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Virtual Title Plants and Beyond

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March/April 1998 - Volume 77, Number 2

By Todd A. Hartle

Title managers who exploit Internet commerce fully can reap its benefits. This article evaluates the latest thoughts about making land title records available on the Internet, which many believe the title industry needs today in order to hedge against future competition and technological change. How do we make plants available? Is anyone doing it? What data to make available and to whom? What are county recorders and clerks doing about making land court records available over the Internet? Learn how these trends and Web applications affect title plants and how you can prepare to meet your customers’ needs.

Electronic commerce today and what will be most important about it in the future is the extent to which it represents the state of change in the way business is conducted in the title community. Today, we can order almost anything over the Internet and the capability to place title orders and sell title information in the virtual realm is a current reality. It is a ubiquitous network business model for prospecting customers, order management, order fulfillment, and information dissemination.

The real impact of Internet commerce has to do with what does not happen in the course of a transaction: no office was visited, thus paper work is reduced; no cash changed hands, thus simplifying record keeping, cash management, etc. Whenever traditional methods of making purchase decisions and executing transactions are bypassed via an electronic network, electronic commerce is playing a role.

Although the implications of this kind of change in transactions are staggering, it may be even more important to consider the ways in which the Internet will change how title companies gather, index, store, and retrieve information. The advent of the Internet and the mobility provided through technology mean less brick and mortar for title plants. Arising from this change is the concept of the Virtual Title Plant, a Web-based application.

The Internet provides a reliable means to disseminate land title information throughout the nation. The open nature of the Internet means that users can access title information from any computer, anywhere, anytime, using a standard Web browser with minimal effort and expense. The Internet will put your organization on an equal, competitive footing with firms locally, regionally, nationally and internationally. The Web will directly or indirectly impact your bottom line.

Of course, there is always the fear that if you do not do it, the other guy will. So, while a company’s data is indeed precious, it is only after having been transformed into accessible information that it becomes a source of economic value. A resource such as the Internet can enhance your plant data’s intrinsic worth. Thus, data is transformed into valuable information.

Threats to Title Plants

County recorders on the Internet? Yes, it is true, they are beginning to use the Internet to publish data. What does this shift mean for title plants in an age where information flow is the driving force of a global economy? Without question, the Web is dramatically changing the form and flow of the environment surrounding the title community -- and will continue to do so.

As an increasing volume of public records migrates to the Web, title managers will encounter an intensified need to demonstrate that their title plant access systems are of major importance to the real estate market. While the thought of putting the company jewels on-line may make some executives feel faint, the trend is moving forward in Web site development for property records access. Those who lead title operations need to fully realize the great importance of utilizing Internet technology in strengthening the title industry.

However, many title managers do not consider the spreading of county data to the Internet a threat because county data is organized by grantor/grantee rather than legal description and is deemed not as accurate as plant data. This is a great fallacy. Pressures continue to build for those in public offices to facilitate accessible inspection of public records. Thus state and county governments have begun efforts toward uniform property records access by leveraging the public data stored through their operations and migrating it to the World Wide Web.

As county clerks become more attentive to quality control and the type of indexes they keep and allow access to, the title industry will suffer. And, as county recorders continue to make records accessible via the Internet, with universal access to searches that can be run quickly and efficiently from anywhere in the country, it will spell the end of title plants as we know them today. They will be worth nothing.

Some plant managers are also very concerned about MERS. Could it become a national recorder’s office in the future and therefore become the national title plant? This is indeed a possibility as technology rapidly advances and prices fall. Plant managers would be wise to hedge against future developments on this front.

How title managers respond to the technology forces affecting records access will dramatically impact the future management of title plants everywhere. If those in leadership positions view recent Internet innovations as an opportunity to redirect their companies toward enhanced strategies and processes that will make their organizations more effective and competitive, then private management of title information access will continue to be a critical attribute. If, however, management remains unconvinced regarding the value of Web access to real property data, county clerks and others will not be so resistant.

Offshore Indexing

Before your title data can be published on the Internet as a defense to these posing threats, it must be in electronic format. Many plants today have their indexes resident in a local legacy database. If so, you are ready to proceed with your Internet strategy. But, what if you do not have an existing data entry system and are not favored with getting electronic files from the county recorder. A back-file conversion may be in order. And offshore indexing portends lower costs and improved timeliness.

Gathering data for a Virtual Title Plant starts like any other plant where the title office procures documents from the county clerk's office. Documents may be still in paper format or microfilm but digitized images offer more flexibility. The difference begins after the documents are procured, when they are then sent to Manila in the Philippines, where they are posted utilizing offshore labor.

The offshore data entry facility, operated by HDEP International, is the only offshore facility which is actually trained to key title plants. Virendra Nath, HDEP president, and Doug Bello of D. Bello & Associates, Burbank, who manages the title postings, have put forth a tremendous amount of effort for almost 10 years to get their personnel trained. But they are trained and they know title documents so that quality control is maintained.

Documents that are digitized can be sent via the Internet to an overseas location. Because of the time difference when using offshore indexing, it is possible that the new data can be available the next morning if digitized documents are utilized. The existence of the industry is based on the ability to have timely and accurate information. Your company’s plant can be up to date to the day as opposed to being many days behind.

Once documents have been posted, the associated indexes are then transferred back to a Internet-based plant hosting service, such as Atlanta-based Fountainhead Information Systems, which stores the data and also keeps track of client accounts and access security on behalf of the title company. Subsequently, the plant information is accessed for a fee over the World Wide Web to subscribers across the nation without using proprietary EDI software.

Marketing Plant Data

Information is the new gold standard. And access to critical data is key to any company’s success, especially data which is current, accurate, and accessible. In this information age, title plants have an edge on real property transactions. Title companies can reach new markets with their various property records and conduct business on the Internet 24 hours a day without geographical and time zone restrictions. But what plant data should you make available?

All of it.

Title records, flood, tax, appraisal and even prior policies are valuable to many different entities. Attorneys want to access copies of specific book and page information without going to the courthouse; lenders want to know who else recorded mortgages; appraisers want to know the price of new sales; Realtors want to know what sales closed; and direct marketers want to know the names of new property owners. And they all can access title information for a fee over the Internet.

A number of government agencies such as the Department of Transportation, and other organizations such as property management companies, property investors, private investigators, and notice to owner businesses, will find use in property records also. Many customers will want to access information across county boundaries and can do so through the Internet.

Web Presence Costs

Any title organization that may want to provide Internet access to its title data, will first research how much it will cost to set up a Web server and maintain it. Opening shop on the Internet, however, requires a major investment in the hundreds of thousands of dollars for computer hardware, software, and maintenance. While you can buy your own Web server and high-speed data link, you also need to add the cost of the services for an in-house UNIX or NT guru to maintain the system and provide the application programming that will be needed.

Consider the following expenses associated with internal Web site management that are needed to start (costs do not include the security devices to protect corporate data).

Cost of Internal Web Site Management

Hardware and Software

$27,000

Internet Connectivity

$31,000

Tape Storage

$3,000

Labor*

$160,000

Total

$221,000

*Two full-time staff plus benefits and overhead

Source: Forrester Research

Now, add the cost of setting up a site for electronic commerce transactions on the Web which is recognizably difficult and time-consuming because most solutions require several steps and extensive programming knowledge.

It is these software programming expenses that represent the majority of an electronic commerce projects investment. International Data Corporation (IDC) reports that companies building Web commerce sites can expect hardware and software to consume 20 percent of a site’s overall budget; the remaining 80 percent goes to software development and integration. To build a gateway that links the Web page to the database requires custom development.

Businesses are already investing hefty sums in their Web commerce projects. According to the

Web Application: Definitions

A Web application is a serious business application that runs on the Internet. It usually involves extracting information from a corporate database, performing an action against that information and displaying the results. The idea of Web applications is that of building serious client/server applications that run inside a browser. Or more accurately that display inside a browser, since most of the processing is actually done on the server

Web browsers talk to servers. Most of the processing is done on the server which may be a combination of Web servers, file servers, application servers and database servers. Web applications promise to save corporations big money, because they do not require high-end PCs on every desk. They run on any device that can host a browser ? a low-end PC, a laptop, an NC(network computer), or even a hand-held. Web applications offer flexibility, scalability, security, and stability because they are based on open standards

Gartner Group, transaction-enabled Web sites cost from $1.5 to $3 million. And many companies spend more than that up to $5 million. The cost of the Web server is just the tip of the iceberg. Companies incur their major expenses building real-time links to back office SQL databases with costs of $500,000 or more. Operating costs can run close to $3 million spent over the first year with staffs ranging from a few to 40, with an average of 19 people.

Title Plant Hosting

Title companies have stored tremendous volumes of records in databases. Is it possible to achieve a low-maintenance environment that will not overwhelm an internal IS staff? How can this be done when data resides on multiple hardware platforms in several different databases? How can all these technical imperatives be met and revenue still generated? A title plant hosting service is the answer.

Businesses are looking for help in finding critical skills and in meeting the business unit’s objectives for time to market, business growth, and increased market share. Taking information out of a plant database and delivering it over the Web requires more acumen than one would imagine. Lacking funds for additional staff and bound by unrealistic deadlines, managers are looking for alternatives. Title plant hosting allows companies to out-source creation, management, and support of their Virtual Title Plants, gaining a low cost, low risk, high performance way to use the power of the Web. For managers, such trends promise less worry over day-to-day operations and a greater role in strategic decisions.

Fountainhead Information Systems, as an example, TitleSearch On-Line - (www.titlesearch.com) plant hosting Internet service technology offers managers the ability to sell title information on the Internet. Title plants are hosted utilizing Fountainhead’s proven technology for a monthly fee based on certain features, storage requirements, and number of transactions. The TitleSearch On-Line - back-end application is a Web server that acts as an intermediary between the user and the database.

A title plant simply provides data to Fountainhead. Fountainhead’s hosting service includes all technical support, administration, and converts your flat file data into a customized relational database that is highly optimized for plant access and control. The system is designed to make providing and accessing title information easy for both data providers and customers. The advantage is that companies do not need to increase their own infrastructure and chase the technology curve.

By outsourcing the on-line application tasks, the complicated server setup, and the site management without the heavy investment in hardware, software, communications, and labor, companies can concentrate on the data gathering and their line business activities. As a result, existing data is not only more usable, but more valuable -- Mission-critical information, centrally administered and universally accessed.

Web Security: Perception vs. Reality

Most surveys regarding electronic commerce on the Internet highlight security as the number one overriding concern. While the specific issues vary a great deal among those looking to do business over the Internet, businesses need to gain required competencies regarding security.

Whether it is just perception or a reality, there is a growing concern that using the Web as a business tool may inadvertently compromise the integrity of sensitive information. However, the Internet is a safe means of doing business. There are no issues with Internet commerce that should retard its use. The problem is perception because people think that critical information can be grabbed off the Internet at will.

To safeguard the privacy and confidentiality of information, applications can be hosted on secure servers which encrypt application information. Transactions can be encrypted using Secure Sockets Layer (SSL), a protocol that creates a secure connection to the Web server, protecting the information as it travels over the Internet. SSL uses public key encryption, one of the strongest encryption methods around.

Virtual Private Networks (VPN) can be created using existing technology which creates a connection across the Internet and encrypts the transmitted data. Authorized remote-access users call their local Internet service provider (ISP) using the Internet as an extension of wide-area networking facilities as a safe, inexpensive way to provide remote access. Digital certificates also meet the growing needs of electronic commerce.

The key is to consider the level of security you need and then plan to invest the time, money, and energy necessary to achieve that level. And, with hundreds of security products on the market, there is no shortage of technology available to address the challenge. Product categories include firewalls, authentication and authorization devices, intrusion-detection software, encryption software, and related solutions that perform event analysis and reporting, router security management, content management, or virus protection.

A Note On Cookies

Internet commerce sites allow customers to place orders and buy information in the stateless Web environment. Most Web sites accomplish this stunning feat with HTTP cookies. A cookie is a small piece of information that is sent to your browser - along with an HTML page - when you access a particular site. When a cookie arrives, your browser generally saves this information to your hard drive; when you return to that site, some of the stored information will be sent back to the Web server, along with your new request

In case you are worried about privacy, there are several things that a cookie cannot tell anyone. A cookie cannot learn your name, your age, or even what country you are from. Cookies cannot even tell whether more than one person uses the same computer to view a site, or whether one person uses more than one computer to surf a site.

In general, cookies are harmless and pose no threat. I recommend keeping them and turning off the "Always confirm before setting a cookie" feature in your browser. Cookies are so popular these days that it is really annoying to confirm each and every cookie you receive.

Most vendors and analysts argue that transactions are actually less dangerous in cyberspace than in the physical world. The highest security risk of any organization is its employees and former employees - - not computer hackers. It is a tradeoff between ease of use, cost, and security. It is necessary to find a balance. The reality, regardless of perception, is that Internet commerce is here to stay.

A Faster Internet Connection

Speed is the name of the game when it comes to accessing Web sites on the Internet. Those "surfing the net" want sites to load quickly and reliably. No one wants to wait. Clients are wanting more information and they want it in real time. Their demands will soon be met.

If you are amazed by the leaps in computing power over the last decade, wait till you see what is happening to the expansion of Internet bandwidth (i.e. speed). Essentially, all other forms of networks: voice, text, video and sound, are rapidly giving way to various new forms of multimedia computer networks. Ruling the new era will be bandwidth measured in billions of bits per second rather than in the millions of instructions per second of current computers.

"We'll have infinite bandwidth in a decade's time, states Bill Gates. Cable companies, regional bells, and computer companies are working in earnest to bring high-bandwidth services to expanding markets to meet the increasing customer demand for improved Internet performance. This would include studying access alternatives such as cable modems, ISDN, ATM, OC-3, DSL, wireless and satellite-based technologies.

Recently, Intel, Compaq and Microsoft announced that they want their customers to access World Wide Web pages up to 30 times more quickly than they can now. They want this to happen over regular phone lines, while the customer can also use those lines for telephone use at the same time. By year's end, businesses will be able to tap the wider pipeline.

This need for Internet bandwidth is driven by the increasing complexity of Web-based services. And professional users who need large amount of data quickly. New high-speed networks being developed by the technology community are set to spearhead the transformation of the Internet into tomorrow's multimedia superhighway. However, Internet bandwidth is not just about faster pipes it is about lower costs; Time is money.

Hawaii Plant - Access on Web

Title plant owners and managers have been remiss to post their records and documents on the World Wide Web. But Marian Nakagawa, president of TI of Hawaii, Inc., in Honolulu, a 20-year, full-service title and escrow company, is among the few leaping ahead of this industry trend and feels it is critical to remaining a competitive player in the industry.

Four and a half million plant records dating back to 1986 are accessible to anyone via Fountainhead Information Systems’ Web site at www.titlesearch.com. TI is leveraging the wealth of information to new customers and should prove to be a valuable new profit center. TI believes this is the way to offset the costs of maintaining a title plant. Where speed and cost are becoming factors in today’s information economy, TI looked to Fountainhead’s Internet technology to address these issues.

The Web-based plant is updated on a daily basis. Data collected from the Bureau of Conveyances is locally processed/filtered and then sent over the Internet to Fountainhead, which adds the data to their relational database application for flexible and speedy accessibility. A fee schedule has been implemented that charges a per-search fee up to a fixed number of searches, with the fee per search rate dropping for larger volume searches. Allowing customers to pay by credit card will be added in the near term.

Currently, the addition of being able to order titles and documents on-line is being integrated. And, older records back to 1947 from microfilm and microfiche are impending. Nakagawa hopes that TI’s documents will be digitized and posted to the Web site in the future.

TI feels these technology efforts will not replace title companies. "What it does is provide information very quickly and inexpensively", says Nakagawa. "I think the underlying fear is that, once people are able to go in and get this information for themselves, it will eliminate the need for title companies. I do not believe it will in any way diminish the need for title company services. It is not like we are providing records that are not available to the public anyway," she added.

"What I visualize is that it will be extremely valuable to lenders, because they can go in and check a piece of property, see who the owner is, what mortgages are on the property, and do it very quickly," says Nakagawa. "It is not a threat; I think it will just speed up the whole process. There is no question; this is the future."

Nationwide Benefits Possible

We often fail to recognize that most of the magic of computing stems from the exponential benefits of interconnection. Some day all title plants will be on-line through the Internet. Title information sharing is key to the survival of the industry.

Since plant sharing is not new, we may describe The Virtual Title Plant as the ultimate joint plant if you will, with each title company earning revenue from the regional data they collected. This could lead the way for a consolidated resource to get title related information and for managers to embrace title plant data standards. Centralizing information creates a one-stop shop for the retention of title related information. All title companies can link up with each other thus, creating a stronger title industry.

Although the optimum will be placing title company plant records on the Web, where title agents and others can freely access as necessary, there will be benefits that more than justify the effort. Among these are reduced communication expense, lower operating cost, and increased revenues -- along with such intangibles as image, increased customer satisfaction, convenience, better service and lower prices. Access to the right information can replace all other factors of production -- reducing the required levels of labor, capital, energy, materials, space, etc., that are needed in title operations.

The reason that Internet commerce is being adopted so rapidly and touted by so many companies, is that it fundamentally changes the competitive landscape in an overwhelming number of industries, including the title business. It reduces costs, improves communications, and removes frictional barriers that once prohibited competitive flexibility. The Internet is changing the world of computing almost overnight and that also means the way title insurance is produced.

Title executives should anticipate moving away from the telephone and fax machine and toward the PC and commercial Internet-based technology services - - both for title information management and for the placing of title orders. This change has implications for the title community as security and speed issues are overcome. To unite and consolidate information is to safeguard the title preservation system.



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