Key points from Seth Godin’s post titled Advice for real estate agents (quit now!):

• Order takers (those genetically programed dinosaurs who know the answer to every question, but bring nothing of real value to the table) are as good as extinct. 
  
• The down market offers infinite opportunities for real champions.
  
• You’re either fanatical about your product or you’re “invisible.”
• All real estate marketing is hyper-localized.
• Become the local go to person for anyone and everyone, even your enemies, that can benefit from hearing your message.
• Build blogs to communicate the “real information, not just data” that’s important to past and prospective customers alike.
  

Now comes the title industry …

Real estate agents have done a far better job branding themselves than have title agents.  There’s little risk of short term disintermediation for real estate agents because they’ve wisely positioned themselves as the point of contact within local communities.  They’ve aggregated audiences of loyal fans.  Real estate brokers, considering current models, couldn’t exist without their agents, particularly the top producers.

The title industry has employed a decidedly different business model.   Chronic anonymity complicated by a self imposed identity crises has been the by-product of decades of bad marketing choices by title companies.  I think it’s safe to say that many title companies have no marketing, branding, or positioning strategy at all.  It’s an error that can’t be corrected when boom markets turn sour.  The silent closure of a title company for lack of business goes unnoticed.  Why?  Most consumers don’t know what a title company is, what it does, or that it exists.

The title industry’s favored marketing tool of the past, a box of donuts featuring a stapled business card, is no longer an effective option.

Could title insurers replace their agents with a team of aggressive sales reps?  It wouldn’t be an easy accomplishment on the operations side, but I think it could be done quickly on the marketing side.  It’s something to think about in light of underwriter affinity for direct operations.  If title agents were to instantly disappear, I suspect that title orders would flow to underwriters in direct proportion to current industry dominance.  First American and Fidelity National would control about 70% of the market with the remaining players competing for any remaining business.  It really has nothing to do with technical superiority or claims ratios.  Underwriter dominance is determined wholly by management’s commitment to attracting and developing marketing talent.

As a value proposition, title companies have to build solid brands within their targeted audiences.  While many of you will continue to market only real estate and lender sources, the importance of internet transparency on consumer decision models can’t be ignored.

Title order pipelines have to swell with increasing percentages of consumer directed orders to remain viable in the future.

Title companies have to start championing themselves and the communities which they serve.  You don’t sell title insurance.  Your product is a complicated mix of reputation, credibility, and service.  And yes, the future of title company marketing lies in the power of Web 2.0 and the power to communicate interactively and selectively.  If you’ve never heard of Web 2.0, we need to talk. 

The boring, static web-sites that are the title industry standard have anthropological value at best.  They do nothing to promote business in the Web 2.0 business environment.   It’s not unusual to find underwriter logos featured on title company web-sites.  The practice results in confusion and possibly the branding of underwriters at the expense of title company irrelevance. 

Keep in mind: the underwriters that you’re marketing on your sites are often your direct competition for title orders.

This post is getting lengthy so I’ll hit my key points:

• Hyper-localized blogs offer unlimited opportunities for title companies to connect with consumers and other local sources of business.
• There’s no excuse for not blogging because it’s inexpensive and most title companies aren’t busy.
• Stop selling title insurance and title insurers.  Sell yourselves!  You are the product!  Become your own product champion.  Become fanatical about your title company.
  
• Use blogging to offer valuable information about your company, your community, and anything else that matters to real people.
• Use the internet to engage others.  It works.

Shortly, I’ll share links to some of my favorite real estate blogs with hyper-localized content.

 

From The Wall Street Journal:

Title insurance is little more then a mandated malpractice policy for lawyers that is purchased, in most cases in its entirety, by the homeowner. If a “title defect” occurs, the title insurance completely indemnifies the lawyer who performed the contracted service. In those states that don’t require title insurance, a form must be completed that releases the lawyer from responsibility for forged or poorly performed searches. Either way, the potential injured party, the borrower, is responsible for the cost.

The commentary was written by Dr. Corey M. Cohen, an emergency physician from Louisville, KY.  “I don’t understand,” says Dr. Cohen, “why other providers of goods and services aren’t allowed to mandate upfront indemnification.”

Think about it: has title insurance metastasized into a perverted form of indemnification against title industry blunders and lack of concerned judgment?

From a past Title-opoly post:

Most perplexing to me these days is the enigma that is title insurance.  Real title claims are exceeding rare as they’ve always been.  Losses by title insurers are derived mainly from transactional risks, not chain of title risks.  Isn’t it time we properly label, package, and price the insurance product that’s touted as the promise of the American dream?  Title insurance really has very little to do with property rights or homeownership.  It should be characterized as an indemnity against the aggregate negligence, malfeasance, and indifference of the industry.

In a perfect world, where states properly regulate the title industry and title insurers dictate appropriate underwriting and auditing standards, title claims would be nearly non-existent.  But, we know that the world is not a perfect place and that numerous problems erode the structural foundation of the title industry. 

The whole debate over the elevated claims levels caused by offshored title searches is a perfect example.  Most title professionals agree that claims are a by-product of the practice.  Why then are title insurance premiums, paid by consumers under the auspices of risk premiums, used to fund losses occasioned by a planned reduction of quality standards within the industry?

In the case of offshored searches, title insurance is clearly misused as an indemnification against losses resulting from a professionally derelict practice.

I know for a fact that title insurers will indemnify high dollar agents against any negligence losses up to predetermined limits, say $25,000.  There’s another example of title policies used improperly as a surrogate for negligence insurance.

Could it be that Dr. Cohen has intuitively stumbled upon something ugly that was born of the title industry’s disregard for public policy?

 

 

I often discuss the similarities between the title and the medical industries.  It would behoove title professionals to first study and then make practical application of many of the best practices employed by medical offices, hospitals, etc.

For example, consider the professional demeanor of physicians.  They are trained to spend roughly eighteen minutes with patients during a typical office visit.  Apparently, this specific time allotment is adequate to discuss, diagnose, and prescribe medication for most common ailments.  Compare an office visit with a doctor to a real estate closing.  Both are rituals designed to initially create trust and then accomplish an important and serious task in a limited period of time.  It’s not a stretch to say that the average doctor is better qualified than the average settlement officer due to professional standards dictated by the medical profession.  Let’s not ignore the aspect of financial compensation.  Doctors aren’t known to routinely give their services away for free.

The expediency and proficiency with which doctors make diagnosis is something for the title profession to consider as well.  Two licensed physicians, each examining patients with similar profiles and symptoms, are likely to prescribe identical, or nearly identical, treatments. 

Could similar opinions be predicted of two title examiners reviewing an abstract containing a title defect?  Maybe; maybe not!  That’s the problem.

The prominence of the medical profession, which has deservedly attained the status of a social institution, is derived from a fanaticism with selection and training.  Sadly, the title industry can’t decide what to do about anything. 

Interestingly, I’ve learned that there are other similarities between the two industries that speak to an unattractive side of human nature.

From an email sent by a Title-opoly reader:

Someday I need to contribute an article comparing the “for-profit” health care industry with the title insurance industry.  While the economic size of the two industries are in totally different magnitudes, the business practices and challenges facing each are so very similar.

And:

When you examine health care off-shoring practices (radiology reports being pre-screened in India overnight for example), record keeping practices (patients being forced to transport among physicians their radiology files), and the ever-increasing ethics rules applying to physicians (entertaining, meals, honorariums from pharmaceutical firms, equipment ownership prohibitions, etc.), the comparisons are striking. 

 

Just two  weeks ago a prominent private university hospital  in … banned vendors from providing meals and marketing materials (ink pens, etc.) to staff physicians but medial samples can still be provided (“I can give some Viagra samples but no ink pens or meals/educational lunches!”)

 

 

We need to admit that the industry, at this time, knows very little about offshored title orders or the long term effects of the practice.  We don’t know who is physically checking indexes, reviewing judgments, drawing descriptions, etc. or that traditional principles of abstracting are being upheld.  We know nothing of the training of personnel or the credentials of management. Why haven’t we seen virtual tours of the now notorious title plants sprinkled around the globe?  Are these places “digital sweatshops” that exploit innocent youths and other sources of cheap, untrained labor?  We don’t know because we have been intentionally kept in the dark.

The one thing we do know for certain: offshore title entrepreneurs lack access to the thorough compilations of information available domestically in local courthouses.

Perhaps underwriters are guilty only of failing to make a case for offshoring in the court of public opinion, but I have my doubts.  There’s clearly a general expectation that title work is completed by highly skilled, local professionals.  We live and work in an age of presumed transparency, yet title insurers incorrectly make the assumption that they are somehow exempt.

Underwriters could, if they wanted, eradicate any fallacies associated with the practice by commissioning a research project.  Title to a predetermined number of addresses could be searched by trusted domestic abstractors and their foreign counterparts.  Comparisons could be drawn and the validity of the study verified by independent sources.  The quality of a title search is quantifiable and associated risks measurable.   The question arises: at what quality low point should an abstracting source be eliminated?  In my opinion, any identified, heightened risk of claim above the accepted historical norm is a cause for concern by title agents, consumers, and regulators.  

I find any argument that offshored searches are cost effective to be misleading.  Cost effective for whom? Consumers would be more than willing to spend the extra money for a superior search product if they understood the claims dynamic.   For the most part, it appears that offshored title searches are used to increase the profitability of individual title companies who should consider charging appropriately for their professional services.

Have underwriters recently adopted a practice of instantly writing checks to accommodative the woes of their insureds who have filed claims.  I think not.  A title agent shouldn’t assume that all is well because underwriters have agreed to assume the inherent risk of offshored title searches.  Underwriters are notorious for pursuing their own agendas and time-frames while investigating claims without prioritizing the emotional and financial needs of their insureds.  A single claim holds the potential of destroying the reputation of a title company with hyper-localized business sources.   A claim is often a lengthy, nightmarish experience for consumers who are certain to publicize the fact that their title company screwed up.  It doesn’t matter that a consumer is ultimately made whole by the title insurer, the title company that issued the policy faces the distinct risk of losing business due to a loss of credibility.

Title agents need to consider other collateral damages that might surface in the “long tail” of a claim.  Though the underwriter has agreed to exculpate the title agent from any liability associated with an offshored search, there are other claims associated costs to factor into the equation.  Will the title agent be compensated fully, inclusive of possible loss of business, if required to spend time in depositions or to give testimony in court?  If, in fact, offshored title searches are more likely to cause claims than traditional searches: isn’t it reasonable to expect class action litigation or regulatory action?  Will title insurers assume the risk of the unforeseen or will title agents be left to fend for themselves?

Knowingly subjecting consumers to a heightened risk of claims is bad business that can only further tarnish the reputation of the title industry.  Underwriters have a moral obligation to fully explore the increased risks associated with offshored titles and to publicly disclose their findings.  A quality title search is the title industry’s most time honored tradition.  Who has the right to subvert its importance to perceived expediency or cost effective?  The definitive answer: no one, not even underwriters making false claims of increased profitability without liability.  Let’s not forget about the accountability of title agents and the mandate of the profession to promote the best interests of the public.  I normally advocate the rights of consumers above all else.  In the case of offshored title searches, I firmly believe that it’s a practice that promises detrimental consequences for consumers and title agents alike.

Click here to read Lenn’s post.

Yesterday, I received the following comment on my Active Rain blog:

“I am new to your site - google-alerts linked me to you.  I have 25 years experience as a Searcher/Examiner, primarily from Southern California working for most of the major underwriters.  The Title Industry has undergone tremendous change in those 25 years, probably more so than in any other time in it’s history.  This is true of any industry, and in most cases “change” in necessary and beneficial.  However, in the case of Title Insurance, this practice of outsourcing searching/examining and policy production is not necessary nor is it beneficial.  Those types of positions have traditionally been the training grounds for higher level positions within the industry.  When I came into the industry, all of the Managers and Executives in the Title Companies had worked there way from the entry level jobs.  However, today, fewer and fewer of the Managers and Executives in the Title Industry have that background.  These new Managers and Executives are implementing changes to an Industry that they have very little understanding of, and the effects of those changes have diminished what was once a high quality, low risk product.  Today, title insurance is all about short-sighted “bottom-line” and shareholder profits.  This is an industry that is under more and more scrutiny from regulators and consumer advocacy groups.  Title Insurance is a vital product, considering the amount of money consumers are investing in real estate.  The leadership of the Title Industry, being those Executives that are trying to maximize profits for shareholders, better come to the realization that conservative underwriting practices, which can only be applied by seasoned, experienced professionals, is the only way to plan for future success and longevity.  That cannot be accomplished by outsourcing. 

Okay, I’ll get off the soapbox and let someone else have a turn.  I’m glad to see there are so many other people out there that seem to share my opinions on this issue.”

Key Points as Talking Points:

• The title industry has undergone tremendous change in the past 25 years
• Change is necessary; Change is good
  
• The practice of offshoring title searches and policy production isn’t necessary … nor is it beneficial
• Title searching was once the training grounds for industry execs … it’s no longer true
• The change agents are corporate decision makers who don’t truly understand the industry dynamic
• Title insurance is, or should be, a low risk, high quality product that consumers … and real estate agents … and lenders can trust
• Title insurance is a vital product
• Conservative underwriting practices ensure the industry’s success and longevity
• Offshoring is not the answer to the industry’s profitability and credibility woes

Historically, title agents were presumed to be title experts. Exactly when and how did things change so drastically? When was the last time you heard the phrase “core title services.” The offshoring of title searches has created the potential of a paradigm shift of unparalleled precedence for the title industry … and consumers.

I’ll always remember the day that MdLandRec.Net was launched in January, 2006. It’s a free site that allows anyone who opts for a password to access Maryland’s automated land records. As a professional title searcher, I felt the way a dinosaur might have felt watching a fiery ball crash into the earth’s mantle. Clearly, change was at hand.

At first, I saw the potential of using the site to “set up” searches and the benefits that might accrue to trained, knowledgeable title searchers.

Questions immediately ran through my mind:

• Did the new site offer a glimpse of the future of title searching?
• Could a title search now be completed from home or office with an enormous savings of time and effort?
• Could a title searcher now avoid the need to travel to the courthouse each morning and the expense of parking?
• Was it now possible to apply sound business principals to the task of title searching increasing both efficiency and profitability?

Shortly thereafter, an alternate stream of questions came into focus:

• Would title company employees have the ability to sit at their desks and gather accurate title information by simply entering names and dates into fields on a computer screen?
• Was the traditional role of the title searcher instantly altered?
• Would the need for title searchers be eliminated in the not so distant future?
• Would title insurers encourage the use of “MdLandRec.Net” by agents when preparing commitments and issuing policies?
• Would E&O carriers agree to insure title company employees who perform searches on “MdLandRec.Net”, but otherwise lack abstracting experience?

Before long, it became apparent that my title searching career was in jeopardy. I was receiving far fewer orders than in the past and they were all horribly difficult. At first, I assumed that underwriters had hired experienced title searchers to work from home or a local processing center. Never, did I assume that title plants would be established on foreign soil.

I believe it to be a generally accepted fact that title searches prepared overseas are inferior to those prepared domestically. With that being said: how can we be an industry of experts without a foundation of reliable information to craft our product?

Yesterday, Lenn Harley addressed the dilemma from the perspective of a seasoned real estate agent in a post titled Offshore Abstracts? Is That Anything Like Vicarious Sex? Pay particular attention to the comment stream. Well intended real estate agents assume that the title work they refer is being conducted locally. I hope it’s true, but I have my doubts considering the well documented love affair that exists between title underwriters and their offshore operations.

Recently, I was asked if I’ve published a list of upcoming speaking engagements.  I have not to date and probably won’t in the future.  Most of my speaking invitations come from corporations or professional trade associations.  The events are typically closed to the public.  My unusual credentials almost always draw a full house.

As you might imagine, the current housing crises has been “center stage” during my recent presentations.

This past Wednesday, I spoke to a responsive group of real estate agents in Frederick, Md.  The elevated degree of receptiveness to my perspectives was a pleasant surprise.

My talking points:

• Only by examining its causes do we surmise that mortgage fraud is properly characterized as a national epidemic, not a series of isolated incidents.  
• Only by scrutinizing the motives of mortgage fraudsters do we recognize the cultural corruption of an entire industry. 
• Mortgage fraud statistics correlate directly to foreclosure statistics which in turn point to a breakdown of professional protocol, and standards, in residential real estate markets.
• The disparities between mortgage fraud and predatory lending are academic at best.  Unethical, often criminal, behavior demonstrated by loan originators, appraisers, real estate agents, and title professionals is the real world nexus that definitively binds mortgage fraud to predatory lending. 
• Legislation and judicial interpretation are not the answers.  Heightened professional standards among real estate practitioners are the crux of the solution.
• Class action litigation will change the form and function of the real estate industry in the next decade.

In light of the subsequently released Bush initiative, I would add that it’s apparent that the feds don’t see housing values rebounding anytime soon.  If they did, the proposal would include a recapture provision if gains were realized when the select group of properties were sold.
  
Bob Carney, who extended the invitation to speak, graciously wrote a post about the presentation for his blog, Focus On Frederick.com.

Click here to read Bob’s thoughts about the lecture.

While preparing for the Frederick invitation, I prepared my own analysis of current foreclosure statistics. 

The results are startling:

It’s a generally accepted fact that 1 in every 196 U.S. households is currently in foreclosure.  Notice I said households.

The U.S. Census Bureau estimates that there were 116,011,000 households in this country in 2006.

Using that number as the basis, simple math tells us that 591,893 U.S. households face the distinct possibility of losing their homes at this time.

A recently released study commissioned by the The United States Conference of Mayors estimates that an additional 1,400,000 at least, will occur in 2008 representing a market value of $316,000,000,000.  You read it correctly, I said 316 billion dollars.

What’s all this mean in practical terms?  In the absence of intervention in one form or another, roughly 5,178,922 men, women, and children could lose their homes between now and the end of next year, or sometime soon thereafter.

The numbers above represent a situation where every person living in the Washington Metropolitan Area were to almost simultaneously lose their homes.  The densely populated area includes the District of Columbia, 5 Maryland counties, 9 Virginia counties, and 1 county in West Virginia.

It’s as though every person living in the Tampa - St. Petersburg Clearwater Area and the Denver - Aurora Area combined were to lose their homes.

It’s the numerical equivalent to every person residing in the state of Minnesota finding themselves without a place to live.

In 2008, a citizen of this country will be 9.25 times more likely to lose their home to foreclosure than to die of cancer in any form.

I still have date availability for 2008.  Let me know if your professional group, learning institution, non-profit, or company is interested in bringing me in for a presentation.

 

Yesterday, I chanced upon a post on Active Rain that tied in nicely with our debate concerning business models.  We have colleagues who embrace the legally structured AfBA as the best possible choice.  Then, there are those who would extinguish the existence of all AfBAs in favor of the “reverse competition” model that has historically defined the form and function of our industry.  Through research, discussion, and self evolution, I’ve come to despise both models.

A young woman who works in Florida’s title industry shared a revealing perspective in a post titled What happened to the good ole days?

Dawn Rodriguez wrote:

“When I first started, I had to learn the ropes before I could hit the streets. You have to be able to know what type of service you’re providing and be able to answer questions. Once I knew this, I was very excited about going out there and getting business. Much to my surprise, I kept getting people asking me “What KICKBACKS does your company offer?”. The first time I heard this, I didn’t know what to say. My response was “Let me make a phone call”. After speaking to my sister [who owns the company Dawn works for], I told the guy that we don’t offer KICKBACKS but our Customer Service is outstanding and just give me 1 deal. I was told “Sorry sweetheart but our title company gives us $300 per file”. I thanked him for his time and walked out. Over and over this is what I get. Do you want to know how many companies I acquired as my client in the past year and a half? TWO! 

This business has come down to pure greed and that’s one of the biggest reasons why this market is where it’s at today. GREED! …  it’s just too bad that not everyone knows they are able to use their own. Even when they do, they are for the most part forced by the parties involved to use someone else. Why? Because the [real estate] company is getting a KICKBACK!”

Need I say more?  And, don’t try telling me that illegal kickbacks aren’t taking place in your markets!  I’ve heard repeatedly from title folks across the land that the going rate for an order is roughly $300!

When are we going to learn the we are our own worst enemy?

When are title insurers going to put an end to their own despicable marketing tactics?

When are title insurers going to stop turning a “blind eye” to the criminal antics of their agents?

The title industry faces an enormously complex set of challenges as it evolves from something that it was in the past to something that it’s expected to be in the present.  The title industry once possessed a “moral high-ground” that has eroded scandalously over the past decade.

It’s now up to you, the rank and file of a once a great institution, to cloak  yourselves with credibility by reclaiming that which has been stolen from you by the misguided and complacent leadership of this nation’s title industry.

The revolution must begin in your own offices!

A year ago today, a post titled Is this really what HUD had in mind when it authorized ABAs? appeared on Radical Title Talk.  At that time, I had a vague awareness of blogging as a communication platform and had even posted a number of times on Flipping Frenzy.  My decision, two days later, to comment to Diane’s provocative post, most of hers are, led to a revelation that blogging was a dialog between writer and reader that could be used to raise issues and comfort an industry during a time of great distress.  Radical Title Talk was, and remains, an edgy site where truths are laid bare regardless of consequence.  It was the muse that inspired my own blogging efforts and has distinguished itself as the origin of all title related blogs. 

In part, Diane Cipa wrote:

“Unless people with influence in the title industry do something to curtail this kind of hogwash, we are on a sinking ship. Title insurance as we know it is doomed and we have ALTA and all the other ABA proponents to blame. All you have to do, ALTA, is draw a very clear line between legal ABAs and shams. Instead, you hide in the gray afraid to say anything.

Welcome to JV country - super shams. It’s the death throes of an industry.

Oh, I haven’t given up. I’ll still be here slugging away with the hope that consumers will come out on top with title protection and reasonable pricing, but sometimes it gets lonely on this soapbox.”

Finally, someone had found the courage to use wit, sarcasm, and sometimes satire to attack an industry that had visibly foundered due to internal dysfunction.  Radical Title Talk is analogous to the title industry as Saturday Night Live is to politics.

I commented:

I visit your blog often and decided to weigh in on the AfBA. Don’t think that you’re alone on this issue; your concerns are shared by title company owners throughout the nation. The difference between you and other title agents is that you’re well researched and trying to do something constructive. Most others are just waiting and hoping for the best as their “piece of the pie” grows smaller each day.

The concept of bundled services in a real estate transaction was the brain-child of the Reagan Bush administration during the late 1980’s. The federal mood and agenda at the time was one that encouraged big business. It was thought that “deep pockets” paired with technology could create a business model that reduced costs and improved services for consumers who were purchasing or refinancing a home. It’s baffling that the feds have done nothing to change the anti-competitive and ultimately dangerous business environment that presently exists for the title professional. We both know that the vast majority of joint ventures currently in existence are structured illegally. Consumers are horribly overcharged and badly represented as the title agent in a directed business arrangement has no incentive to provide a service that is anything other than mediocre. Can you image sending your children to school in the morning while telling them that you expect nothing but less than average accomplishments academically, socially and athletically? The entire concept behind the joint venture is senseless. We are after all talking about someone’s home and one would hope that such an important endeavor would attract the best and the brightest.

I have to agree with your assessment that ALTA has made the situation worse by doing nothing. It should come as no surprise, though, as a handful of title insurers effectively control all land title associations. Through the joint venture, title insurers control much of the business that belonged to title agents only a decade ago. Still, it’s surprising to me that underwriters turn a “blind eye” to sham joint ventures during agency audits. Let’s hope that underwriters are held as culpable as their agents during the criminal investigations and class action suits that most certainly will occur. I’ve lost much of the confidence that I once had in underwriters in the aftermath of the Washington state investigation. I think it’s safe to assume that the illegal marketing activities revealed in Washington pervade the entire nation.

At the end of the day, I believe that it’s the “educated” consumer that will determine the fate of the title agent. I use the word “educated” to refer to a consumer who is aware of the negative factors confronting them in a real estate transaction. I happen to believe that a fully aware consumer would chose to close with a title company like yours and not as part of a confusing bundle of services. Keep up the good work!

Certain that a hungry audience existed nationally, I had finally found a voice and a means to communicate.

Title-opoly was born.

This past week was spent relocating my office.  I had stubbornly held onto the “brick and mortar” that made sense only a decade ago, but had sadly become a ridiculous waste of precious resources.  The decision to “downsize” office space was particularly difficult  for an industry “dinosaur” like myself.  Liberty Title was launched during the same era that marked the introduction of fax machines to office settings.  The year was 1988 to be exact.  The company was relocated twice to larger offices to accommodate the growth that we all experienced during the 1990s.  In time, the need to hire and train “live bodies” was increasingly offset by the availability of industry specific technology. 

While Liberty Title is long defunct, Rybczynski Consulting espouses the inherent superiority of human judgment over computer code.  Only a fool would ignore the vast importance of automation in elevating industry efficiency and profitability.    At the same time, technology has masked the overall ineptness of many who paradoxically call themselves title professionals.  We stand at the brink of a “perfect storm” initiated by lax licensing standards, a lack of regulatory enforcement historically, and the reckless disregard of underwriters that sign anyone with a workable stream of premium revenue.

Next week finds me with a whirlwind lecture schedule that includes stops in Knoxville, Nashville, and Chicago.

On Another Note

Several months ago, a real estate agent asked that I evaluate the merits, or lack thereof, of a “self-styled” concept offered by a company named PayoutOne  (Advance Home Value Access).  The result was an Active Rain post titled The Architecture of Ambiguity.

PayoutOne’s misguided philosophy is premised on the right of a purchaser to access the equity in the house that’s under contract.  The seller signs a note for funds that are knowingly used to create a fraudulent financial profile for the contract purchaser.  The company makes a claim of full disclosure to lenders because repayment is shown on the seller’s side of the HUD-1.   PayoutOne charges patently usurious fees for short-term advances that are scandalously characterized as a marketing product.  The company most assuredly is making loans though it maintains otherwise. 

The company’s website touts buyers with the following statements: “Minimize your out-of-pocket costs” and “Gain access to the equity in a property prior to the initial purchase transaction.”

One question at hand: Is PayoutOne properly licensed as a lender in the states in which it conducts business?

The broader issue at hand:  The motives of any title professional who has knowledge of PayoutOne’s core concept and closes a loan when the company is involved must be called into question.  An improperly disclosed seller concession is, after all, mortgage fraud.

The ball is now in the court of every regulator, public official, and underwriter reading this post.

I wrote recently of having first heard of affiliated business in 1992.  While that’s true, I had a possible encounter with the anti-competitive effects of AfBAs as early as 1988.  At that time, I was doing a fair amount of business with different Coldwell Banker offices in the Baltimore area.  One day I was told by a once loyal real estate agent that she could no longer place orders with my company. 

I’m sure you’re wondering why.

As it turned out, Coldwell Banker had entered into an administrative agreement with a large Baltimore-based title company named Sentinel Title.  Coldwell Banker agents who used Sentinel Title would receive their commission checks at the settlement table.  The alternative was to wait for a check from Coldwell Banker corporate.  Office managers were openly endorsing the new arrangement.    Needless to say, I lost enough business to cause concern.

So much for loyalty among real estate agents.

The arrangement eroded in time, but the damage had been done.  I wasn’t able to regain the traction that I once had, and deserved, with the Coldwell Banker agents I had dealt with in the past.

In 1988, a title agent still had marketing options and could develop new sources of business rather quickly.  Today, a title company that loses a single source of business is likely to go out of business.  It’s nearly impossible, in 2007, to generate a substantial account based solely on reputation, service, or pricing.  As a practical matter, there are no such things as credibility branding or an effective marketing mix for title professionals.  There needs to be.  Real estate agents expect, and demand, a piece of the action. And, they get it without regards for the means of payment.  Most title companies are now wholly dependent on one, or a couple, source(s) of business.

My question: How can a title agent say no to any source of business when asked to do something criminal, or conveniently turn a blind eye?