Are we like Dionysius, hanging on by a thread?
Everything is fine until it’s not. These are truly precarious times. In addition to the suffering and death COVID-19 has spawned, from a business perspective, our title world is forever changed.
Aside from being inundated by emails from every vendor you’ve ever dealt with explaining how wonderful they are in their response to the pandemic (Really airlines? Now you think cleaning the planes is a good idea?),the title industry is facing a perfect storm.
Refi volumes are through the roof; a good problem to have IF you can fulfil the orders. Unfortunately, between workforce restrictions (even for essential services), shelter-in-place ordinances and staff who get sick or cannot work from home this is easier said than done. The fact that both domestic and offshore resources are scarce and now unreliable doesn’t make things any better.
Forecasts indicate many more will become ill and it is clear that the pandemic is far from over. The high refi volumes can stop in an instant when rates inevitably rise. Homebuyers may decide to just hang on to their cash in anticipation of bargains.
Underwriters are now faced with new risks to consider, such as increased gap exposure due to shuttered country recording offices, increased risk of fraud and forgery (with new “creative” ways to get deals closed such as drive-by signings), and social engineering cybercriminals blitzing the skeleton crews of title agencies with higher hopes of diverting funds from a hastily processed file. While RON and other emergency legislation is being reviewed, digital closings are simply not a reality in all places. Not all lenders are eNote and eVault ready.
Many of our clients have reached out to us for our thoughts on what all this means for their business today, next month, and in the future.
From a business sale and value perspective, we tend to discount refi volumes in excess of 25% of a title agency’s total book unless there is some stickiness to an origination source, such as an integration with a lender. It’s just too volatile.
From the perspective of our consulting and diligence arm, our advice focuses on the word ‘evolve’. The antiquated title world has been evolving for some time. We see some of the recent clever technology driven innovations as having added impetus as a result of current events.
How title people work now will inevitably change. Sales people for example should focus on how they add value to their clients as a priority over hanging out with them at happy hours. They should facilitate transactions and involve themselves in ensuring smooth closings. Technical knowledge will become more important than social skills.
The number of staff working from home will inevitably grow (thereby granting the wish of every four-legged furry friend!). People will be more deliberate and smarter about how they work. Employers who get this right will reap the benefit of lower office expense.
New technology and ways of doing things aren’t always clean or easy. As a culture we have a long history of resisting change. Many folks in 1439 thought Gutenberg was crazy when he invented the printing press (‘Almost no one can read -who will buy the books you print?’). That same mindset was prevalent when TV sets were invented (‘Why buy a TV for hundreds of dollars when you watch movies at the corner Nickelodeon for 5 cents?’), and when Fax machines were invented (‘Why buy a fax machine? The print fades and the paper curls…’) and more.
The simple truth is that there is and will always be those who resist change and those who embrace change. There are always some who are leaders, some who are followers, and some who just throw in the towel. The title industry and title agencies must evolve or be left behind.
How title agencies respond to this new environment will most certainly be something buyers look at. Do you have a solid Business Continuity Plan? Have you dusted it off in the last few years? How quickly can you turn the switch on if you need to? Have you embraced digital closings? Are your teams trained on eClosings? Have you discussed implementation with your lender clients and IT? Can systems be integrated remotely? Do you have access to signing services with e-signing capabilities? Do you know which county offices in your market are closed and which are accepting eRecordings?
Some in the industry are indeed hanging on by a thread. For others this is a golden opportunity to embrace evolution.