Lenders and servicers are not the only ones faced with regulatory burdens. Title and escrow companies are also wading through the influx of new rules and requirements.
Cristy Ward, Chief Strategy Office at Mortgage Connect sat down with MReport to explain how title and escrow companies are dealing with regulatory requirements, where this industry is headed, and how they can ensure their business is successful.
MReport: What is the biggest issue or challenge that the title and escrow industry is dealing with right now?
Ward: The most prominent challenge for the title and escrow industry today is centered on the profound regulatory changes we have endured, and their effect on the economics of the real estate transaction. Over the last three years, the cost of increased regulation, more stringent compliance, and TRID have increased costs across the board for our industry. Today, TRID maintenance continues to be the center of focus for lenders and their associated title and closing partners. Technology hurdles are driving inefficient processes, and the costs are continuing to rise for both Mortgage Bankers and the Title and Closing Industry.
MReport: How are title and escrow companies faring with regulatory requirements? Which pieces of regulation are affecting business operations?
Ward: The industry has been able to absorb most of the regulatory changes up until TRID. The new TRID rules and regulations have not only increased the cost of doing business, they have created significant challenges with process implementation. TRID has been tough on the industry as a whole. Many lenders are still struggling with technology platforms and forced to create manual workarounds to process their transactions. The title and closing companies that were committed to training their employees, used technology as a tool and not “the solution”, and focused more on TRID knowledge, education and timelines did well.
MReport: Can you provide an overview of where the title and escrow industry used to be and where this sector is headed in the future? (Ex: Pre -and Post-Crisis)
Ward: Pre-crisis was a more competitive environment in the Title and Closing industry. There were many more companies at that time which led to increased competition. More products were being launched by the underwriters and technology was being leveraged. Since the crisis, we have seen a retrenching of innovative products and technology, as well as companies becoming hyper focused on creating processes to comply with the regulatory guidelines. The consolidation within our industry post-crisis has attributed to a less competitive market today.
MReport: For those companies that opt to innovate in this industry, what does the future look like? What aspect of the market provide the most opportunity?
Ward: However, I do feel the future is promising for those who choose to innovate in the Title and Closing space. There is great opportunity to create specialty products and processes in conjunction with our lenders to complement their strategic initiatives. There are strong demands in the market to create solutions that will help attract future homebuyers and improve upon the Consumer Experience in the mortgage industry. The lending process as a whole is overly regulated and that regulation has caused disruption to innovation. Those who will flourish in the industry must embrace innovation to meet the demands of growing demographic segments, specifically the next round of first time homebuyers, Millennials. While much has been said about this group of 18–34 year olds, one fact remains consistent: at a projected 75.3 million they present a large portion of homebuyers in the coming years. This demographic will not be tolerant of the current paper intensive mortgage process.
Historically, our industry has delivered transactions through two types of business models. One, where you have a brick and mortar local closing agency and the other, where traditional large vendor management firms process centralized refinance business. I believe there are other models that need to emerge for our industry to continue to evolve and keep pace with the market. To date this has not been done successfully and I feel there is great opportunity for market disruption.
MReport: What advice can you offer others in the title and escrow business to be successful?
Ward: The Title and Closing companies that will be successful in the future will need to be innovative in their service offerings by developing unique solutions through technology, process flow flexibility and creativity in how they can enhance the Consumer Experience. I believe there is a tremendous amount of opportunity in this space to make a difference.