While some signs in the new year point to a better time ahead for the title insurance industry and housing market, agents, underwriters and all stakeholders are still seeking ways to navigate the current less-than-ideal conditions.
Kay Underwood-Zach, owner of Title Insurance Consultants, LLC, and Pat Carney, CEO of title technology provider Viking Sasquatch, spoke with The Title Report about ways to find optimal results on the balance sheet and with team members.
“If you don’t tell your story, and tell it with accuracy and transparency, your team will make up their own version and it will be difficult to rewrite their version,” Underwood-Zach said. “The industry has changed and will continue to do so, and those who do not adjust and adapt will be left behind. If you’re doing something today the same way you did it five years ago, 10 years ago, or longer, you are missing opportunities. A relatable analogy is banking; we do not bank the way we did even five years ago.
“Leaders should foster open communication, remain adaptable and be ready to evolve to meet the demands of a changing market. This approach will help guide their teams effectively through difficult decisions and prepare them for the future.”
Carney was asked to recount recent experiences helping title companies find better margins and increase efficiency.
“Although every company and circumstance are different, we have identified recurring patterns that demand attention and found solutions that yielded positive results,” he said. “One of the biggest challenges facing title companies is the need to control and reduce expenses while simultaneously expanding revenue streams. Historically, personnel costs have been the most significant expense category in the title sector. As a result, many agencies initially focus on streamlining their workforce to cut costs.
“While this is a valid approach, it’s essential to do so strategically. When implemented carefully, centralization and outsourcing some tasks can empower title agents to trim expenses effectively, allocate resources better and respond swiftly to market fluctuations. Additionally, optimizing their current title production software can significantly boost efficiency and reduce operational costs.”
Fitch Ratings’ outlook for the U.S. title insurance market for 2024 is neutral. The firm opined that mortgage interest rates are near peak levels and title insurance industry profits will expand modestly from 2023 levels, tied to revenue and expense ratio improvement.
Profitability within the U.S. title insurance sector is fundamentally linked to activity in the U.S. residential housing and mortgage markets, which continue to experience uncertainty due to factors like higher interest rates and affordability hurdles over the last 18 months. Fitch expects that to continue, albeit to a lesser degree, into the first half of 2024.
Recent data from Redfin showed pending U.S. home sales posting their smallest year-over-year decline in two years (-3 percent) during the four weeks ending Jan. 7, with mortgage-purchase applications up 3 percent from early-December, and Redfin’s Homebuyer Demand Index up 5 percent over that same period.
Even with pandemic lockdown measures a longtime thing of the past, the title industry and society as a whole are still learning what truly constitutes “the new normal.” Underwood-Zach said recognizing that is vital in making smart, informed decisions regarding “excess.”
“In a ‘post-COVID world,’ our understanding of what excess means in business certainly has changed, and as a result, title companies can, and need, to be more flexible,” she said. “A comprehensive review of all operational expenses is essential. This includes revisiting vendor contracts, renegotiating terms and exploring opportunities for bulk purchasing or cost-sharing with other title companies.”
With many employees now working from home or adopting hybrid schedules, agencies need to evaluate whether office space requirements have changed, Underwood-Zach added.
“Title companies should consider re-evaluating their needs and downsizing or reconfiguring their office spaces to better align with the new way of working,” she said. “This change could lead to significant cost savings on rent and utilities. Title companies can also cut costs when it comes to travel. Hybrid and remote work have increased the use of virtual meetings and conferences. By evaluating the necessity of in-person meetings and events, companies may find that they can reduce spending significantly.”
Carney pointed out that some cost savings brought on through aforementioned measures may need to be spent on new cybersecurity initiatives, especially necessary with more remote workers.
“With the increased reliance on digital platforms and remote work, the cybersecurity landscape has become more complex and challenging,” he said. “Title companies need to invest in secure, efficient, and user-friendly software and systems to protect sensitive data and ensure the integrity of real estate transactions. Technology investments can streamline processes, enhance collaboration, and reduce the need for excess paperwork and physical office storage.
“Companies are also being advised to offer tools to support the mental health and productivity of their employees. This can include offering flexible hours, mental health support programs, and ergonomically sound home office setups.”
Knowing that “one-size-fits-all” rarely applies to title agencies in regard to revenue optimization and efficiency is a vitally important first step toward meeting goals, Carney said.
“Success lies in partnering with experts who can identify the specific options suited to a particular agency's needs, which is exactly what we do,” he said. “Collaboratively, we can analyze potential tools and solutions, develop a comprehensive phased implementation plan, and guide the agency through the entire process to ensure long-term success.”
Industry veterans Jim Campbell and Aaron Davis continue the conversation about finding success in challenging markets in The Title Report’s upcoming webinar, Strategic Planning for 2024, on Tuesday, Feb. 13. Get more details and register for the webinar here.