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Going Global The U.S. Title Industry’s Next Big Frontier

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November/December 1998 - Volume 77, Number 6

by Michael Hick

In Australia, a popular map shows the world with the South Pole at the top.

It has the caption, "Now look who’s Down-Under"! Meanwhile, astronauts looking at planet Earth from outer space do not see the North Pole as being at the top -- in fact there is no top or bottom to anything from out there.

In this age of extraordinary change, whether you’re on the top of the world or the bottom, it’s time to step back and rethink the many preconceived ideas that come out of culture, background, and education. One of the major sea changes of our time is that "The World has gone Global." This glaring oxymoron carries a description of one of the most dramatic revolutions mankind has ever experienced. More than the invention of the wheel, of printing, or even the entire industrial revolution, the "global" revolution has started to change the way we think, live, and do business. Even more important is the speed with which these changes are taking place. The world is nothing like it was, even ten years ago, and the speed with which it is changing is simply incredible.

There are numerous reasons for this global revolution. The political ones are of course the toppling of the Berlin Wall and breakdown of central European and USSR communist regimes, the revival of free enterprise in China, and the acceptance of the free market system as an alternative to planned economies in many countries. In terms of the social reasons, large numbers of educated people are leaving their country and traveling the world to satisfy their curiosity and round out their education, an experience previously only available to the rich and leisured classes. This experience particularly applies to many young people who are now entering the workforce as experienced world travelers with a global network of friends. Then there is the most obvious reason, that of technology, which is the real engine of "globalization." Suddenly, we have all become connected. One way to think of this change is to consider where you were with your electronic understanding and connection only five years ago. That recollection will help you project where the world will be in five years time. The extraordinary facility of the web for business, connecting people as well as ideas, and its impact on political and social systems throughout the world can only be imagined.

America’s Destiny

The United States leads the charge of change. The rest of the world’s nations take their cue from America, whose culture, attitudes, systems, and beliefs are taking hold in the most surprising places. From Tashkent to Tanzania, American influence is present in one form or other. "Even in the most remote places of the world", they say, "you can find a Coke." There is, as we know, a reaction against this tide. Many people are deeply concerned about the "Americanization" of their culture and are committed to its prevention by almost any means. This is a fact of the developing story of mankind, and it has happened before to many cultures. It is America’s destiny to deliver some of its best attributes to a needy world. One of these is the American method of real estate conveyance -- the title industry and it’s associated services.

The wild rush for land and the inventive entrepreneurial spirit of the 19th century presented special challenges to the security of real estate ownership. Problems produce progress, and the title insurance system was conceived. In a period of not much more than four decades the title insurance process was able to cope with the vast expansion of this country, and in more recent times has proven that it is flexible enough to deal with some of the most complex real estate transfers known to man. In short, the American title insurance process is arguably the most efficient and cost-effective in the world.

This proven benefit to the people of the United States needs to be exported to the rest of the world. It’s a job that will keep the industry busy for the next one hundred years and beyond, and one which will bring incalculable benefits to the human race; however, the task is massive, difficult, and presents huge challenges. But not more than those faced by our predecessors when they looked across this untamed continent over a century ago.

Crushing competition at home

Sometimes it seems that here in the United States there is little else to do day after day but try to beat the competition at their own game. Fighting over the same business, trying to find a new edge to customer service, cutting costs here and there, and hassling with regulatory issues. It is almost as if the Title business has outgrown it’s market; "all dressed up and nowhere to go"!

This has happened before in other countries. In the second half of the 19th century, Britain experienced the same thing. It’s industry had grown to the point where the domestic market alone could no longer satisfy the output, so there was only one way to go -- overseas. In Japan in the 1970’s the same thing occurred. Its vibrant productivity was too large for internal consumption, so it had to export, then manufacture abroad.

The U.S. title industry, however, does not have to look far for it’s foreign business. Its customers are already over there. If an effort is not made soon by the industry to offer title services to it’s customers overseas assets, then maybe the customer will get used to the idea of doing without these services.

American business started to go global after WWII. Major corporations like Ford, General Motors, and the oil companies were quick to see the opportunities before then, but the big push by Fortune 500 companies came in the 1950’s and 60’s. Since then, most of this category of industrial and commercial giants proceeded to establish assets abroad. Then the great hotel groups followed to provide lodging for the traveling American executive, and fast food franchises sprang up like mushrooms in the night to help our weary traveler feel at home. They were soon followed by insurance agents, accountants, consultants, and law firms, who were all anxious to serve the needs of their customers from back home.

While the first overseas expansion was mainly confined to major corporations, in this new revolution it is the small- to medium-sized companies who are now going overseas, and it should be the independent title agent who leads the charge to get this global business. The agent who recognizes this will make contact with the end buyer, the original insured, convince them of the value of their services, and then follow them along their international trade routes, wherever they may go. It is the bread and butter insureds of the title industry who are going global.

To put things into perspective as well as remind us how widespread this phenomenon really should be, Tom Peters says that any firm doing over $2 million in revenue should be in the global marketplace, and every firm over $25 million "should be alarmed if it is not doing 25 percent of its business overseas." He wrote that in 1987.

It’s different overseas

Outside the boundaries of the United States, the land registry system is mainly the responsibility of the central government, and the process of conveyancing is in the hands of lawyers. The systems and the protocol are inevitably locked in tradition, and the only legal recourse open to a property owner is against his lawyer. Lenders depend on the central registry for confirmation of title and sue the lawyers in the event of negligence in the conveyancing procedure, very few title claims ever seem to develop against the land registry. It is, of course, like suing the government. In many countries such as The United Kingdom, Canada, Australia, and New Zealand the Land Registry provides Title Certificates supported by the full faith and credit of the Government. This method is known as the Torrens System, named in 1858 after a South Australia public official Robert Torrens. Torrens explained that "an act of registration alone created title and that title was indefeasible".

The Torrens System has its roots in the confused conditions of colonial settlement. The question is "Can it handle the flexible and litigious conditions of modern business and the rapidly changing world of lenders ?"

The English system is a case in point. The United Kingdom Land Registry was established in it’s present form over 100 years ago. It works within law drafted around the Torrens System. Solicitors have access to the registry on-line if they have the facility (very few do) and they provide contract preparation and search services to their client, the buyer. This same solicitor also acts for the lender and the seller also appoints their own solicitor to deal with contractual issues.

This age-old procedure worked without customer complaint for many decades, except for the subdued moaning about the high costs of solicitors, until the property reversals of fortune of the mid-1980’s revealed some serious conflicts. Lenders started to sue the solicitors who acted for them in transactions that turned into foreclosure on the grounds of negligent review of the initial proposal -- in other words, getting the lender into bad loans. They also sued valuers (appraisers) for over-valuation of property against which loans were made.

The result of all this litigation, which was unusual for England, was that the Solicitors Indemnity Fund, which is the only carrier an English solicitor can use for primary professional liability, ran into deficit on their claims account to the tune of almost 4 million pounds and growing. British lenders have become increasingly concerned about depending on litigation recourse and are now considering how some form of title insurance can give them better protection. Likewise solicitors are becoming increasingly concerned about their exposure and are now actively buying "Defective Title Insurance" on those risks which present special problems which, in England, can be obtuse and complex often wrapped up in long forgotten historic rights and privileges.

The UK is a perfect example where the understanding of the principles of Title Insurance coupled with support technology, can best be provided by the US Title industry. Of course there has to be considerable modification, localization and improvisation, but the understanding of primary lenders needs and the concept of one-stop property transfer is at the heart of the American title experience, which is an intellectual property in serious need of export.

Innovative opportunities

Not only have many of your customers gone global, but the secondary mortgage market is springing up in every international nook and cranny. This entrepreneurial and innovative activity is largely American owned and managed, and financed by global funds. Here is a splendid opportunity for enterprising title professionals to sell the security and services of title insurance to a market that already understands its values.

The Second Annual Investors Summit on Global Asset Securitization was held June 24 - June 27, 1998 in Barcelona, Spain. It attracted over 700 delegates from worldwide banking, professional accounting, secondary lending, international law, insurance and reinsurance, property lenders, and building societies. There was nobody there from the U.S. title industry. Why? Securitization is an American invention. Its concepts are spreading around the world like wildfire. Title insurance can be part of the securitization system, but the industry needs to be sitting at the table when the first international deals are being consummated. Here is a massive new global opportunity, which rightly belongs in part to the U.S. title business.

After the fall of Communism, there was a gigantic task to be undertaken in the work of land reform and conveyance of real property. In a back to basics effort to establish systems and laws, the countries of Eastern Europe, helped by a U.S. title underwriter, are making strides to assemble information and put in computer systems. In Hungary one underwriter, working with the government sponsored enterprise fund, has installed a system to register government land and to develop tax information from tax maps. An intriguing program for farm management springs from the software of a U.S. title company. Data processing of farm fertility assisted by satellite tracking and mapping provides valuable information to bankers considering loans for farmers. In Slovakia, title industry-developed software is building the country’s ad valorum taxation systems.

The "New Democracies" of the world have only the United States to look to for guidance, for advice, and for practical help as they move uncertainly into the wilderness of the free economy. The very basis of a free economy is the private ownership of land. The title industry is working with the U.S. Agency for International Development in some of the new republics of Eastern Europe by helping them to establish land registry systems. As the old collective farms are sold for token sums to the families who have farmed them for generations, title professionals from America are issuing certificates of ownership. A look at a photograph in the Spring 1997 edition of Stewart Times, a publication of Stewart Title Guaranty Company, shows the proud, smiling faces of the new owners of Nisporeni Farm, Moldova, clutching their documents on closing day. To be able to participate in and even create these momentous occasions makes the effort worth while, because when it all comes down to it, it is not just for money, growth, or the bottom line. It is for the sure knowledge that the system of land title transfer, as invented and developed by the U.S., is worth exporting to the world, and is a gift of profound benefit as well as a wealth of opportunity.


Michael Hick is Director of The Success Resource Center, Houston, assisting the title industry to achieve it’s growth potential and prepare for future opportunities. A professional speaker and consultant, he has spoken at numerous state association conventions, ALTA® Executive meetings, and many underwriter management seminars. He has worked as a consultant overseas on behalf of title underwriters expanding their global operations. He can be contacted at (713) 465-9697. Email address is global@MichaelHick.com.



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