Amid growing concerns about compliance costs in title insurance, a trio of title agents has formed a consortium to help smaller firms manage their back offices more efficiently.
The founding members of TitleConnect are Capitol Title, Closeline Settlements and Monarch Title. By centralizing tasks like information technology support, human resources administration and compliance assistance with TitleConnect, smaller title firms can better manage their costs while still retaining their independence, said executives from the Washington, D.C.-based group.
"A lot of these companies have spent literally decades building their service, building their reputation and we're not just about folding them all into one massive organization," said Mike Bell, a principal of Closeline Settlements. "We want them to retain their independence, we want them to retain their branding but enjoy the benefits of the economies of scale."
TitleConnect's launch comes at a time when the American Land Title Association's voluntary quality guidelines are becoming a de facto standard for title agents, and the Consumer Financial Protection Bureau's new integrated disclosure regulations have added new complexity to the mortgage closing process.
While TitleConnect's co-founders have been devising the concept for about five years, it wasn't until they attended a seminar on the ALTA guidelines that they saw an opportunity for the consortium to be financially viable.
"We walked out, looked at each other and said, 'This was going to be the impetus. This is going to cause the change in people's mindsets,'" Bell said.
ALTA's "Title Insurance and Settlement Company Best Practices," contain lists of prescribed steps for conducting title and settlement services operations and cover areas including information security, consumer complaint resolution, escrow account controls and reconciliation procedures and other functions. Meanwhile, the new TRID regulations, which integrate disclosures required under the Truth-in-Lending and Real Estate Settlement Procedures acts, require more communication and precision between title agents and lenders.
TitleConnect's three founding companies have a combined 18 offices throughout Washington, D.C., and its Maryland and Virginia suburbs. Title agents can use any of the offices in the network to make closings more convenient for clients, while also streamlining other back-office functions. While the ALTA and CFPB requirements may seem unrelated to office locations, the overall goal is to help small title firms focus on client transactions.
"They are acting as catalysts where it is compelling certain organizations to take a much closer look at the concept then they may have thought of doing so in the past," said Elliot Liss, another principal at Closeline and TitleConnect co-founder.
Title agents are indeed feeling a financial squeeze complying with new guidelines and regulations, said Shannon Cobb, executive vice president of American Tax and Property Reporting in Plano, Texas.
"It is a huge resource issue and those with not as deep of a pocketbook, how are they going to deal with the technology challenges; how are they going to deal with some of the other compliance challenges? It is a stressor on the smaller players in the industry."
Cobb, a former executive with WFG National Title Insurance Co. and LandAmerica, said there will be added pressure on mom-and-pop agencies that maintain the status quo with their operations. But those pressures will also lead them to alternative solutions, like some form of consolidation, "because it makes total sense to pool your resources."
But fears of widespread title agent consolidation may be overblown. In a recent survey of title agents by Habif, Arogeti & Wynne found 65% of agents have not considered merging or discontinuing their residential settlement services.
One explanation for this may be that many small title agencies are located in smaller markets where there is less competition. Whatever market contraction does occur will be in large cities, said Richard Kopelman, CEO and managing partner of the Atlanta-based accounting firm. Plus, many title professionals value their status as small entrepreneurs.
"There are a lot of fierce independents out there, just like there are in the accounting industry," Kopelman said.
That's why a consortium like TitleConnect, whose management has plans to expand beyond the Washington, D.C., market, could be an attractive option for small firms that want to focus on growing their businesses.
"We want to be looking at all of the non-customer-facing facets of our business and focus on the efficiencies that we can create and allow the individual members to maintain…all of the customer-facing aspects that most folks in our industry pride themselves on," Liss said.