Secure Settlements Inc. (SSI) recently conducted its second annual confidential survey of thousands of lawyers, notaries, escrow agents and title agents to examine the status of closing professionals in the increasing regulatory environment. The survey, conducted Jan. 13-17, comes nearly one year after the previous industry survey seeking similar information. SSI uses data from confidential polling to support its mortgage industry pre-funding quality assurance risk management tools. In the age of the Qualified Mortgage (QM), data about personal experiences relating to the closing process is a critical element to understanding consumer and enterprise risk.
The poll, designed by SSI risk analysts, contained 14 carefully selected questions ranging from: level of experience, source of business referrals, satisfaction with bond and insurance coverage and pricing, fraud experienced at the closing table, and relationship with lenders and title insurance underwriters. The same questions that were asked in 2013 were asked again this year to determine any changes brought on by shifts in business and new regulatory requirements from the Consumer Financial Protection Bureau (CFPB) and other regulators.
Highlights of the poll included:
►Nearly 45 percent of all business is being referred by real estate agents, up from 27 percent last year, and only 15 percent is coming from loan officers as opposed to 36 percent last year. This reflects the movement away from a refinance market to a purchase market where the source of business is more directly tied to the real estate industry.
►The rising cost of E&O and surety bonds are troubling many agents. More than 60 percent of agents polled are dissatisfied with the cost of their current coverage. This may be a reflection of the insurance market’s increasing concern over historical losses surrounding escrow and closing fraud. A number of insurers have recently left the market altogether for legal, title and escrow liability insurance, increasing costs.
►Nearly 20 percent of those polled actually witnessed fraud at a closing last year, up from 16 percent in 2012, while 36 percent were asked to commit fraud at a closing and refused to do so, up slightly from 33 percent last year.
►The increasing focus on best practices and education seemed to have an impact on the amount of hours dedicated to professional education. Whereas nearly 40 percent responded in last year’s poll that they had five or less hours of continuing education, this year the number was reduced to 25 percent. Fully 54 percent of respondents had completed 10 or more hours of professional education in 2013, with nearly 15 percent (likely attorneys who have high CLE requirements) having completed 20 hours or more.
►Lenders received only average marks from agents for communication, timely delivery of wires, closing and post-closing issues and overall levels of service, with the lowest marks given for communicating closing instructions and handling post-closing document errors.
►Title underwriters received higher marks overall from agents polled, with two areas of concern being defense for errors and claims, and training.
The results confirm the need for continued due diligence, third-party risk management and quality control in the area of residential mortgage closings.