The 'forgotten cog' in the real estate machine during coronavirus
As the mortgage and real estate industries traverse the challenges of the increasingly digital coronavirus landscape, title agents and their integral part of the process can get overlooked.
Lenders keeping pace with the high demand that comes with historically low interest rates — and do so remotely — stands as the largest concern in the market right now. However, the bevy of different people involved and moving pieces normally taken for granted add layers of complication to the mix.
"Title agents are a forgotten cog in this whole real estate process," Nate Baker, CEO of Qualia, said in an interview. "I think now with this crisis going on, their important role is particularly visible. There's a lot of challenges in physically finding recording documents with counties that are actually causing difficulties for people now that we're more behind the scenes."
As businesses try to maintain continuity, logistical bumps in the road need workarounds. E-signings power a digital answer to the in-person title officiating procedure. But counties need to have remote capabilities or stay open, otherwise title insurance can't be obtained. If title insurance, can't be obtained, the flow of capital in the mortgage industry won't continue in those geographies.
"There are some practical areas people are running into with county offices shutting down and having the inability to record the deed or the title and then get title insurance," Willy Walker, chairman and CEO of Walker & Dunlop, said in an interview. "My understanding is 88% of the counties across America have e-filing, but I've run into some very big counties over the last 24 hours that don't. Others were trying very hard to get recordation and mortgages processed in county offices working remotely, making sure there's no other first lien on the asset ahead of the loan [so as to] then be able to get title insurance."
As of the close of business on April 2, only a confirmed 11.6% of county title offices remain open across the country while 32.8% operate in a modified state — where they may be physically closed but are still e-recording documents — and 4.3% are totally closed. Among the top 20 metro areas, those numbers go to 13.8% open, 50.3% modified and 10.1% closed. Overall, the statuses of 51.4% municipalities are unconfirmed compared to 25.9% in the 20 largest markets.
"That's the No. 1 thing people are watching right now in our industry: will these counties remain open? We're seeing title insurance companies step up to fill in a bit of that uncertainty and void," Baker said. "They're issuing gap insurance that allows these transactions to close. My perspective is that's very much a short-term solution. If the counties remain closed for a long period of time, we'll have some real difficulty processing closing volumes. At the end of the day, if the county isn’t set up to do digital transactions — which a lot aren't — then this whole process can grind to a halt if they close."