Rafael Castellanos, owner of Expert Title Insurance Agency, New York, said the title industry has been under fire in recent years because of a number of problems, not the least of which are agent defalcations. “The hardship they have left in their wake unfortunately gives all of us a bad name,” he said.
But the good news is the American Land Title Association has looked to provide standards through a best practices statement to bring all agents up to the same level and this will have big implications for the business going forward, he said.
There are going to be some smaller agents who will not be able to comply with the standards; those may end up leaving the business or merging with other companies. That could be either good or bad for the title agent industry Castellanos said.
Some mom and pop shops might not be able to compete in the new environment. But it will also force those people who are just out to make a dollar as an agent without knowing anything about title insurance to become “really good agents,” he declared.
The industry trade groups, including ALTA and the state groups like the New York State Land Title Association, need to help to help keep agents informed about all the happenings as well as advocate for the business, he said.
As for the business environment for title agents right now, with overall volume declining but purchase business up on a year-over-year basis, Castellanos said it has been “very interesting” as of late.
He is hearing from consumers who do not have a commitment yet or have not yet locked-in their rate and said to him they are reluctant to refinance because rates have risen. “I totally understand. And people who are buying have the same concern because they are worried ‘Am I going to be able to afford this?’”
It is not just the interest rate that is a concern but other factors that go along with owning a home, such as the cost of energy for a house and the taxes (among others), which are going to increase.
So folks who are on a tight budget are likely to drop out of the market, Castellanos said. Half a point in either direction could make a difference if the transaction (refi or purchase) will go through. The title business is heavily dependent on the amount of real estate sales and mortgage refinancings.
Things are relative, he noted. Compared to just 20 years ago, rates were near double digit amounts. Now there is a generation of home buyers who have never seen rates in the area of 10%.
But now, an increase from the area of 3% up to around 5% makes a big difference.
For example, the rate spike caused a situation unique to New York, where because of state law, loans were pushed into high cost territory and for a period the market seized up. And this did have an effect on consumers’ willingness to buy homes, he said.
“If you are sitting on the fence, it will sway you in a bad way,” he said. But people who have a need to buy or refi will still do it.