From market changes and real-time payments to using Tinder for talent recruitment, members of the 2022 National Settlement Services Summit (NS3) underwriting panel covered a lot of ground in their session.
Old Republic National Title Insurance Executive Vice President Jeff Bluhm; Stewart Group President, Agency Operations Tara Smith; Fidelity National Financial Senior Vice President for the Southeast region Ravi Bapodra; First National Title Insurance Co. President and CEO Chris Phillips; and Doma Title Insurance Executive Vice President and Chief Underwriting Counsel Valerie Grandin took part in the discussion about the ever-changing landscape of the title industry.
Market changes
Bluhm lead the panel, opening the session by inviting his colleagues to discuss coping with the current changes in the market.
“When I hear ‘change in the marketplace,’ I look back and say we’re no longer going to see the firehouse of refinance transactions. I think that’s pretty much a reality at this point,” Bapodra said. “But what’s interesting is that if you look at MBA statistics, they actually list that purchase transactions for this upcoming year is forecasted to be at $1.7 billion. Compare that to last year, when it was at $1.65 billion.”
Even with that positive forecast, there is still contraction in the overall real estate market, he said.
“That means there’s less orders, less opportunity, and that also means there needs to be a full-force sales effort to really go after and earn that business,” Bapodra said.
Smith said it’s important to be strategic with staffing adjustments made in response to changes in the market.
“You can’t just take your staff that was previously focused on refi transactions and shift them over to commercial. Those are obviously very different skill sets,” she said.
Home equity lines of credit (HELOCs) are starting to make a comeback in the market as an alternative to refinancing, Bluhm added, as many homeowners have a lot of equity in their houses today.
“As we’re all going through the market change, we recognize it’s important to make sure we’re diversifying our overall business and not just being focused on one side of the market,” Bapodra said.
Real-time payments
Another area that is changing in the industry is the way that money is transacted, Bluhm said. One of those ways is using real-time payments. In April, The Clearing House increased the general transaction value limit for real-time payments from $100,000 to $1 million.
“We’ve seen tremendous growth in adoption of real-time payments,” Smith said. “I believe in Q1 of 2019, there were about 200,000 transactions among 15 participants, and in Q1 of 2022, it was well north of 36 million transactions with 217 participants. I’m expecting the number of participating banks and entities to increase to 250 by the end of this year and north of 300 by next year.”
From an underwriter’s perspective, she said, Stewart would insure a real-time payment transaction as long as the good funds language in a specific state is inclusive enough to allow real-time payments and all other underwriting requirements for the transaction are met.
“The way that good funds laws are written in various states, we believe that there are some states where there may need to be some modifications to the language to allow for real-time payments,” she added.
Such transactions have benefits and risks. While they can be sent at any time, including after banking hours, and can cost less since the fee structure is different than for wire transactions, real-time payments also are immediate and can’t be pulled back, Smith said.
“Wires getting sent inadvertently to the wrong place happens frequently, and banks have a process on how to get that money back,” she said. “How does that translate into the real-time payment world. If you inadvertently send something to the wrong place, how do you get it back?
“I think it’s an exciting movement for our industry and something that can be used as a differentiator, but there are still some risks to consider and monitor as well.”
Technology innovations
As the title space continues moving more of its business online, Bluhm wondered what the office of the future may looks like.
“What is the future transaction is going to look like? I would say it’s probably going to be all digital, and I mean all digital: everything, every document, every piece of money, everything you do is going to move electronically or digitally,” he said.
Most of us have already embraced such technology, Phillips said.
“We do it every day by paying our bills online,” Phillips said. “I haven’t written a check to the cable company in three years. I just push a button. We can get to that point for everyone in our industry: push a button and be all set. We are already doing it. We just need to expand it into our realm of real estate.”
Bluhm said he will be long retired when that happens, but Grandin disagreed.
“The only caveat I would give you is that we also know what is changing in the industry is the customer, who is going to insist on that maybe before you are ready to deploy it,” she said. “I think it will be here sooner than we know.”
Attorney opinion letters
Smith spoke about the announcement from Fannie Mae in April that it allows lenders, in some instances, to obtain an attorney opinion letter (AOL) as an alternative to a title insurance policy.
“This isn’t new guidance,” Smith said. “Freddie [Mac] has been accepting attorney opinion letters in limited circumstances since 2008, so this aligns the GSEs together, Fannie and Freddie.”
Smith is a member of the American Land Title Association’s (ALTA) Board of Governors. She said ALTA continues to work closely with the GSEs on the issue.
“We have had recent conversations with the GSEs that it’s not their intention to take on additional risk by accepting the attorney opinion letters,” she said. “As an underwriter, we’re looking at the coverage that’s provided by the AOLs and comparing that to the traditional title insurance. We’re evaluating if by accepting the AOLs the lenders are taking on additional risk, and then evaluating what, if any, specific cost savings there are with an AOL compared to title insurance.”
There will always be alternative products to contend with in the title industry, Smith said.
“We have to be prepared to show the value of our products and be able to talk about the value that we have and articulate that value to our customers and to the lenders,” she said.
Recruiting and retaining talent
One of the biggest challenges in the industry right now is not specific to title, Phillips said: recruiting talent.
“You can’t even go to Starbucks and get a coffee because half of them are closed or there is one person working,” he said. “It’s a nationwide problem, not just an industry issue.”
Title is a people industry, he said, so it is critical to find the right people. Recruiting “nice” people is at the top of his list.
“You can train nice people to do anything in our industry if you give them the right start,” Phillips said.
That includes giving new recruits a clear roadmap that shows them specifically how to advance.
“This works really well for millennials,” Phillips said. “They see a future that includes salary, responsibility, leadership, and they know the process they have to go through. It intrigues people and gives them a specific goal and a way to get to where they want to be.
“It’s very important for millennials to know there is an endgame. They want it now, and you can say, ‘Yes, you can have it. It’s not now, but here is the timeframe we can get you there. You have to meet these milestones but once you do, you’re going to get there.’”
It is important that employees who get promoted get the proper training to be a manager, Grandin added.
“We really help them succeed because in our mind, if we don’t train that manager, we are failing that manager and all their direct reports,” she said.
Phillips is encouraged by the number of young people he sees getting involved in title, as they are the future of the industry.
“A few years ago, truly, we did not have that in the industry,” Phillips said. “Our future looks good, and we just have to adapt to this new generation of younger people coming into the industry and teach them.”
One of the ways some companies are adapting is by meeting new recruits where they are, Grandin said.
“There was a recent article where a company recruited interns on Tinder,” she said. “So, it’s kind of going to those recruits where they are in a different setting.”
Another recruiting challenge she sees is in hiring talent for technology positions.
“They are also being recruited by a number of other tech companies, so we’ve got to be sensitive to the benefits those companies are offering,” Grandin said.
Remote workers
Another personnel issue the panel discussed was whether team members should be expected to work in the office, work from home or employ a hybrid schedule.
“I think we learned so much from the COVID experience, that you can be just as efficient if not arguably even more productive from home, so long as there are a couple of things that are in place,” Bapodra said. “A good production system must be in place, along with the ability to have policies and procedures so that you can manage effectively.”
Successful businesses will be those that are flexible on the workplace issue, he said.
“I think from a future perspective, the reality is that some people don’t want to work from inside of an office. I think we have to come to grips with that,” Bapodra said. “If you do not react in a flexible manner, you are at a competitive disadvantage. We’re trying to attract people, not detract.”
Flexibility is important, Smith said, and that includes scheduling some time for team members to be in the office.
“What we’ve seen is established teams that went and worked remote were fine, but as you start to try to build new teams, it’s harder when you’re remote,” she said. “We can’t diminish the value of human interaction, and the ability to form relationships is so much easier when you’re in person.”
Phillips, too, said a hybrid approach provides the necessary face time the industry requires.
“Work when you can away from the office, but you’ve got to be there to see that person in person. You don’t have to do it every day, but you’ve got to build that personal relationship,” he said.
Bluhm said he calls remote working the “grand experiment, because I truly believe that we may not know how this is going to play out, what impact it’s going to have on culture, on the future growth and development of the next generation in our industry, the psychological effects if you get isolation issues involved; so doing things very intentionally when you have a remote workforce is critical.”