by David W. Moore
Individuals who have been in the title and escrow industry even for a short time, let alone those with many years of experience, have seen drastic changes, especially when it comes to technology. These changes have greatly affected the way we do business. We communicate through e-mail and instant messages. Faxes and e-mails have reduced the need for delivery services. Our phone systems now have recorded messages and advertisements, together with message centers. There are computer software programs to handle almost every aspect of our business. Title reports are uploaded and downloaded, e-mailed, distributed through transaction management systems, and stored on hard drives. Paperless processing of information is becoming the norm, and our customers are demanding more. Although the title and escrow industry has extensively adopted computers and related technologies, we are being torn in many directions and must be able to adapt to new systems and provide services in more electronic ways to satisfy our customers’ needs.
With the expansion of the Internet, access to information has greatly increased and improved our research process. In many areas of the country, title research can now be conducted through an online search process. Many county recorders, clerks, assessors, and treasurers provide information through the Internet. For access to many of these county Web sites all that is required is a simple registration process. Even if there is a charge, in many cases the cost is minimal. By logging onto a Web site, we can now search a parcel of land, obtain information about the property owner, and access other information necessary to produce title insurance and closing documents. Imaged documents have replaced large books and microfilm. We can examine these online documents, produce title reports through various electronic means, and then deliver the report electronically to our client.
Our customer base has also shifted. In addition to local clients, we now work with customers throughout the country. Through technology we can interface with these clients, provide services which were only recently provided face to face, and thus increase our client base and the products we offer. No longer are we restricted by the business environment of our local market. Historically, borrowers would go to their local bank to apply for a loan. Property owners would contact a local real estate sales agent to sell their house, place a sign on their lawn, or place an ad in a local newspaper. These individuals now find lenders, real estate agents, and others online to accomplish these tasks, many outside our normal regional market. Competition has also changed. Many other companies are providing alternative and competitive products. Some lenders are no longer requiring title insurance on their loans. Signing services and other service providers compete for our escrow services. The Internet is broadening the competition base, but also allowing our industry to enter other fields and to provide a myriad of new services. With these changes we must understand the changes in the marketplace and be able to better provide for our clients. The only way that this appears to be feasible is through an e-commerce model; e-consumers want e-business.
Company Web Sites
The Internet and electronic commerce have changed the way business is done. With the Web, the economic structure of business models has changed. An example of this change happened in the early days of the Web. A book publisher decided to put the complete text of its books on the Internet. Many people thought sales would diminish because no one would buy their books if they could obtain them for free on the Internet. But the opposite happened; their sales increased. The books published by this company were generally college textbooks and research publications. Before the Internet, many of the publisher’s clients were reluctant to purchase a book due to the high cost, and without knowing if it would meet their needs. With the text of these books on the Internet, the publishing company determined that its customers were more inclined to purchase the book because they knew the book contained the information they needed. Rather than relying upon a synopsis and not knowing exactly whether the book would contain the information they needed, they could now quickly determine the book’s contents. But printing the book on a home computer, using a large amount of toner and a ream of paper was not an appropriate way to use the book. The published book was then a favorable alternative. Thus, the business model of the publishing company changed. They made more information available on their company’s Web site, which greatly increased their sales.
Company Web Sites
The Internet gateway to your company is probably the best place to start when reviewing your e-commerce business plan. What does your Web site do for your company? How are you embracing the Internet and the e-commerce world? The economics of the Internet has also changed the way the real estate world does business. It is estimated that more than 70 percent of the people who are buying homes or refinancing loans are between the ages of 25 and 50. This generation has grown up with computers and the Internet. They have no problem using the Internet to transact business.
An important part of a title company’s Web site is the online order page. These order pages are an effective way of obtaining your orders and interfacing with your lenders clients and customers. They are easy to set up and even easier to maintain. Do a Google search of other title companies to review their order pages and how easy they are to create. The creation of an online order page is just a database input page. You can include functionality that will automatically advise you of the order, will assign it an order number, and will then e-mail your lender or realtor clients, advising them that the order has been received, giving them an order number and thanking them for the order.
An effective thing my company has done is to personalize our Web order pages. We have an area of the order form that includes the client’s contact information. It is simple for us to take a plain, generic form, add the client’s contact information, save the file with a new file name, and upload the page to our Web site. We then e-mail our client the URL for the customized page, which they can bookmark for future use. We will create a customized order page for everyone who could potentially submit an order. If they know we have gone to the trouble of creating a page for them, they know we appreciate their business.
The delivery and distribution of reports can also be accomplished electronically. Many, if not most, of our clients will accept reports in a paperless format. By e-mail or by transaction management software, the title report is available electronically. Our lender clients are going paperless, so must we. Even if your office is small and you have not invested in title production software, a title report can be prepared through word processing. Create a template for your documents and forms and then fill in the blanks as necessary. The use of merge codes can simplify this process. After the title report is prepared, it can be e-mailed to your client.
Company Web sites can be used in a number of different ways, for both lender clients and consumers. Companies can place their marketing materials on their Web sites for better and more economical distribution. Fee and rate schedules will give a client and consumers a better understanding of your charges. Pictures and a biographical sketch of your key employees are an effective way of introducing your clients and consumers to your staff. Other information for consumers may include a description of your services, necessary information to bring to a closing, and calculators to determine mortgage payments. The list of things that you can place on your company’s Web site is only limited by your imagination.
The e-mortgage is finally a reality. For years we have heard that electronic documents will be accepted and become the standard means of completing a real estate transaction. However, we are still in an infancy stage. Many mortgage lenders are experimenting with e-mortgages. Many different procedures need to be implemented for the signing, storage, and distribution of e-mortgages. This was a hot topic at the 2006 ALTA® Tech Forum. Fannie Mae even held a couple of focus group meetings to review and discuss the implementation of e-mortgages. There was a lot of information gathered and exchanged.
As our lender clients begin adapting to this format, how are we going to process these types of closings? As the e-mortgage process may vary from lender to lender, we must be able to adapt and handle each situation. Many title companies now receive their closing documents through e-mail or some other electronic means. These documents are printed, signed, and returned as paper documents to the lender. With e-mortgages, documents will be signed and acknowledged through some form of electronic signature and returned to the lender electronically. This will take some changes in our production process. How are you going to prepare your closing documents to be added to this e-mortgage package? How are you going to have them signed, notarized, and returned? There is still much work to be done to make this an effective and comfortable closing for our clients.
One concern with e-mortgages is how consumers will accept them? Will they feel comfortable reviewing the documents on a computer screen? With all the news about loan fraud and identify theft, will our lenders and borrowers embrace this e-mortgage world? But as the retail marketplace has adapted to an e-commerce model, so borrowers should be able to adapt to the use of computers screens and signature pads in the closing of a real estate transaction. Nobody questions the used of a signature pad when using their credit card at Wal Mart. However, we must be able to keep all of our clients comfortable through a transition period.
E-Closing, E-Signing, and E-Notary
Since many of the closing documents need to be signed and acknowledged by a notary, e-closing, e-signing, and e-notary are extensively intertwined. Through federal laws, it is now possible to have real estate documents signed electronically. In conjunction with the state laws that govern notaries public, documents can be completed in an electronic format. To be able to close electronically has both advantages and disadvantages. For the most part, documents still need to be reviewed, approved, signed, and acknowledged. With e-commerce, all that is really changing is the visual presentation of the documents and the structure used to affix a signature.
There has been some experimentation with digital signatures for real estate transactions. The basic process of digital signatures is the use of security passwords and encryption software. Secure computer Web sites are used for e-commerce transactions, which store the information necessary to validate the electronic transaction. However, for real estate this format does not place the normal signature on the documents. The resulting documents have the normal text information but not the nice calligraphy form of the signature, which makes the document look nice. With a digital signature there is a “private” code (password) that is used to execute the document. Through encryption software a digital signature, or code statement, is placed on the documents usually at the beginning and at the end. This digital signature code appears to be a mishmash of letters, numbers, and symbols. Through the use of a “public” code, the validity of the document can be ascertained. If any changes have been made to the document after it was digitally signed, even if a single space is added, the public code would report an error.
After the digital signing process, and as required for real estate documents, the electronically signed documents must be recorded. However the software and process necessary to accomplish this task has never fully been implemented. A digitally signed document does not appear to have a signature, rather only the digital signature represented by a code statement. Most real estate professionals do not recognize the documents as being signed.
The real estate industry still likes to see the calligraphy form of the signature. To facilitate the appearance of this normal type of signature, the real estate industry has moved in another direction. With the use of signature pads, real estate documents can be signed, then acknowledged. This process places the signature on the document electronically, and it appears to have the calligraphy signature we have all come to trust. Because of the e-recording systems that many counties have implemented, this form of digital signature is readily acceptable.
An essential part of the e-closing process is the notarization of the document. Various states have taken different approaches to this matter. Two different approaches have been implemented. The first format is the creation of an “e-notary.” This is a special category for a notary public. Once a person becomes a notary public under the laws of their state, he or she can complete a process to become an “e-notary.” This empowers them to complete an acknowledgment of an electronic document in an e-notary format.
The other system of electronic notarization is to allow all notaries public to execute an e-notary. This system has different requirements because of the e-sign process. These requirements generally require additional information to be placed on the document, such as the notary’s appointment or certificate number. This additional information is required because the notary’s seal cannot be affixed to an electronic document.
There are more than 90 counties across the country that are now accepting documents for recording purposes in an electronic format. While these systems may have some variation, their procedures and practices are similar. With the use of electronic recording, documents are delivered to the recorder’s office through an electronic process. Because the documents are already in a digital image format, the recorders can save money because they don’t have to scan the documents for archival purposes, and the title company can more timely and economically handle this type of recording.
The e-recording approach has been in use for a few years. It has been found to save time, and title companies can better manage the documents after recording. Today, rather than having a recording clerk spend hours at the recorder’s office waiting in line to record, with an e-recording system, the entire recording process can be accomplished in the office with just a fraction of the time previously required. The process for e-recording is basically as follows. When the documents are ready for recording, the title company’s recording clerk logs onto the e-recording company’s Web site. The clerk scans the documents to be recorded and send them electronically to the recorder’s office. The documents automatically go into a recording queue. If someone records in person at the recorder’s office, they log onto a computer in the recorder’s office and are placed in the appropriate sequence in the recording queue. When it is time to record, the county recorder’s staff reviews the documents to verify they meet the legal standards necessary for recorded documents. If approved, the documents receive an electronic stamp that contains the recording information. If they are not approved, the title company receives a message on the Web page. After recording, the title company receives the recording information placed on the documents. The documents are immediately available on the recorder’s Web site. The average time from beginning to end for this e-recording process is much shorter than the old-fashioned way. No one leaves the office, and we fulfill the recording process in a more effective manner for our clients. Recording fees are handled either with a recording account with the county recorder or with the e-recording company.
E-commerce is here, and the e-consumer is waiting for us to implement the changes required by this new way of doing business. As a title and escrow industry we have the ability to provide our lender and consumer customers with an effective electronic commerce system. Using Web sites, computer technology, and various distribution systems, the title and escrow process can be accomplished in a more efficient and economical manner. Keeping up with the technology advances of e-commerce is essential if title companies are going to survive and thrive in the world of the e-consumer.
|David W. Moore is president, Township Title Insurance Agency, Inc. and the Title & Escrow School, Murray, Utah. This article is an excerpt from his presentation during ALTA®’s 2006 Tech Forum. David can be reached at firstname.lastname@example.org.|