What a great time to be alive -- few of us are privileged to live in two different centuries! I guess December 31, 2000 is technically the magic date, but 1999-2000 just feels like the time to celebrate. A time to look both backward and forward, to embrace the best of our past and carry it with us into a future full of change.
I have observed the abstract and title business as conducted in the Mid-West, also known as the "Abstract Belt," for some sixty years. John and I had a father who began his career in the title business in 1932 and started his own business in 1944. My first job was "shagging" abstracts (he was an old baseball player, thus the metaphor). The year was 1938, and I was ten years old before the summer was over.
The early abstract companies in this part of the country were generally started by attorneys who discovered they enjoyed the title part of their practice and started specializing in that area. Their employees and others saw a good thing and entered the business. Many early companies were controlled business arrangements (yeah, I know ? strategic alliances, but I am an old-fashioned guy). In many smaller communities, an owner would have to wear a number of hats (lender, real estate agent, attorney, or surveyor) to make a go of it.
Large or small counties, these owners, both men and women, were generally key figures in their communities. Many had held elective office, such as school board, mayor, city council, and some were in the legislature at times. They were active in civic and church organizations. Their work in the courthouse brought them in contact with many elected officials. Many of these local politicians were next year’s state legislator, attorney general, or member of Congress. This broad base of political knowledge, familiarity, and influence is unique to the title industry.
In the early years, the product was an abstract of title. Abstracters were very proud of their product. Quality 100 percent ragpaper, expensive covers, and various methods of binding all went into the finished product. For years the Kansas Land Title Association (KLTA) conducted a contest at each convention for the best abstract. This was based on appearance and organization of content. The "Blue Ribbon" was a coveted prize and would be used in the company’s advertising for the ensuing year. I mentioned earlier that men and women were owners of abstract companies. I think a career in the title business has been open to women since the beginning. Witness KLTA’s first woman president, who served 1930-31. Her name was Pearl Jeffery, and she was a stem-winder. She later served for many years as secretary of the KLTA. I remember reading some of the minutes she took at one convention. Pearl did not like one of our members, and when this gentleman persisted in taking the floor time and time again in discussing a matter, Pearl quit recording his remarks and just wrote "the S.O.B. is on his feet again."
While many abstract companies represented title insurers prior to WWII, it was after the War that title insurance really started to enter the marketplace. In the Mid-West, we began seeing title insurance requested by government agencies and major companies. The larger agents had been telling the smaller abstracters that this was coming, and they should get ready. We had many panel discussions on the topic at state conventions. Of course, it was the secondary market that really brought title insurance into a dominant position and forced the conversion to title insurance across the state.
While the passing of the abstract may be viewed with a touch of nostalgia, a title policy is obviously better protection for buyers and lenders. It was a simpler time, and when we are in a bind over a good customer demanding coverage that does not meet underwriting guidelines, I stop and think life was much easier when you just showed the record in the abstract, sent it to an attorney, and let him solve any problems. Of course, I wouldn’t want to go back. Being able to work out problems using title insurance to get the deal closed is very satisfying and provides benefits to our customers that just were not possible in the old days.
The closing of transactions accomplishes much the same benefit. We finally get to see the people who are paying our charges. We get to show those folks what a title company is like and what it does. A closing is central to the real estate process, and in those areas where title companies close transactions, they are rapidly becoming the sole providers of that service. In those areas, a solid closing operation will be a key item in maintaining a place in the real estate process.
The Marketplace Today
It is obvious today that the local independent title agent is facing a radically changing marketplace. Automation is exploding. The Internet may become the highway to the placement of orders and delivery of our products. Those products are not just the old traditional commitment, policies and reports, but may expand into credit reporting, flood certification, appraisal, inspection, home warranty, and a myriad of services unimagined just a few years ago.
How fast will this occur? I think it will depend on the size of the market and perhaps its location. The bundling of services in our area encounters resistance because of long-standing relationships between users and providers. The loyalties thus generated will be hard to change. I know of closers working for a major underwriter who use the flood certification services of a competitor because they give better service. Service is still the name of the game! Closers want to get the deal closed. Whatever the service, if someone outside the organization can provide it faster, they have a shot at that business.
The agent is faced with large capital expenditures in order to keep up with the demands and needs of customers. The agent is also faced with the continuing consolidation of underwriters. Where will that end? No one knows, but I would not be surprised to see only three or four left when the dust settles. The agent is faced with nationalization of a part of his customer base. Decisions regarding the placement of title business will be made by someone at locations far removed from the local scene. Agents are faced with the possibility of creating partnerships with lenders and real estate agents in order to survive.
Where will all this end? No one knows. But I do have a real conviction that the old tenets have not been repealed: Customer service, quality of product, reasonable, not necessarily lowest price, personal relationships, and ethical conduct are still the keys to success in this business. Sure, some of the whiz-bang, smoke and mirrors currently making the rounds will have their day but in the final analysis a well-run title agency has a place in every market. It may not be quite the same as it has been during the last millennium, but the prospects of providing more and better products to customers should be exciting. I firmly believe there will be a niche in every market for an agent to occupy if willing to stay ahead of the curve and change with the times.
An Underwriter’s Perspective,
by Donald P. Kennedy, Chairman of the Board, First American Financial, ALTA® Past President
In the Beginning
The 20th Century was a fascinating period, and full of challenges, but the New Millennium promises more change in the first five to ten years than has occurred since the birth of the title business. Examining history can at times be both educational as well as entertaining, and I offer the following observations to you in search of at least one, and perhaps with a little luck, both of those.
My view is from an underwriter’s perspective, in that my family has been associated with title insurance business for over one hundred years, beginning in California when my grandfather acquired control of the Orange County Title Company before the turn of the century. My mother, who passed away at 97 years of age, admitted to me shortly before she died that she had heard more than enough "title talk," first from her father, then her brothers, then her son, and now her grandson. I’ll try to be brief with my "title talk."
Most of my experience has been West of the Mississippi, which, until the middle of the century, was sparsely populated, and considered somewhat behind the times, especially by the people East of the Hudson River.
In the early years of the 20th century, the world was much simpler. Customers were friends, and the banks and real estate companies were owned or run by local people. There were controlled business problems even in those days, when customers owned stock in the title companies, but the practice was common and nobody thought of complaining to the authorities.
Title service was not a problem, except for the customer. The companies examined the same documents at least three times. This resulted in a low loss ratio, but horrible service. Probably the best service on the West Coast took from three to four weeks for the initial report. Employees seldom walked rapidly, took it easy, worked hard, but were not particularly productive. Their real goal, generally speaking, was not to make an error, which could result in a loss to the company.
Competition in the early days consisted of a reasonable number of companies owned by local people, managed by local people, all of whom were friends socially, and most of whom played golf together. Personnel practices were plain common sense, although slightly illegal. Under no circumstances would employees from other companies be hired without making certain the person had terminated.
As you think about it, those were wonderful days; there were no sales forces as such, as everybody was considered a salesman for the company. The communications systems were simple: telephone and U.S. mail did the job. The product itself, in California, was generally in the form of a guarantee of some sort, which created a negligence liability with little emphasis placed on abstracts. East of the Mississippi, most of the title evidence took the form of abstracts. The first title insurance policies in California were issued in San Francisco in 1887, and the first certificate of title was issued in 1895 in Southern California. This led to a complaint by the insurance commissioner that these certificates of title were in fact insurance, which in turn led to the first legislation in California authorizing title insurance. Can you believe that the bureaucrats were snooping around that early in history?
Because of the manner in which the public records are indexed in most areas West of the Mississippi, it was necessary to build title plants, which merely re-indexed the public records to the properties involved rather than to the grantor and grantee. This led to a more efficiently produced product, but it did increase the expense substantially and required qualified, knowledgeable employees. Today, generally speaking, title plants are still a practical necessity, but title plants can be accessed with little capital by merely entering into a contract with your competitor or with others owning and operating title plants.
As time passed, the title industry remained relatively stable and survived World War I with little basic change. The great depression, however, was another matter and along with all other industries in the country, the title industry was practically destroyed, especially in the eastern states. Many companies went bankrupt and still more discontinued maintaining their title plants. Our company survived by creating a part-time work schedule and making certain that each family unit had at least one breadwinner. The company lost money during three of the Depression years, but the amounts were small. I do remember learning to hate creamed chip beef on toast.
Impact of World War II
As World War II broke out in Europe, our company, because of its deep title plant, was able to negotiate country, state, and federal contracts, but it was difficult during this period to find qualified people to do the work. As I write this about wars and depression, I can’t help recalling my daughter’s comments during the 60’s: "Your generation just hasn’t experienced the problems we have had to endure." As World War II ended, certain basic changes began to occur which had a profound effect on the title business. Population growth exploded as the baby boomers appeared, and for the first time the population became mobile as people flooded toward the South and West, "wherever the sun shines." These population shifts were a blessing to the title industry and they radically changed the customer base. For the first time customer’s, lenders, mortgage brokers, mortgage bankers, and real estate companies became nationwide and demanded service in all areas of the country.
In the mid-fifties the biggest company in the country, from a capital standpoint, was the Title Insurance and Trust Company in Los Angeles, which dominated the largest title insurance market in the world. Lawyers Title probably had the greatest geographic and agency coverage country-wide, while Chicago Title, the second largest company in the country, made the first large purchase in modern title industry history when they acquired Kansas City Title Insurance Company, which had representation throughout large areas of the country. I hasten to report that in the face of all this change, Orange County Title Company stayed in Orange County for a number of good reasons, none of which I can now remember.
It was clear to everyone, however, as the customers began to operate across county and state lines, and in some cases nationwide, that it was necessary to have the capability to service these customers. It was either service them in all areas or lose the customer entirely. Finally in the late fifties, our company, along with a number of other companies, decided to expand into adjacent counties and areas so that our customers could be properly serviced. This led to consolidation of the companies within the industry. Some companies, including many title insurance companies in California, were disturbed by the trend and decided that the stockholders would benefit more by the sale of their company. This led to the sale of a number of fine old title insurance companies in the San Francisco area, as well as San Diego and Orange County. Our company, on the other hand, decided to expand our base within our financial capabilities. As it turned out, the most difficult problem was to find good, capable people to service the new acquisitions. This consolidation continued throughout the country as family corporations decided to sell when their children showed no interest in the business. This consolidation is going on today as this is written. The largest merger in the history of the industry will probably be completed next year between Chicago Title and Fidelity Title Insurance Companies, which will create the largest title insurer in this country.
I think everyone will agree that the past ten years have been an exciting time in business and that the 21st century will be even more exciting. The technological revolution has enabled the industry to establish rapid and creative computer systems, which provide a real service to all title insurance customers. It is clear that in the near future the product will be created and delivered electronically. The opportunities are without limit, but are not without risk. Tot take advantage of computer-oriented progress requires a large capital infusion. This, in my view, however, does not mean that small companies cannot prosper in the title insurance industry. I think the future for agents is every bit as bright as is a future for the underwriters.
Having said all that, a basic principle is that without sales, all of the modern technology in the world will not help a company. Although it is on a different basis than the early 1900's, selling the product is still personal and eye-to-eye. The biggest difference is that today it is necessary to go eye-to-eye with a number of people plus a committee. Yesterday, it was one person. Service has to be at a level, but it is also essential that the sales personnel continue to do their job and continue to bring in the customers. It is a highly exciting time, and the New Millennium finds the title industry right on the bubble. In my opinion, the need for title information and hopefully title insurance, will exist long into the future. It will always be necessary, in some way, to convince the buyer or lender that the seller or borrower owns the real estate he is selling or encumbering. And now, enough of this "title talk."