The question at hand: are title policies offering enhanced coverage worth the extra money paid by consumers?

You can respond to the poll until midnight of Wednesday, Feb 27.

The question at hand: Does ALTA have a responsibility to speak out against the offshoring of title searches?  It’s my contention that ALTA’s board has a duty to prioritize the issues negatively affecting the majority of its membership. 

One would think that the disintermediation of domestic abstractors is a topic worthy of concern, even mild hysteria, among the rank and file of the title industry.

Even though the voting was initiated at a rapid rate, the number of responses fell off quickly.   Only 35 of you voted.  The bottom line: 32 respondents felt that ALTA should take a stand against offshoring while 3 respondents felt otherwise.  This site has enough traffic to warrant a much greater response.

Title-opoly receives daily visits from foreign locations that can originate only through search engine hits.  The visits are attributable only to your unlicensed and untrained colleagues in India, the Philippines, Panama, Israel, etc. who are trying to assess the mood domestically.  I’m referring to the “key board title novitiates” who are living the good life at the expense of your reputation and future.

I’m assuming that they find great comfort, financially and emotionally, in the obvious complacency of the American title industry.  Foreign title “professionals”, for want of a better word, have every right to bask in their certain job security because the title industry in this country is afraid of a fight.  The once great title profession is afraid to take a stand against anything, even the contrived developments leading to its premature demise.

Many of you are barely holding on while hoping for an early spring this year.  I know because readers send emails describing their plights.  Most of you have greatly reduced the size of your staffs.  Some of you have downsized from the “brick and mortar” needed in the past.  Some of you are flipping burgers to make ends meet.  Well, spring “ain’t” happening this year, or next year for that matter.

Even if lower interest rates, subprime resets, or economic conditions were to spark a refinance frenzy, small to mid-sized title companies wouldn’t benefit as they did in the past.  The underwriters have quietly positioned themselves to harvest refinance orders by partnering with the monstrous sources of business.  We’ve stupidly placed wealth and power on the lap of five underwriters, trusting them to be the stewards of our industry’s future, while they in turn have invested their resources overseas.  Pathetically, it’s the same money remitted to them in the form of domestic policy premiums. 

All the while, ALTA, the ostensible leadership of this industry, hasn’t said or done a damn thing to protect the hard-working, blindly loyal members who subscribe each year.

In a comment to a recent post, Sam, the regulator, made a relevant and interesting remark.

Sam said:

“As an insurance regulator, this [the offshoring of title searches and processing functions] may have gone past the critical mass point. reigning in this practice may be putting the toothpaste back in the tube. No doubt the industry will push back strongly. They have divested themselves of their local resources and made substantial investments in Manilla, Bangalore, Israel, Ahmendabad, Kolhapur and any other place that can operate 24/7/365.

As a title professional, this is a grim marketplace scenario, reminiscent of the American auto industry in the early 1980’s.”

Sam’s right … you know.  All industry related lobbying targets the interests of the big players even though you foot the bill.

What’s it going to take to piss you guys off?  What’s it going to take to convince you that some fights need to be fought?

As a community service and a courtesy for ALTA, I’ve decided to include a link to Monster.com.  It’s also intended for all underwriter personnel who are in any way related to agency operations.

Some months ago, readers were asked if they would provide a copy of a title search to a buyer if asked to do so.  The not so overwhelming majority of respondents, 68% to be exact, said that they would.  The remaining 32% said that they would not.

The obviously loaded question was aimed squarely at the practice, now widely accepted, of offshoring title abstracts to foreign sources.  The issue seems to tear at the very fabric of the title industry.

Fran Gaspari raised a couple of interesting points.  He suggests that the title commitment is his work-product and the abstract a part of an ongoing process.  Fran also raised the issue of hand-written abstracts being illegible, an all too frequent occurrence due to a reluctance by abstractors to automate their reports.   It was a pet peeve of mine when examining titles and a problem tolerated by title companies for far too long.

In the past, I wouldn’t have found it prudent for a title company to pass along a raw title search, voluntarily or upon request, to a consumer.  It could after all create unnecessary liability or pure nuisance should a consumer choose to compare the abstractor’s work to the final form of the commitment or final policy.  A title search is but a single element of an intuitive investigative process that is a title examination culminating in an indemnity contract.  Now, I have to take the position that a traditional title search is a testament of sorts to the professionalism of any title company.

The whole notion of searching titles from India, and other such places, just feels wrong to me.  I’ve spent time enough rummaging through land records and probate courts to understand that title research conducted from a distance couldn’t possibly be as complete or as accurate as research performed locally.  It’s about a truth greater than the competency or training of the abstractor.  Court houses enjoy a well deserved reputation of not revealing secrets without a struggle.  There’s a need for local abstractors who have the experience and judgment to “sense” when minutia in a title seems other than it should be.  There’s a need for abstractors to have established relationships with clerks who have a way of producing files or records that are needed to piece together the numerous variables of a difficult title search. 

Most disturbing to me is the fact that title searches are delivered from abstractor to title company in the form of a commitment.  At first blush the practice seems to point to convenience and business efficiency for the title agent, but let’s not be hasty.  If commitments are produced offshore as part of a title search, regardless of the degree of accuracy, the process that is a title examination will be disintermediated along with the independent title agent.  We must not allow the practice of offshoring title research to become the established norm for the industry.  If it does, and it might, what need is there for licensed title professionals?  The traditional duties of the profession other than title examination can be parceled between regional centers setup by underwriters and the army of mobile closers who stand ready to have documents signed at anytime and anyplace. 

The process of examining titles is the essence of your profession!

Consumers deserve the peace of mind afforded by thorough title searches prepared by competent, local abstractors.  Consumers need to know if they’re involuntarily electing for a work product, meaning the process that culminates in a title commitment, that’s substandard and more likely than available alternatives to cause exposure to liability at a future date.  Any title industry practice that heightens the statistical possibility of claims should be treated as a crime against society.

As an industry observer, I have to assume that ALTA has a mandate to protect the interest of all title companies, large and small.  I have to believe that the rank and file of the industry is comprised of small to mid-sized title companies.

Why then has the leadership of your professional trade association remained quiet in regards to this crucial and time sensitive issue?

Does anyone disagree with my premise that the forced extinction of local abstractors will ultimately result in the demise of independent title agents?  Feel free to voice dissenting opinions.

It’s time for another poll.

To protect its members and the public at large, should ALTA take a stand against the offshoring of title searches? 

I’ll keep the poll in the sidebar until midnight of Friday, January 5, 2008.

There’s been quite a bit of discussion recently concerning the need for a thorough title search when preparing a title policy.  Robert Franco added a great deal of insight.

As part of a particular comment, Robert opined:

” This is something I have been thinking about for a while… tell the title company that you (the buyer) require them to provide you with a SEARCH in addition to the title commitment. You are paying for the search and you should have a right to receive it.”

It’s an interesting perspective.   The title commitment is technically a title company’s work-product.  The abstract is a resource, along with others, used to prepare the commitment.  Even though the buyers pay for the abstract, are they entitled to a copy of it?  Aren’t you opening yourself up to unnecessary liability by giving a copy of the abstract to buyers?   What would you do if asked?

The question: If requested, would you give a buyer a copy of a title search? 

YOU TELL ME! 

I’ll keep the poll in the sidebar until midnight of September 12.

(I’d love to see the posturing of an experienced real estate attorney, representing a buyer, after being handed a copy of a title search conducted in Bangalore.  In Maryland, he or she would chew it up, spit it out, then go for blood.  And, rightfully so!)

Recently, I’ve published a number of posts dealing with the outsourcing of title work to India and other foreign locations.  The volumes of comments by title professionals prove that we are a concerned group.  I’m always impressed by the intelligent and relevant responses made by Title-opoly readers.  The comment thread often reads like an article in the Harvard Business Review.

The core theory on which title insurance is based is the elimination of all known defects as revealed by an exhaustive examination of title.  Homeownership should come with the assurance that the threat of litigation is statistically unlikely, almost non-existent.  The willful use of unpredictable  sources of title information for examination purposes raises any number of important questions.  I was taught that an abstractor has an obligation to rely on every available index and known source of title information.  In my mind, to do anything other transforms title insurance into a casualty product rather than an indemnity contract.  The outsourcing of title orders overseas hasn’t necessarily taken place long enough to establish a claims and litigation pattern.

I have to raise the question:  If a title policy is prepared using an unreliable search, isn’t it in the consumer’s best interest not to purchase an owner’s title policy?  

My reasoning:  The title policy severely limits the scope and dollar amount of the insurer’s liability.   Title insurers should be prepared to suffer losses if they want to cut corners with searches.  New developments in abstracting standards will greatly change the nature and volume of claims.  A consumer might be well advised to litigate, without the limitations of a policy, in an attempt to reach for the deep pockets of insurers and possibly receive additional punitive damages. 

Please feel free to disagree.

I like Rhonda Porter’s idea that regulated labeling, or disclosure, might be an appropriate measure to aid consumers, and their attorneys, to make proper choices regarding the purchase of a title insurance product.

Rhonda also raised the valid point that most of us posses only localized abstracting expertise.  Her particular knowledge comes from working with title plants on the west coast where a high degree of automation has existed for some time.  It might make sense for a consumer in Washington state to purchase a title policy when the search was outsourced overseas.   In Maryland, I don’t think it does.

To my knowledge, Chicago Title has the only significant title plant at its disposal in Maryland.   I find the starters provided by the company to be a good starting point for a search, but generally unpredictable and often unreliable.  The starters are simply past policies and are only as good as the office that wrote them. An abstractor has to know enough to delve deeper when the exceptions appear inappropriate.  I’ve seen starters for condo units that took a blanket exception to all condo documents and plats of record without referring to them specifically. That doesn’t work for me and it shouldn’t work for any underwriter interested in preserving the notion of homeownership as we’ve known it in the past.

I have to keep open the option that underwriters have secretly amassed vast sources of information in this state and have made the resources available to adequately trained outsources.  There’s also the possibility that underwriters have bought access, from local jurisdictions, to more reliable indexes than are available to the public at large including local abstractors.  I’m just hoping, and praying, that no one is stupid,or greedy, enough to attempt a Baltimore City abstract using only the on-line site with which I’m familiar.  

A reader named Sam made any number of important comments including:

“I appreciate the other points of view and agree that outsourcing has it’s drawbacks. We see errors on a daily basis and try to have the “cookie cutter” work go to our offshore vendors as that is what they are good at.”

Another reader, Shelley, raised the question of the technical qualifications of abstractors trained overseas.

She wrote:

“Property owned since 1980. I discovered a ‘slight’ discrepancy in the property description. I ended up having to search back further (using a real-live searcher located IN the court-house) and together we discovered my present owner’s property was “accidentally” sold, along with the adjacent lot (previously owned by PO) to a builder and financed with an over $1M mortgage. We now have to get new deeds and mortgage releases, etc etc. I wonder if this would have been discovered in India; or otherwise online. So far, I don’t think any bulldozers have torn her house down yet.”

We can’t forget about certain nuances, like mortgage releases, that are sometimes difficult to hunt down for even the most seasoned abstractor working inside of a courthouse.   I predict that underwriters will be writing volumes of letters to indemnify over unreleased mortgages by builders and developers in subdivision resales.  Attorneys will figure out a way to capitalize on the situation by refusing to close without actual releases and charging heavily for their curative services.  I saw it happen in the western part of Virginia several years ago.

One of my favorite comments was made by Title911, who wrote:

“I recently worked with a First American Company that uses this oversea’s method. So I have personal experience with this process. It puts much more burden on the already over burdened Title Officer to check and recheck every detail.”

Rebecca Levinson said:

“How very scary. I worked for a title company underwritten by Fidelity and cannot imagine how this decision came to pass.”

Gary Sloane opened my eyes with the following statement:

“I agree the final title product cannot be any better than the search from which it is created, and the idea that a search would be done overseas strikes me as ridiculous…but I work for a midsize title co. that is fairly old fashioned: We have a company that actually looks at information on paper in county buildings and such. And no, it’s not Mayberry, we’re in Chicago … there are problems that face small to midsize title companies that far exceed the abstract issue.”

I’d like to thank everyone who added so much to this discussion by commenting.  In addition to those already mentioned,  many familiar industry pundits including Diane Cipa, Tim Killcoyne, Robert Franco, and Fran Gaspari weighed in with great advice worth visiting.

I apologize for the delay in posting the results to Title-opoly’s most recent poll.  We’re busy at Rybczynski Consulting trying to launch a number of innovative educational concepts.  I feel that continuing education would be more productive, by far, if title agents, real estate agents, and loan officers took certain courses together.  It would be interesting to somehow add consumers to the mix.  A great deal of time has been spent developing a “best practices” methodology to employ when any questionable situation presents itself. 

I’ll release more information before long.

The question asked title professionals: Would you purchase an owner’s title policy if the title search was conducted by an “overseas” source?”

A total of 46 of you participated in the survey.  The vast majority (78.3%) of those surveyed indicated that they wouldn’t buy a policy.  A relatively small number (21.7%) of those surveyed felt otherwise.  The comment thread has been interesting to say the least.  I’m extending an open invitation to all readers and pundits to weigh in on the results. 

Look for my own highly opinionated response this weekend.  I’m on my way, in the morning, to Wisconsin to address that state’s land title association.  Click here for brochure.

A special thanks to all who participated in the poll and/or commented.

There’s been a great deal of spirited dialog on this site over the past several days.  It was sparked by a post about the “off-shoring” of title work by title insurers.  I’ve known for nearly a year and a half that  Maryland’s title work was being done somewhere other than the land records.  Maryland flexed it’s cyber automation muscle in the form of a site launched in January, 2006.  Soon thereafter, there were visibly fewer abstractors at work in courthouses.  I wanted to believe that abstractors were working from their homes, or title companies were trying their unqualified hands at in-office abstracting, or business levels (title orders) were off due to economic reasons.  I realized, though, that any abstractor with an inkling of self respect, or survival instinct, knew better than to rely solely on a new site that proved itself inaccurate from the start. 

It’s now evident that title insurers, and other large players, have been stealing jobs from skilled Americans, like thieves in the night, and placing abstract orders at foreign points around the globe.

The question arises, how important is an accurate title search when preparing an owner’s title policy?  We know nothing of the qualifications, or backgrounds, of these “so-called” abstractors.  How much confidence do you have in their abilities?  How reliable is their work-product?  Have title exceptions lost their importance in title insurance theory?  Are title insurers not concerned about consumer rights and class action litigation?

Title professionals, share your thoughts on the matter by responding to the poll shown in the sidebar. 

The question is simple and straightforward.  Your response is completely anonymous.  If you work for an underwriter, no one will know of your participation.

Question:  Would you purchase an owner’s title policy if the title search was conducted by an “overseas” source? 

You can answer until midnight of August 13th.  I’ll post the results shortly thereafter.

Rest assured, if you’re an agent for First American, Fidelity National, or Stewart Title, your underwriter will be competing against you at the retail point of sale before long.  Underwriters have the ability to create brand awareness and brand loyalty among consumers by partnering with huge industry players … you do not.  The tactical plans appear to target refinance transactions by interfacing with consumers at loan applications and producing turbo charged title commitments.  If I’m right, long term strategies include an innate desire for underwriters to dominate purchase markets.  An oligopolist has no choice but to act aggressively and deceitfully.  It’s the way they’re wired.  Market dominance and influence is to the oligopolist what an ice cold martini is to an alcoholic.  The desire is uncontrollable; the thirst insatiable.   Oligopolist have to avoid, at all costs, the appearance of being monopolistic.  It’s why so many underwriters work hard at portraying a public image of separateness when in fact they’re part of a larger corporate family.  To cross the fine line between oligopolism and monopolism means regulatory control and public scrutiny. 

How does one even explain the costs vs. benefits of titles searched and examined in under 60 seconds?  Start by comparing title underwriters to car manufacturers who place a monetary value on human life.  Title underwriters no longer care about underwriting standards or the negative consequences of title issues to families and communities … the arrogance goes hand in hand with the “God syndrome” of which they are blatantly guilty.  The bean counters at corporate will simply estimate next years volume and recalculate price structure after factoring in losses.  Oh well, what’s left to say … CHEERS … and good luck to homeowners when they try to sell their homes only to learn that they can’t because the title insurer they trusted missed a [ insert screw-up here ].

The current survey asks if you’re concerned about the effects of instant title on your own business levels.  Are you?

The results of last week’s poll make an interesting point.  The perceived relevance of annual audits differs vastly between title company managers.  The question at hand:  How useful are your underwriter’s audits from your perspective as a manager?  The majority of the 19 respondents felt that their audits offered some practical benefit to their company’s performance.   The categories “very useful” and “not every useful” received an identical and significant percentage of votes.  No one said that they were without an opinion either way.  I incorrectly anticipated the results to cluster around “not very useful” and “somewhat useful” without much activity at the polarities.

Obviously, there are a significant number of auditors who make the effort to transform their visits into learning events for title agents.  But, a meaningful audit experience with entrance and exit interviews costs time and money and requires a willingness by all participants.  I wish that we could conduct a larger study with the same topic while creating subcategories to identify patterns by state and by underwriter.  An underwriter, or state agency manager, truly committed to the continued success of title agents would tend to place a positive spin on the need for a thorough external review of policy and practices. 

It would make sense for an underwriter to brand itself around the importance, fairness and difficulty of audits.  Title agents with a desire to expand professional horizons would gravitate towards an underwriter that stressed a meaningful audit experience each year.   Imagine the viral marketing effects of associating with an underwriter that publicly espoused the superiority of it’s agent selection process and annual review.  Positive audit results, or rankings, could have real world value similar to any ivy league diploma.  We’re talking exclusively about agent competency, not policy remittance.  As a title agent you couldn’t lose … consumers would make a path to your door … if they were aware.  It’s all a matter of perception based on credibility.  It’s the reason your underwriter should be spending money on training auditors and on national PR that benefits you instead of baseball tickets and golf tournaments.

A special thanks to all who participated.

To my way of thinking, the annual audit should be beneficial to both the title company and the underwriter.  Underwriters need to look for telltale signs of fraud, theft, and a general disregard for accepted practices.  But, a well designed audit is also an opportunity for you as a manager to learn about problem areas and improve performance overall. 

Are the auditors that visit your office even competent enough to offer advice that would enhance your operations?

On the sidebar of this site is a poll questioning the usefulness of audits from your perspective as a title company manager.  It will stay there for one week before the results are publicized.  Your participation is anonymous and very much appreciated.