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TitleSearchBlog.com

The future of title searching and abstracting
by Dave Pelligrinelli | 2010/10/05 |

The conspicuous headlines for the past few weeks have been about the mortgage assginment crisis. For industry professionals who have been paying attention, this is old news, since it has been talked about for years. As far back as 6 months ago you read here that the issue was "blowing up."

Professional title searchers should not be distracted by the noise in the mortgage industry. Over the next few years, the abstracting industry will change forever. Remember outsourcing and offshoring? It is back with a vengeance. First American is still increasing its offshore title processing capacity, and Fidelity announced today that it currently has 800 title searchers in India, with plans to increase that to 1800 next year. That is one of the largest groups of associated abstractors in the world, and it is not going anywhere.

TitleSearchBlog.com ::

In The Economic Times (India) article, Fidelity's senior vice president provided a preview to the direction of their future development. He said the company has now graduated from doing indexing and data entry to detailed property title searches and other value added transactions like title policy underwriting and engineering, database management, mortgage and tax services. The firm is developing software to process title insurance policies in India for the US market. The software development team alone will grow from 25 to 100 people within 6 months. Professional title abstractors should know that these offshore operations aren't just thin-search document fetchers anymore.

 Certainly keep an eye on developments in the mortgage assignment gap controversy, but be especially vigilant as to how all of these issues will affect the future of title abstracting. The upcoming 2010 NALTEA Conference in Dallas TX will address the critical issues to be faced by professional title abstractors in the coming years. Adapting to new business environments and developing business in non-traditional markets such as mineral rights searches, cell towers, commercial properties, and pipeline easements will be presented. Experts from within the country records system will offer their insight into the future of public records. Informative training and roundtable discussions are scheduled for NALTEA members in attendance to draw knowledge and resources from. Industry leaders from the vendor manager side of the business will advise attendees on building relationships with lenders and title companies.

With all that is occurring in the title industry, it is not an exaggeration to say that this might be the most important event the independent abstractor could attend.

Dave Pelligrinelli

TitleSearchBlog.com

 




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626 words | 2914 views | 4 comments | log in or register to post a comment


eye-opening stuff

I have said before that I have no philosophical objection to outsourcing, but I do object when we as taxpayers pay for the digitization of land records merely to facilitate the bulk sale of those records and the offshoring of work that could be done here in the U.S., especially when we have such high unemployment here and people are hurting.

I think the horse may already be out of the barn for many American abstractors.

If I were a state legislator, I'd be taking a hard look at revamping my state's land title laws and systems.  I have long argued that our county-by-county land record archives are clunky, costly, and as we see, tailor-made for the offshoring of title work.  I have admired more modern and efficient land title systems, such as the land title system in Australia for instance, from a distance.  In Australia, the government rather than private title insurance guarantees title and land records are not just digitized but digital.  Land records are kept in one unified system at the state level, rather than dozens of counties having their own system at the county level.

Would moving to such a system, if it occurred in every state, eventually eliminate the private title abstracting industry in America (and India)?  Yes it would.  But consider:  the transition to a new system would entail a great deal of work and would likely take years or even decades-- work that today's independent title abstractors can do.  The government, unlike private title underwriters, has the motive to keep any contracting work in America, in terms of reducing unemployment, bolstering the tax base and so forth.  Thereafter, the kind of skills that todays abstractors have would be needed,  just in government jobs-- or private sector, government contracted jobs if you prefer-- not pure private sector ones. 

I know that fiercely independent title insurers used to being their own boss are not going to like this proposal too much, and the inital reaction will be outrage at any suggestion that title work be kept for the private sector, but if the work is going to India anyway, what is really saved?

 

 
by Slade Smith | 2010/10/06 | log in or register to post a reply

2020

Slade, you have it right. It is ironic that just a few days ago I wrote this in an article:

"There is even the possibility that the government proposes a national land registration system such as that used in Canada and other countries. This would be a difficult project to execute in the U.S., however. A registry of just mortgages overseen by the government might be a reality at some point." - http://titlesearchblog.com/2010/10/04/what-the-mortgage-assignment-crisis-will-mean-for-the-future-of-real-estate/

Your horse-out-of-the-barn metaphor should not be overlooked by professional abstractors. Just because we don't want something to be true, doesn't mean it isn't. I see it as a certainty that land records become a government system, at the Federal or at least state level. Not just an office for recording, but a managed system of issuing and guaranteeing title.

The mortgage assignment gap controversy will be the issue which brings this to the attention of lawmakers, who are motivated to take action. It is a no brainer for them. It is legislation which appears to protect their constituents (from errors and fraud), while at the same time benefiting their corporate and industry supporters (backing of title and mortgage industry). There would be no significant opposition from any large scale groups. It might start with something like a government "involvement" with MERS.

At the same time, the huge scale of the project fits perfectly into stereotypical government motives of adding government jobs, annexing control over systems, and increasing budgets. For a Federal agency, what's not to like? A decade to completion sounds about right. A year or so to propose and build support for the idea. Another year or two to work out details and pass legislation. A year to develop vendors and systems to execute, and 5 more years to complete.

Present day abstractors shouldn't panic about the future. Plan and prepare yes, but not panic. There are plenty of opportunities during that time, and even beyond. Sure, some have to do with being part of setting this system up, but I can see even more lucrative examples of opportunity for work outside a hypothetical land registration system.

 
by Dave Pelligrinelli | 2010/10/06 | log in or register to post a reply

I'm surprised though, that I haven't seen this considered or discussed much

There was the ill-considered "public option for title insurance" proposal in New York that was a total non-starter, because for one thing they concentrated on the insurance aspect of title, when the real meat of the title industry is the assurance component.  Hence, they simply attempted on a public insurance fund on top of the current system, which really would not have solved anything.

Rather than waiting for politicians who don't really know what is needed in a new, 21st century title system, title professionals should be the ones thinking about how the system can be reformed and presenting their ideas.  I too think there is a lot of opportunity in this area, and the time to start presenting new ideas is when there is a lot of attention on title issues-- in other words, now.

Sitting back and wishing for the good old days doesn't seem like a good option for most independent American title searchers at this point.  I'd love it to be otherwise, since here at SOT we'd obviously benefit from a return to prosperity for the American title searching industry.  I'd like to say that the outcome of this current situation would be that the trend would be to go back to full title searches done at the courthouse by Americans, but I just don't see it.

 
by Slade Smith | 2010/10/06 | log in or register to post a reply

India Land Title Association

Wall Street's imperial and cavalier attitude is exactly that which creates these unintended consequences!

It's obvious the established title channels are not in the interest of Wall Street. MERS is just such an example (Freddie and Fannie are big stockholders). The tedium required to "perfect" a mortgage lien was an obstacle in their thinking. Their only concern is how quickly and easily they can book fees and turn collateral. Any impediment brings Congressional action sanctioning their activities. Wall Street and Washington are joined like the solid, deep intertwining roots of big oak trees.

Wall Street never considered the foreclosure process. They were accustomed to simplifications like "margin calls". A brokerage account could be liquidated in short order. Never did Wall Street anticipate the necessities of holding housing collateral, insuring it, paying taxes and utilities, mowing lawns, etc. Nor did they have have any inkling of the jurisdictional differences.

The title search and loan recordings came under attack way back in 2002 when huge resources were expended to find automated systems to facilitate the mortgage pool movements. Wall Street needs to book profits on the bets being undertaken and systems which are not conducive had to be discarded!!

I always understood the foreclosure process was "exacting" because of the devastation to those having their homes taken. It has to be a living-hell to face. But this process which was carefully designed and which was balanced to both sides of the mortgage collateral has the unintended consequence of hindering the swift seizure Wall Street demands. What other debt has "redemption periods" and "forebearance clauses"?

And with the mortgage market essentially a department of the US Treasury via the FED lenders need quick, efficient means to refinance and/or foreclose. Book fees and interest or foreclose and book fees and interest. It doesn't matter but whatever Wall Street deems as interference will get altered.

Listen to the differences.

On the Larry Kudlow show Diana Olick argues the foreclosure process is slowing down the housing recovery. This is Wall Street's side that they are bogged down in a big bureaucratic quagmire and borrowers' are sitting in homes rent-free. Larry Kudlow brings up the point that the securitization process is archaic:

http://www.cnbc.com/id/15840232?video=1607245632&play=1

Then listen to Rep. Alan Grayson's description:

http://www.youtube.com/watch?v=AqnHLDeedVg

The title searches behind this finance/refinance/foreclosure engine needs a more efficient method according to the loan/bet bookies. So we'll probably encounter compulsory membership in the ILTA -- INDIA LAND TITLE ASSOCIATION!! The ALTA will become a subsidiary!

We've bailed out Wall Street and now it faces collapse because it can't seize from the very ones who bailed it out the collateral to which Wall Street is entitled even if Wall Street was reckless and negligient!!

Here's how Dan Norcini explains the situation which I think hits the Bull's Eye:

Norcini continues:

“That collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected.  The banks cannot go and get it.

Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million.  So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.  

They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%.  The sales pitch would emphasize the fact that this CDO was backed by real collateral.  In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.  

Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear.  The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.  

Consequently, they are then barred from foreclosing on the property.  Because they can no longer foreclose on the properties, the CDO is now effectively worthless.

The hedge funds and the pension funds cannot now sell these CDO’s on the open market, so how are they going to recover their original investment?  Perhaps you may say that won’t be a problem because these instruments were insured.  The problem is now the credit default swap or the insurance policy that was purchased to protect against default assumes that the insurer has the financial wherewithal or resources to make good on the claim.

If there were only a small number of these problem CDO’s this would not be an issue.  But as the number of the foreclosures continue to skyrocket, and more and more banks are prohibited from seizing the collateral behind the property, the sheer magnitude of the number of claims presented to the insurer will overwhelm their balance sheet.

In effect what you have is an insurance company which doesn’t have enough money to pay off the claims.  Compounding the problem is the fact that the CDO’s and credit default swaps related to these claims form a mass network of interdependence.  This then ripples through the entire system and creates a domino effect which can cause the failure of entities creating the next financial crisis.

Ultimately the Federal Reserve will be asked to step in and buy up the now worthless CDO’s and put those on its balance sheet.  In order to do this the Federal Reserve will have to engage in massive quantitative easing, taking onto its balance sheet the worthless CDO’s in exchange for  newly issued treasuries.

This of course will have a horrific effect on the US Dollar"

 
by Wyatt Bell | 2010/10/06 | log in or register to post a reply
TitleSearchBlog.com

TitleSearchBlog.com is read by title professionals, related industries, and the general public. The posts are intended to inform the public about the need for professional title searching, and provide the title search industry with an insight to the publics point of view.

 

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