Prashant Kothari of SitusAMC Insights: Title, Mortgage Industries Share Same Challenges; None Insurmountable
Prashant Kothari is Managing Director of SitusAMC’s Title Production Services and has nearly three decades of mortgage and title industry experience. He began his career in the mortgage division of Kidder, Peabody & Co. followed by multiple roles at Freddie Mac, including working in the Freddie’s Office of the President. These experiences gave him deep insights into new opportunities across the financial services and mortgage industries. He can be reached at email@example.com.
MBA NEWSLINK: What are some of the issues that are holding up title cycle times right now?
PRASHANT KOTHARI, SITUSAMC: Title work is performed in an assembly line fashion, with a variety of activities that need to take place before the closing. However, two activities in particular—title searches and tax collection—tend to be the primary bottlenecks that hold up everything else. Another challenge is that most title companies are short-staffed and are handing off work to vendors that haven’t properly invested in technology and other resources to clear up bottlenecks effectively.
NEWSLINK: What challenges do home lenders face with today’s title industry?
KOTHARI: Because the title industry remains very labor intensive, it takes a lot of people to do the work. This increases the chance of errors and makes the closing cycle time longer for lenders, who are already struggling with heavy demand for refinances and purchase loans. Plus, every bottleneck in the title process stalls the transaction, which ultimately hurts the consumer experience. These delays are a major frustration for lenders right now.
NEWSLINK: It sounds like the title industry shares many of the same shortcomings as the mortgage industry, is that right?
KOTHARI: The title industry is exactly like the mortgage industry in that both have volatile revenues and fixed costs. They do share similar shortcomings, yet compared to the mortgage industry, the obstacles are more acute in the title industry. Staffing is probably the biggest issue right now. During my nearly two decades of visiting hundreds of title agencies, I’ve observed that they are optimally staffed one day a month, overstaffed a couple times a month and understaffed for most of the month.
NEWSLINK: Why don’t title agencies just hire more staff?
KOTHARI: Most title agencies want to hire more people, but there is a huge shortage of qualified candidates for open positions. While title is essential to the mortgage transaction, as far as career options go, most young people don’t view title work as very exciting. On top of that, the average age of a title production worker is in the high fifties and nearing retirement. So, the industry has a big challenge ahead.
One of our own clients in California is desperately trying to hire staff and has gone to local colleges to set up classes and recruit trainees and interns. But they are struggling because technology and manufacturing companies are offering work that young people consider far more interesting.
NEWSLINK: How can title agencies get a better grip on wide swings in work volume?
KOTHARI: Much of the work on the production and curative sides of title operations can be handled by outside firms such as ours. We’ve made significant investments in technology and talent, and have also combined both offshore and onshore teams to deliver a broader range of title services and help firms clear up bottlenecks in the title process.
I estimate that up to 80% of title work can now be outsourced, which enables title agencies to focus their resources on the most critical work. When agencies are short staffed, experienced partners can pick up the slack for them and help them scale their business and profits.
NEWSLINK: Should all title insurance functions be outsourced?
KOTHARI: There are several important, specialized functions that should remain in-house at the title company and not outsourced. These includes functions that involve very complicated transactions and technical legal issues. That being said, with improvements in outsourcing, companies can now look to third parties to handle more complex work than most title companies realize. Plus, proprietary systems with compliance and QC controls built in can be customized to meet the business rules and specifications of individual title agencies.
NEWSLINK: Should title outsourcing be utilized only for simple refinances and not for more complicated home purchase transactions?
KOTHARI: Ten years ago, I would have said yes. But there are now viable solutions for handling purchase-money transactions as well as refinances. There are partners available that have both domestic and offshore teams as well as decades of experience with title production for purchase transactions. For example, we’ve built new systems for handling title work on purchase loans, and are providing specialized training to our staff to handle purchase transactions.
NEWSLINK: Are requirements and processes for financed home purchases similar in all states?
KOTHARI: No. All states are different and have very specific requirements for purchase transactions. The requirements for originating purchase loans are particularly complicated in larger states, especially California, New York, and Florida, to name a few. It is key to have specialized desks to handle work in these states in addition to title curative teams working stateside to make sure the work is performed efficiently and compliantly. It is also important for a title partner to have technology integrations with due diligence tools to ensure all purchase-related work is compliant with investor guidelines as well as state and federal regulations.
NEWSLINK: How much time can title firms save by outsourcing?
KOTHARI: Every transaction is different, but in an optimal arrangement, cycle times can be slashed significantly. For example, a curative issue that could potentially hold up a loan closing by up to a week can be resolved within a day with the right help. A global delivery model with teams working both onshore and offshore also enable nearly 24-hour support, with work orders being received at the end of the workday and have the completed work sent to the title company by the next morning. More importantly, by having the bulk of title production work taken off their plate, title agencies can pour more energy and resources into growing business.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)