Every mortgage lender wants what’s best for their customers and employees. If you’re overseeing refinance operations at a lender, you care about many things, but there are likely three you’re always looking to satisfy: your customers, your employees, and your margins.
Even with record refinance demand over the past year, many lenders aren’t achieving their full potential when it comes to customer satisfaction, efficiency, and profitability. Part of the problem lies with inefficient and fragmented refinance title and settlement processes caused by working with far too many different vendors.
Let’s make sure you’re asking the right questions to ensure you understand the hidden costs of this approach and to allow you to optimize your own refinance title and settlement process.
#1: Are the number of title vendors we work with creating more work for my operations staff?
For great reason, you allow local realtors to choose a title agent for purchase loans, as realtor relationships are crucial for your loan officers. For refinances, despite realtors being out of the picture, you use the same old model: a long list of local title agencies.
Most lenders have to manage 50 different processes, service levels, pricing sheets, and points of contact. This can create bottlenecks in your title and settlement process, as time is often spent obtaining accurate quotes with multiple sets of fees and chasing down trailing documents from many different vendors. Not to mention, the difficulty of managing vendor performance without one centralized performance summary can be cumbersome.
Centralized title models have become more popular, where all refinance title and settlement services are handled with one title and settlement provider. Lenders have one point of contact and one monthly report for their deals. Partnered notaries and attorneys are contracted out on your behalf by the title provider, allowing you to close multiple deals efficiently with one consistent process across your entire geographic footprint.
This allows your staff to be more efficient by working with fewer vendors, allowing you to scale loan volume without hiring new staff, which can be very costly to hire and train.
#2: When we contact our title vendors, how quickly do we get a response?
With most local title agencies, each branch has a limited number of staff who juggle many different responsibilities, including physically conducting closings for a good portion of the day. As a result, these agents frequently don’t answer the phone when you call and may take an extended time period to respond to emails or voicemails, leaving you in the dark about the status of your transaction.
In a centralized title model, you have one team dedicated to managing all of your refinance deals across the country. This team is solely dedicated to processing your orders from one centralized office and isn’t responsible for physically attending closings. Therefore, they are always available to pick up your phone call or quickly respond to your request for a status update. They can update you on the status of any deal in your pipeline, eliminating the need for you to contact 50 different vendors on 50 different deals.
If you find that your title vendors are very responsive, one area that may still be worth evaluating are their turn times.
#3: What commitment and final policy turn times are you receiving from your title vendors?
When working with local title vendors, you can expect your commitment turn time to exceed 5 days and your final policy turn time to surpass thirty days.
Local title vendors often lack written rules on efficiency due to their inability to scale, hire, and segregate responsibilities. To speed up deals, you need agile title vendors who meet strict benchmarks for efficiency at every step of the process. Using a limited amount of elite vendors can help to ensure speedy turn times and drive profitability.
For example, we recently worked with a client to adopt a centralized title model. They reduced the average final policy turn time to 4.7 business days and reduced their commitment turn time to 1.4 business days.
If you’re having trouble reducing your turn times, adopting a centralized title model could help you get back on track.
#4: How many different sets of title and closing fees are we charging our borrowers?
Transparency plays a large role in respectability in the eyes of the consumer. Title and closing fees on your refinance deals can vary drastically from vendor to vendor.
The greater your pool of title vendors and quotes, the greater your exposure to the risk of your fees being out of tolerance at closing. Explaining discrepancies between the initial quote and the actual fees charged at closing does not create a positive customer experience. Plus, you’re absorbing avoidable tolerance violation fees.
In addition to a centralized vendor providing one consistent set of fees, many will even allow you to pull quoted fees to your system via middleware, preserving fee consistency from start to finish with minimal effort on your part.
If you’re considering if centralizing is worth the switch, add fee consistency to your checklist to examine. Are you having to tell your borrowers a different fee at the start than at the close? Are you occasionally out of tolerance for those fees? If either of these is yes, view this through the lens of the borrower and your bottom line.
#5: Are all of our borrowers getting their ideal customer experience?
According to a study by McKinsey on mortgage refinance borrowers, only two-thirds of non-bank users and less than half of bank users rated their customer experience as a 9 or 10 (on a scale of 1 to 10, with 10 being extremely satisfied).
Case in point: there’s room for opportunity to stand out.
With online reviews, every customer has your future sales in the palm of their hand. They can control your revenue stream for years after their transaction.
Lenders lack control of the customer experience by using many different vendors with many different customer service standards. How do you know that every borrower is having a positive closing experience when you’re working with so many different vendors?
As a refinance lender, in the eyes of the borrower, your reputation is tied to the entire title and closing process, from start to finish. As the pandemic hit, some title vendors were fully prepared for electronic closings (eClosings), some were partially prepared, and some weren’t at all.
Larger centralized title vendors have the resources and experience to invest in adopting new technology like hybrid eClosings and Remote Online Notarization (RON) closings, which is not the case for small local vendors. This technology provides additional security and convenience for both the lender and the borrower.
With a centralized title provider utilizing eClosing technology, hybrid eClosings and RON can be readily available for every refinance, regardless of geographic location. If you’re committed to efficiency and convenience, ensuring you have eClosing capability across all your deals may be worth considering.
#6: What security standards are my title vendors being held to?
Let’s put this front and center: 155.8 million individuals were affected by data exposures in 2020. That’s 2% of the global population. $150 million dollars were lost in real estate wire fraud in 2018. According to the FBI, 11,300 people were victims of real estate wire fraud in 2018, which is a 17% increase since 2017.
Most local title agencies don’t have the time or resources to run expensive annual data security audits, monthly external and internal vulnerability scans, monthly staff cybersecurity training, robust email security solutions, or even the highest quality virus protection. Not to mention, very few local title agencies have several million dollars in cybersecurity insurance to protect against wire fraud.
Nationally centralized title and settlement providers, such as Corporate Settlement Solutions, have the resources to implement each one of these safeguards, including auditing procedures like ALTA Best Practices and the SOC2 certifications. ALTA ensures title vendors have proper procedures and policies across the entire title and settlement process. For instance, ALTA mandates various job duty segregations for document integrity purposes, reconciliation protocols, third-party due diligence requirements, and many other areas around security.
SOC2 certifications are typically viewed as one of the gold standards in cybersecurity. This is an intensive auditing procedure that ensures the agency’s service providers are securely managing your data.
These audits can run anywhere from $20,000 to $80,000, depending on the complexity of the infrastructure. Many small vendors simply cannot or choose not to put forth the resources to attain these various protections and audits. This is ultimately at the expense of your data security.
The more title vendors you work with, the greater your risk of incurring a cyber-attack, especially if they’re small local agencies.
In conclusion, consolidating your title vendors doesn’t just cut operational costs. It doesn’t just drive your refinance deals to completion without speed bumps, red lights, or detours. It drives their refinance deals.
From faster speed to closings, to the use of technology like RON closings, to more secure communication, and greater responsiveness, implementing a centralized title model is a useful strategy to optimize the customer experience and drive results.