Ask any of us in real estate-related businesses to describe the perfect closing experience and you’ll likely get minor variations on this theme: all documentation is prepared accurately and delivered on time; the notary arrives promptly and handles the signing with great professionalism; the title policy and other documents are swiftly and efficiently delivered; and the homebuyer has absolutely no complaints.
And while most closings go down this smooth path, there are times when U-turns and roadblocks can make for a bumpy ride. That’s why, as lenders strive to meet consumer expectations and adhere to the recent raft of regulations spelled out in Dodd-Frank and by the Consumer Financial Protection Bureau, they’re also taking a hard look at the practices and protocols of their vendors.
Increased responsibility and accountability for the actions of third parties involved in a closing are now compelling loan originators to define and document processes for regulators and investors; and they are often doing so at the transactional level, should that information be required for a state or federal audit. This type of loan-level data transparency will be required as a matter of course by secondary market participants.
As lenders scrutinize and monitor vendors, the vendors are themselves focused on the establishment of industry-wide standards for their businesses. Data managers, notaries and title companies are beginning to develop methods designed to ensure a level of quality and consistency that results in a positive customer experience.
Consistently delivered data is not only a path to compliance, but can help promote an increase in mortgage lending activity and investment. In order for investors to return to the market, they will need near-real-time loan performance data to enable quicker, more precise decision making.
FHFA supports this vision of the future in the strategic plan for the agencies and the common securitization platform. This platform will run on Mortgage Industry Standards Maintenance Organization data standards. Data management companies that are able to come together and work within a structure that includes standardized naming conventions, definitions, information provision methods and basic data rules can enhance efficiency and quality, while making data sharing and collaboration easier.
The notary industry is also taking a hard look at how it can improve and standardize its practices. This is especially important to national lenders with centralized call centers where loan approval and funding processes happen online. In these cases, the notary is often the only lender representative the homebuyer ever sees. While the notary is an independent contractor, in the buyer’s mind the notary represents the lender and the signing experience is very much a reflection on that lender.
Currently, there are no industry-wide standards for the notary community, but a consortium of large lenders, settlement service providers and the National Notary Association is actively working on standards that would address training, background checks and code of conduct for notaries. Some lenders have implemented their own standards, but notaries who work for multiple lenders must adhere to the often differing standards of each. A unified approach to notary signing via standards and protocols could keep notaries from becoming frustrated by multiple lender requirements and help them provide a more efficient, consistent and positive customer experience.
Earlier this year, the American Land Title Association released new standards for title and settlement service providers and will soon release complementary audit standards. The group’s objective is to provide its members with best practices for protecting consumers, meeting legal and market requirements, and providing quality service through employee training.
While compliance with these best practices is voluntary, title agents and underwriters who adhere to them will help to ensure a positive and compliant real estate settlement experience. It is also possible that lenders will seek out title agents certified in ALTA’s best practices, creating a market incentive to meet these standards.
Striving to create a good customer experience isn’t foreign to anyone in the lending and closing industries. But when actions are taken that increase investor confidence while raising customer satisfaction and promoting regulatory compliance, it’s a win all around. Adoption of standards in the closing space may, in fact, be just the action that is needed to meet new regulations, create efficiency and improve the customer experience.
