A few columns ago, I discussed how the initial negative reaction to vendor management and independent vetting of title agents was short-sighted. That vetting established a form of new credential that agents could use to set themselves apart from the pack.
At that time, I commented about how the major underwriters seemed to be growing their direct-managed offices, perhaps to reduce their reliance on contract agents to increase revenue and reduce risk.
Vetting, I suggested, helped to level the playing field for small agents by allowing them to market themselves to banks and mortgage lenders as subject to an independent review and oversight from a risk standpoint (separate from the underwriters with whom they have contracts and revenue sharing arrangements). I ended that column saying: “Vetting helps the little guy!”
Now, we have word that direct-to-consumer title insurance is developing: Title insurers bypassing agents and selling insurance direct to consumers at a 35 percent average premium discount. This will result in fewer agents and lower commissions as everyone tries to stay competitive. And while it may offer consumers better pricing, there is no guarantee it will offer them betters services, nor does it eliminate vetting and monitoring since lenders will still be held accountable for settlement agent activities. It may, however, leave many small agents looking for a new way to earn a living.
Competition can be good, as it breeds innovation, lowers prices and generally leads to better service. Consolidation can be bad, especially if it creates an environment that is volume-driven and revenue-focused, and is not consumer-friendly. Time will tell what consumer-direct title insurance will mean for consumers and the industry.
In the meantime, small agents may be able to demonstrate to banks and lenders that they are just as good a risk as large firms in the provision of mortgage settlement services. It’s time to embrace independent vetting; it may just be the advantage you will need to stay competitive in this new era pushing greater consumer choice with respect to title services.
Andrew Liput is president and CEO of Secure Settlements Inc., a company he founded after nearly 10 years studying the problem of escrow and closing fraud and the uninsured risks associated with mortgage closing professionals. He may be reached by e-mail at [email protected]
This article originally appeared in the April 2014 issue of National Mortgage Professional Magazine.