by Jerome Jelinek, Chairman
In the first and second installment of this series we examined the advantages of consolidating and actively managing title vendors for refinance transactions. Some of the benefits that we have seen include greater control over pricing, service standards, compliant vendor due diligence and reduced risk from wire fraud and cyber-attacks. As we noted, some of the nation’s largest mortgage lenders have been early adopters of this strategy. Recently, we have seen a growing interest on the part of next-tier lenders, including regional banks.
While the decision to consolidate down to a core group of title companies is relatively easy for direct-to-consumer lenders, the process can be more challenging for larger banks and lenders originating through branch networks. A successful transition to actively managed closings for these lenders often requires a comprehensive plan to align operations and, most importantly, to gain the cooperation from loan officers (LOs).
Recently one of our clients, a top 20 lender, embarked on a program to actively manage their title vendors for refinance transactions within its 13-state lending footprint. As a first step, they reduced the number of title companies they are working with from more than 100 down to five, some focusing on the West Coast and others focusing on the eastern half of the country.
“The most important aspect of our goal to utilize only preferred/managed vendors for fulfillment of our refinance transactions hinges on the formal agreements we establish with them to achieve the best possible service for our clients, while mitigating risk,” the bank said during the rollout.
The bank also noted: “In executing a refinance transaction with a non-preferred provider, we have learned through experience that those “one off” refinance transactions can be problematic from a trailing documentation standpoint, which can lead to issues as it pertains to delivery to the GSEs.”
By going to a manageable number of title partners the bank was able to perform the in-depth due diligence that they do with other kinds of vendors, and to set consistent service levels. For example, with this more centralized group of vendors, they now require that 80% of refinance commitments be delivered in two business days or less, and that final policies be delivered within 15 days. They also require their providers to be SOC2, Type 2 compliant, something they weren’t able to do on a decentralized basis.
Once the vendors and infrastructure were in place, the bank took a two-step approach to gaining LO acceptance of the new program. For the first three months, LOs were encouraged — but not required — to use the five core title companies for their refinances. During this time, the bank educated their LOs on the benefits of using these title companies, including consistent pricing and borrower experience. At the end of that period, the LOs were then required to use the core group. The core group of vendors, along with their fees, was also programmed into the lender’s LOS for ease of ordering.
The transition went very smoothly with relatively little pushback from the LOs. Today, the bank receives title policies and trailing docs at one of two central operational centers.
This is not to suggest that a two-step approach to change management will be necessary or even work for every lender. It will most likely depend on how much decision-making authority a lender has given its LOs in the past as well as their existing corporate culture.
However, as lenders know, getting LO buy-in is often critical to the success of workflow changes and adoption of new technology.
While this bank rolled out its program over a six-month timeframe, moving to an actively managed title program can be done in a relatively short time, as compared with major program implementations, like LOS or servicing systems.
Today the bank continues to experience significant benefits from an operational and risk standpoint. Its strategic decision to consolidate its title vendors has proven to be a transformative move towards enhancing its refinance operations. By centralizing title services, the bank achieved notable improvements in efficiency, consistency and customer satisfaction.
Jerome founded Corporate Settlement Solutions (CSS) in 1992 and served as CEO and Founder until transitioning into the Chairman role.
Jerome assists with the strategic direction of the company and leverages 30+ of industry experience to lead revenue strategy and execution. He also oversees the legal and regulatory functions of the company.
Corporate Settlement Solutions is a single-source provider of real estate title, closing, valuation, flood and recording solutions.
Our team is highly engaged in delivering results that make our customers more efficient, effective and profitable.
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