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First American Launches Blockchain System
press release, First American
   

First American Financial Corporation, a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today announced the launch of a shared blockchain system designed by First American to increase efficiency, reduce risk and improve the title production process. The system is intended to facilitate the exchange of prior title insurance policies between underwriters that contribute to the system. Old Republic Title Insurance Group, the nation’s third largest title insurance underwriter, has committed to be the first to participate. Each policy included in the blockchain system will be coded with a unique identifier by property, streamlining the search process and increasing the accuracy of searches for prior title insurance policies.

“First American has a long history of innovation and our development of this system demonstrates our ongoing commitment to applying state-of-the-art technologies that reduce risk and improve the real estate transaction process,” said Dennis J. Gilmore, CEO, First American Financial Corporation. “The potential exists to create a robust exchange of title insurance policy information that delivers greater transparency, efficiency and accountability to the industry and enhances the closing experience for consumers.”

The common practice of sharing policy information among title insurance underwriters can be beneficial to underwriters and consumers alike, as it both increases efficiency and reduces risk. This blockchain system melds that established practice with emerging technology to further increase efficiency and lower risk in the title production process.



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A few thoughts about this development:

1) If I read this correctly, First American and Old Republic are doing an end-around run against the work we do as title searchers in searching for all types of encumbrances.   If I read it correctly, the title insurance industry will completely rely on the searches already done throughout their territories.  What this might mean if the prior searches they rely on were done poorly or incompletely is that those errors will be cemented into the title chain. 

 2)  And as title insurance arose in order to obviate the risks of deficient searches by creating exceptions and exclusions to coverage, First American, Old Republic and any other title insurer claims all the income to be made from our work. 

 3)  This marks the velocity of change in the title search industry and how all of us in that industry will soon be out of a job.   There are only so many beautician/barber shop jobs open, only so many taxi driver jobs open, only so many people hankering after pizza. 

4)  The stated justification for this move is to "enhance the closing experience for consumers".  As this unfolds, it is yet another industry gainfully employing thousands and thousands of good people that is being destroyed and, as each industry falls to this kind of change, the question becomes how many consumers will be left who can afford such a thing as a closing experience?  If we all become barbers, taxi drivers, pizza workers of whatever kind, etc., what happens when there are only 6 people in the country/world who can afford to buy anything?

Then again, the CEO and executive suites of First American, Old Republic and all the other plutocrats who own everything will enjoy the swift, frictionless, fast-tracking of the closing process. 

The monopolization of the USA continues apace.

 

 

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OK, so, I have to rant, again. I spoke to an old friend (who is now in upper management in a title company that is not First American or Old Republic) about blockchain and the fact that title companies are hiring "no experience necessary" abstractors and not sending work to freelancers. As far as freelancers he said it's all about money. Pressure is being put on managers to increase profits.  A lot of companies have done this by laying off the longer/higher paid employees, combining jobs to create a new job title and then hiring younger lesser paid employees to do the job, which now includes doing the title search.  As far as claims due to inexperience or blockchain related issues, he said "That's what insurance is for.  We pay for it so why not use it". 

Don't underestimate the other guy's greed.  A movie quote, yes. But one that holds true today in any business. Some of us believe in doing a title search the way it should be done, meticulously. But the people who run the companies look for any and all ways to improve their profit. I mean come on, when you run a business, you’re looking to increase profit and decrease expenses. Well, they see blockchain as a way to run their company with less people. They think the money they gain by laying people off, hiring “newbies”, dropping freelancers and using blockchain is far greater than the money they’ll pay for E&O.

Do I think blockchain will affect use anytime soon? I think just the coming possibilities of blockchain has already started to chip away at our freelance jobs, and this announcement about First American and Old Republic is going to decrease freelance work even more. I also think, even if blockchain turns out to be a dud, freelance work will not increase, because as I’ve said, E&O and new young employees cost less then paying freelancers. Sure, we still get the complicated searches, but there’s only so much of that to go around. And on job websites now I’m seeing jobs for employees to perform “complicated searches, in our office”.

Is this the way everyone in the title industry runs their business? No.  But I think the industry as it relates to freelancers is downsizing, with profits being a determining factor. Do I like it? Nope. Do I have to face facts? Yup. Could I be completely wrong on all topics? Eh, maybe.

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First American is going to have to first convince the various legislatures that it is in their best interests to turn over their land records recording business to private industry.  This technology, not only puts abstractors out of work, it also gets rid of recording offices.  Recording offices with their recording fees and transfer taxes are a major source of revenue for local and state governments.  If you thought the war over MERS Assignments of Mortgages was something, wait until you see the chorus of elected officials when their revenue source is attacked.   If First American fails at getting rid of recording offices, then all block chain becomes is an expensive parallel electronic filing cabinet, which may or may not be a good substitute for the public record.  The courts would then have to chose which set of records to believe when the challenges to title begin to flood the court dockets.    

When blockchain was unveiled as a currency a few years ago, it was going to replace cash and credit cards, but now that the trading price of bitcoin is a fraction of what it was at that point, that sort of talk has been getting quieter.  I suspect blockchain for titles will as well.  Like bitcoin, it will become the currency  of choice for people hijacking computer systems, and general international electronic fraud. The consumer is not going to be too well protected once the first fraudulent title hits the Internet and becomes a permanent chain of title.   It is a shame to see a major international underwriter become involved in such an undertaking.  One would have thought they would have been more circumspect.  

 

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Blockchain has the potential to transform business and government.  It is not disruptive technology.  It is transformative technology just like TCP/IP laid the transformation of the internet in 1972 and it took 30 years, thereafter, for email to gain critical mass. 

"If bitcoin is like early e-mail, is blockchain decades from reaching its full potential? In our view the answer is a qualified yes. We can’t predict exactly how many years the transformation will take, but we can guess which kinds of applications will gain traction first and how blockchain’s broad acceptance will eventually come about."  Harvard Business Review, Jan. 2017.

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January 2017 $800–$1,150Increase  Bitcoin market since Harvard Business Review Quote
5-12 January 2017 $750–$920Decrease Price fell 30% in a week, reaching a multi-month low of $750.
2-3 March 2017 $1,290+ Increase Price broke above the November 2013 high of $1,242[158] and then traded above $1,290.[159]
April 2017 $1,210–$1,250Decrease  
May 2017 $2,000 Increase Price reached a new high, reaching US$1,402.03 on 1 May 2017,[160] and over US$1,800 on 11 May 2017.[161] On 20 May 2017, the price of one bitcoin passed US$2,000 for the first time.
May–June 2017 $2,000–$3,200+Increase Price reached an all-time high of $3,000 on 12 June and is oscillating around $2,500 since then. As of 6 August 2017, the price is $3,270.
August 2017 $4,400 Increase On 5 August 2017, the price of one BTC passed US$3,000 for the first time. On 12 August 2017, the price of one BTC passed US$4,000 for the first time. Two days later, the price of one BTC passed US$4,400 for the first time.
September 2017 $5,000Increase On 1 September 2017, bitcoin broke US$5,000 for the first time, topping out at US$5,013.91.[162]
12 September 2017 $2,900Decrease Price dipped harshly from China's bitcoin ICO and exchange crackdown (those following improper practices)
13 October 2017 $5,600Increase Price shot back up as the world moves on past the incident following China's crackdown
21 October 2017 $6,180 Increase Price hit another all-time high as the impending forks draw closer
6 November 2017 $7,300 Increase  
17-20 November 2017 $7,600-8,100 Increase Briefly topped at USD $8004.59/BTC at 01:14:11 UTC before retreating from highs. At 05:35 UTC on 20 November 2017 it stood at USD$7,988.23/BTC according to CoinDesk.[163] This surge in bitcoin may be related to developments in the 2017 Zimbabwean coup d'état. The market reaction in one bitcoin exchange is alarming as 1 BTC topped nearly US$13,500, just shy of 2 times the value of the International market.[164][165]
15 December 2017 $17,900 Increase Bitcoin price reached $17,900[166]
17 December 2017 $19,783.06 Increase Bitcoin price rose 5% in 24 hours, with its value being up 1,824% since 1 January 2017, to reach a new all time high.[167]
22 December 2017 $13,800 Decrease Bitcoin price loses one third of its value in 24 hours, dropping below $14,000.[168]
5 February 2018 $6,200 Decrease Bitcoin's price drops 50 percent in 16 days, falling below $7,000.[169]
31 October 2018 $6,300 Steady On the 10 year anniversary of Bitcoin, price holds steady above $6,000 during a period of historically low volatility.[170][171]
14 November 2018 22:00 UTC $5,580-5,590 Decrease Falling below $6000 (source: Coindesk [172])
24 November 2018 16:30 UTC $3,778 Decrease Falling below $4,000 (source: Itsblockchain.com [173])

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Bitcoin is an application built on top of blockchain technology. Blockchain, therefore, is much more important than Bitcoin or any other cryptographic currency idea.  The insurance industry is interested in blockchain for other potential applications.  Applications that will provided consensus, provenance, immutability and finality.  Those are the benefits blockchain delivers.  New distributed applications (dapps) built on top of blockchain or utlizing the technology is what Harvard is excited about.

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Blockchain has delivered it so well, and non-disruptive for Bitcoin.  I guess if you invested a lot of bitcoin in Blockchain, you would certainly want it to expand to other industries.  

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Insurance companies, like other financial institutions, are not immune to the kind of blue-sky thinking that led to the financial meltdown of 2007.  Use as much balloon juice as you wish but blockchain technology will never be as secure as a brick-and-mortar registry with locks and keys.

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i love people who make stupid pronouncements.  

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Simply by virtue of the enormous employment loss which will result in recessionary pressures within the respective communities, it most definitely is disruptive.  Whole industries disappear:  searchers, real estate lawyers' business is narrowed to land disputes so you better hope the records are error-free.

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