Title and closing companies are faced with a highly regulated mortgage environment and lack of consistency in compliance requirement, but are finding ways to overcome the challenges brought on by new regulations.
Steven J. Melmet, Esq., CEO of Vendor Connect, LLC , a national company which manages and coordinates REO title and closing transactions sat down with MReport to explain how title companies are wading through the heavily regulated environment without running into trouble.
MReport: What is the biggest issue or challenge that the title and escrow industry is dealing with right now?
Melmet: Companies of all sizes are dealing with challenges brought about by CFPB/TRID. In part because of the substantial amount of resources required to be in full regulatory compliance, the industry finds itself expending more time, labor and resources, receiving fewer net revenue dollars as a result.
Other challenges include: Differing interpretations of the Closing Disclosure causing an increase in time frames to close the transaction; Dealing with a new “3 day waiting period” after the disclosure is sent; Assisting various lenders as to the placement and characterization of fees to ensure compliance with requirements of the new Closing Disclosure.
On the title side, competition is causing title premiums to drop (some more significantly than others). While this is a good thing for the consumer, it is eroding profit margins for title service providers which could adversely affect not only their profit margins but also their ability to provide the same high level of service.
MReport: How are title and escrow companies faring with regulatory requirements? Which pieces of regulation are affecting business operations?
Melmet: The industry is experiencing a lack of consistency in compliance requirements from one lender/investor to the next. There is significantly more “paperwork” required. Obtaining lender pre-approvals is time and resource consuming which directs a certain amount of attention “away” from the primary goal….which is to ensure a timely and successful closing.
The title side has not materially changed except for the protection of “non-public personal information." The industry is experiencing inconsistencies in regard to each lender’s guidelines on what and how to deal with fees and charges on the Closing Disclosure.
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)
Melmet: The end result of the new regulations is “delayed” closings which is directly opposite to the original goal of most REO managers who seek to close as many transactions per month as is possible.
Title and closing providers must devote additional financial resources to meet the demand for enhanced regulatory compliance (i.e. encryption to protect non-public information, protection from wire hacking which is on the rise, including insurance to protect against cyber theft along with higher E & O requirements).
On the flip side, the consumer benefits as they now have more time to review the Closing Disclosure and to initiate the wiring of funds. Because of the strict enforcement of the non-dissemination of borrower data, real estate agents many not be seeing as much information as they did in the past. However, it is believed that communication between the lenders and title/closing providers will improve as the industry adjusts and gets through its “learning curve."
MReport: What advice can you offer others in the title and escrow business to be successful?
Melmet: Embrace change brought about by the new regulations and be proactive in ensuring for success in our new regulatory environment. Invest in personnel and IT resources to stay one step ahead of ever changing compliance/ regulatory demands for lender requirements including lender approvals, audits, encryption, digital signatures, tracking, and record keeping.
Communication is still of utmost importance amongst all the “players” to the transaction. In years prior, it was all about timely closings and clean title. While those bullet points are still “key," companies will need place an equally focused eye on “compliance and regulations." Continual training within each organization cannot be over-emphasized. Be the best at what you do and create a “buzz” about your services so lenders will want to choose your company for its title and closing service needs.
Editor's Note: To read more about how Title and Closing companies are faring with regulatory requirements from Melmet and more, see "Murky TRID Waters, Everywhere," located in the May 2016 issue of MReport.