get work done for the time it takes to keep reading the instructions. They want you to be liable for all things.” With more than a year of work under the TRID rule, it appears that the industry is finding a comfort level with the new mortgage process. In fact, nearly half of the title agents surveyed told us they are perfectly comfortable with TRID – a sharp increase from about a third of respondents who said the same the previous year.
“We do not consider ourselves to be vendors of the lender. Some lenders think we are. This causes many problems in California that most lenders do not understand.”
49.2%
“[We’re] still educating lenders and real estate agents on the process,” an agent said. “The disclosure of the title premiums is an issue that needs to be addressed. We are a simultaneous issue rate state. It is confusing to the consumer.” But in maybe the best news of the entire survey, only 1 percent of respondents said they were struggling with TRID, half of the amount from last year. “Has this done for the title business what we thought it would?” one agent asked. “No, not really. There are points that work in the forms, but the lending underwriting and processing can still bog down a closing at the last minute.”
On a scale of 1-5, rate your current level of comfort with TRID:
30.3%
15.4%
4.1%
1 - Perfectly comfortable
10
2
3 - I'm still unsure on a few things
4
1.0% 5 - I'm struggling
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Certifications, standards and vetting Among the most influential compliance guidance to come to the title industry in 2016 was a bulletin from the Consumer Financial Protection Bureau, issued in October, and addressing third-party oversight for lenders.
Still, the change in tenor of the third-party oversight landscape showed in our survey. Agents said they are growing more comfortable with agent vetting and increased lending oversight of third-party providers.
Among the concerns from third-party vendors in the lead up to implementation of the TILA-RESPA Integrated Disclosure (TRID) rule was the scrutiny they faced from lenders, who now would be ultimately responsible for errors in the mortgage process.
Nearly one-third of respondents said they were “perfectly calm” about increased lender oversight, up about 7 percent from a year ago, with about half of respondents saying they did not have concerns, up 10 percent from the 2016 survey.
This was a particular concern for smaller agents, who feared they would be held to strict compliance standards that much larger vendors were required to meet. The CFPB responded to industry questions in the fall by reissuing its service provider bulletin, saying, “This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management.” Although some in the industry read the news as a sign that lenders would be able to ease oversight of smaller vendors, compliance experts generally agreed that the CFPB bulletin provided a path for larger or more integral vendors to be subject to more oversight and scrutiny in appropriate risk management, rather than a lease for lenders to ease up on oversight of its third-party vendors.
“While I have no fear of an audit or of any breach of security problems, I do feel that the expense of third-party vetting is making it extremely hard for the small, independent agency/closing attorney to operate,” one agent explained. In another sign of progress, last year, third-party vetting ranked fourth among agents’ top concerns heading into 2016, with nearly a third of respondents choosing it. This year, however, only 18.5 percent of agents said it was a concern, sixth on the list and just barely ahead of a lack of customers. (see full chart, page 6) What’s more, those who expressed some concerns about increased lender oversight fell 10 percent in this year’s survey to a third of respondents. “I don’t mind the vetting, but I suspect it will be costly for the
Have you implemented the ALTA Best Practices?
Have you implemented the ALTA Best Practices? 3.5%
1.1%
1.5%
16.3%
17.5%
82.6%
81.0%
47.1%
49.4%
2015
2016
Yes - All of Them
12
2017
Some of them
No
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lenders, and they will ultimately select a few, large vendors and the little guys will be shut out,” one agent predicted. Best Practices and third-party certifications have grown in stature and importance as agents have found themselves vetted by more lenders and parties in the last three years. At this stage, agents said Best Practices are essentially a done deal. Less than 2 percent of respondents this year said they have not implemented Best Practices, with 81 percent saying they are fully implemented. But although Best Practices appear to have been embraced by the industry, implementation of SSAE 16 or SOC standards is not as widespread.
“Not sure on this,” that agent said. “We are very small.” But even though agents overall feel more comfortable with third-party oversight throughout the industry, some do believe vetting has gone too far. “I do not like providing info which I believe is confidential about my company, especially since I’ve no idea what they do with my info,” one agent told us. “They should be compelled to accept my underwriter’s Best Practices certificate.” Another agent added, “too many people are asking for my personal information, which has nothing to do with my business.”
“Until lenders require it, we’re certainly not going to volunteer for this expense to prove that we know what we’re doing,” one agent told us. This year’s survey found that the percentage of agents that had either implemented SSAE 16 or SOC standards – or who intend to do it this year – remained practically unchanged. Just over half either had or planned to implement standards. At least one other agent questioned whether the expense involved in gaining SSAE 16 or SOC certification is worth it.
“While I have no fear of an audit or of any breach of security problems, I do feel that the expense of third-party vetting is making it extremely hard for the small, independent agency/closing attorney to operate.”
Have you implemented SSAE 16 or SOC standards or do you intend to within the next year?
Have you implemented SSAE 16 or SOC standards or do you intend to within the next year?
On a scale of 1-5, how nervous are you about agent vetting and increased lender oversight or third-party service providers? 33.2% 29.6%
20.7%
48.1%
51.9% 9.8% 6.7%
Yes
No
www.TheTitleReport.com
1Perfectly calm
2
3 - I have some concerns
4
5 - Very concerned
13
Technology With millennials representing an ever-growing percentage of first-time homebuyers, some analysts say it’s not a matter of if the title insurance industry will embrace eClosing – but how rapidly. After all, that demographic group is generally technically savvy and is perceived to place a higher value on a faster closing process than other demographic groups. A recent Ellie Mae buyer survey found that millennials want it both ways. That is, they want to be able to navigate their way through the buying process faster than others, but they also want human interaction to be easily available if needed. Even so, the respondents in our survey did not seem to be in a rush to radically alter the status quo. Some blamed the slow pace of embracing eClosings on state regulations; others seem content to continue doing things the oldfashioned way as long as possible. “We won’t do them at all,” one survey respondent said. “In our state, all documents must be notarized face-to-face.”
How prepared are you to handle eClosings? How prepared are you to handle eClosings?
Another agent put it this way: “At this time, I do not want to do them.” This year’s survey did not find a significant difference in the percentage of title agents who are either already conducting eClosings or who are pretty close to being ready to do so. Slightly more than 15 percent of respondents said they were already conducting eClosings and 28 percent said they were pretty close to being ready. That’s 43 percent of respondents in this year’s survey who reported either already conducting eClosings or being pretty close to being ready to do so; a fraction less than the 43.5 percent who said the same last year. The percentage of respondents who this year said they were not even close to conducting eClosing was slightly less than last year. “I can be ready as needed but no one in our area is requesting that at this time,” an agent pointed out. Another added: “We are ready. The rest of the real estate
How often do you conduct eClosings? How often do you conduct eClosings?
15.1% 30.6%
12.2% 16.2%
28.0% 26.3%
I'm already doing eClosings Pretty close to being ready I'll be ready in the next 12 months Not even close
14
71.6%
More than last year Same as last year
Less than last year
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industry is not.” Ambivalent or not concerning eClosings, the percentage of title agents who conducted more eClosings in 2016 than in 2015 increased. Slightly more than 12 percent did more eClosings in 2016 than a year earlier, up slightly from last year’s survey results, with just under three-quarters saying they did the same amount. That total was down about 2 percent from the 2016 survey results.
most essential were escrow account security (66.5 percent), cybersecurity technology (62.9 percent), title production systems, paperless storage and eRecording capabilities. “I love technology and love to work to make it more of an automated process,” one agent said. Last year, those four technologies were also the top choices for agents, saying they can’t live without them. Among the newer technologies, portals saw a slight rise in “can’t live without it” responses to more than a quarter of respondents this year. The theme of integration is one that some agents want to see expand.
“I don’t like them and won’t do them,” one agent said. Interestingly, title agents are embracing other technologies. Title agents who said they cannot live without technologies offered to choose from increased for every category except auto-filling of forms. According to our survey, the technologies respondents found
“Regardless of the systems, what needs to happen is integration among all systems,” another agent said. As another agent pointed out, though, “Title technology doesn’t do us any good if the lenders won’t use it.”
Rate your attitude about these title technology attributes/solutions Rate your attitude about these title technology attributes/solutions.
Don't have it Don't need it Would like to have this Neutral Can't live without it!
eRecording capabilities
Escrow Account Security Technology
Cybersecurity My technology Title Production System
Cloud Hosting
www.TheTitleReport.com
Integrations With Providers/ Customers
AutoFilling of Forms
Lien Release/ Document Retrieval
eMarketing Solutions
Paperless Storage
Portals
15
Is enough being done in the industry to prevent fraud and ensure data/escrow securit
Security According to a recent report from Verizon, more than 70 percent of the cyberattacks in 2012 targeted businesses with fewer than 100 employees. Especially enticing to hackers, analysts say, are small businesses with electronic connections to Fortune 500 companies – which includes banks such as JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, US Bancorp, PNC, Bank of New York Mellon, BB&T, SunTrust, Fifth Third and Regions Financial.
Is enough being done in the industry to prevent fraud and ensure escrow security?
30.9%
Although there’s no evidence that title insurance companies have been targeted more than other small businesses, there is a growing concern among our survey respondents that the industry is not doing enough to prevent fraud and ensure escrow security. More than one-third of survey respondents do not believe the industry is doing enough to prevent fraud and ensure security. That’s significantly higher than the quarter of respondents who felt that way a year ago. “Electronic recording has opened new doors for fraud,” an agent said. “I’ve been working in (the) title industry since 1972 and feel that there are just too many opportunities for creative fraud made available by this.” Another third of survey respondents believe enough is being done to prevent fraud and ensure escrow security; 30 percent were unsure. “I feel the title industry acknowledges the concerns and has implemented procedures,” another agent said. “I don’t think the real estate agents have embraced or feel that this is an issue that requires them to address the problem.”
35.8%
Yes
Hand in hand with security precautions are the insurance policies which protect companies in case of breaches. More agents this year said they saw no change in their E&O policies over the last year, with more than half of agents agreeing, as opposed to 40 percent from a year ago. However, some E&O policies are not as inclusive about breaches. One agent told us their E&O coverage “does not cover cybersecurity” while another said they needed to find new coverage each time the company was up for renewal “because the underwriter we were using has decided to get out of covering title agents.”
16
No
Unsure
Has your insurance policy changed Has your E&O E&O insurance policy changed in the last 12 months? in the last 12 months?
Fraud and cyberattacks, unfortunately, are issues that are not likely to go way. Some title agents said constant monitoring and education are vital to prevent fraud and ensure escrow security. “I believe we are doing what is available to do,” an agent said. “We are educating ourselves and our customers. Continue the education with underwriters for us and we, in turn, educate consumers.” Other agents said they are not sure what additional steps the industry can take. “I do know that it should not all fall on the title agent.”
33.3%
11.8% 5.2%
56.7%
21.1%
5.2% Yes - Considerably more expensive Yes - More exclusions than before Yes to both No - Actually, it is cheaper No - No change
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Underwriters When it comes to underwriters, agents seem willing and able to get deals done using all sizes of companies. Perhaps that was a result of the best year (2016) the title industry has had since 2006 – plenty of business for all involved. One agent indicated that the choice of which underwriter to use is often a convenience issue. “The large underwriters with which I work have local and/or state offices with which I can work, so I have not had any real problems,” that agent said.
What type of underwriter do you prefer to work with? What type of underwriter do you prefer to work with?
38.5%
37.5%
As they have in the past, some complained of being squeezed out of deals by underwriters seen as competitors instead of partners. “The larger underwriters take business away from us,” one agent said. Although the largest percentage of respondents (38.5 percent) said they preferred to work with big and national firms, a nearly equal percentage (37.5 percent) stated no preference, similar to last year’s results. There also does not seem to be a large outcry for more regional underwriters, as only 21 percent of respondents in this year’s survey agreed with notion that more regional underwriters are needed. That’s down about 5 percent from the responses last year. However, agents appear to feel good about the state of the industry overall. This year 38 percent said the industry is in better shape than when they entered – the highest amount of responses in our survey’s history.
14.5% 8.0% 1.5% Big and national
Please rate your level of agreement/disagreement with the following statements:
All of the Something Small and None of regional the above above in the middle
Please rate your level of agreement/disagreement with the following statements: 3.5% 10.1% 20.2% 32.4%
27.3% 23.7% 56.6%
Agree Neutral
29.8%
58.1%
Disagree
66.2%
69.2% 31.3%
37.8% 21.7% 12.1%
The title industry is Our industry needs Lenders hold in better shape than to do a better job too much when I entered communicating power over us
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Fraud gets too much hype as a concern in the industry
We need more regional underwriters
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Demographics The more things change, the more they stay the same.
How would you describe your agency?
Although it’s been seven years since the launch of the Voice of the Title Agent survey, the audience has remained steady. This year 78 percent of respondents identified as independent agents – in 2011 that total was 74 percent. Affiliated agents slightly outnumber direct agents in the remainder of the audience, as they have historically in the survey results.
11.3%
10.7%
Those identifying as affiliated agents were affiliated with various industry firms, including mortgage lenders, real estate brokers, and homebuilders. “Most of my work was foreclosure-related and I think it finally bottomed out,” one agent told us. Most agents work in the South (35.4 percent) followed by the Midwest, the Northeast and the West.
78.0%
Most survey respondents work in small offices. Forty-six percent of those surveyed are employed by firms with one office with another quarter at firms with between two and five offices.
Independent
Direct
Affiliated
“We only opened our doors in December 2016,” one agent said. “Our business is increasing steadily each month.” “[We have a] good market, great marketing plan, phenomenal employees!” another agent offered. Experience matters in the title industry, and over time that has shown up more prominently in the survey. The past two years, just Where are you located?
Where are you located?
If affiliated, with what type of companies? If affiliated, with what type of companies?
49.4% 14.2%
23.1%
25.3% 14.5%
21.7%
26.5% 9.6%
35.4% 27.3% Real estate agent
Northeast
18
Midwest
South
Real estate broker
Homebuilder
Mortgage lender
Mortgage broker
Other
West
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over half of agents said their company had been in business for more than 20 years. That total was just 38 percent in our first survey in 2011, and again in 2012. It wasn’t until the 2015 survey that more than half of agents had been in companies that were 20 years or older. This year more than three-quarters of respondents said their companies have been in the title industry for more than a decade, up just slightly from a year ago, and the highest total in the seven years of our survey. Agents again told us they thought residential loan closers had the hardest job in the title business (see graph on page 20), although fewer said so this year (28 percent) than last year (40 percent). Sales ranked second again at 20 percent, but a new category of IT/cyber technology checked in third at 17 percent.
How many years has your company been in business?
51.1%
20+
25.4%
11 to 20
17.4%
6 to 10
2 to 5
4.0%
Agents said the new requirements brought on by the TILA-RESPA Integrated Disclosure (TRID) rule had made the job of a closer even more difficult. 1
“Keeping up with the relentless lender requirements due to TRID,” was the concern of one title agent, while another said, “The back and forth with the lender to complete the upfront fees and final CD has created hours of extra work on our part.” Still, another agent said there was a role we left out from the choices that should not be underestimated. “I notice you never include the owner in the list of hardest jobs,” the respondent said. “We take it on the chin during tough times, and we dish out jobs and money during the good times. That ain’t easy.”
How many offices does your title company operate?
How many offices does your title company operate?
15.4%
20+
11 to 20
6 to 10
2 to 5
1
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2.1%
4.9%
7.4%
25.8%
46.5%
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What do you think is the hardest job in the title business? What do you think is the hardest job in the title business?
28.1%
Residential loan closers Sales IT/cyber technology Compliance manager Title searchers Underwriting counsel Auditing
20.3% 17.2% 13.5%
9.9% 7.3% 3.7%
How often are you pressured by customers to insure over certain items you normally How often are you pressured by customers to insure over certain items you normally would not? would not?
6.5%
Which Which type of deals does your types of deals does your company handle? company handle? 97.6%
Purchase
95.1%
Refinance
15.5%
81.5%
Commercial New construction
36.5%
72.7% 59.5%
Short sales Foreclosure/ REO
41.5%
55.6%
Reverse mortgage
46.3%
Mortgage Modifications Deeds-in-lieu
Very often Rarely
44.4% 33.2%
Sometimes Never
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