How Can We Improve Our Overall Title and Settlement Process?
Many of our lender customers express frustration with using so many different title & closing vendors across their lending footprint. With multistate lending operations, title vendors sometimes number in the hundreds! This results in as many different levels of quality, fee structures, points of contact, and methods of communication as there are vendors. Management of this process, as well as required third party compliance, becomes impossible. The byproduct is an extreme inefficiency that does not exist in other lender processes. The end result too often is borrower dissatisfaction and continuing tolerance violations from last minute fee changes.
A game-changing strategy to improve these results is to reduce the number of title & closing vendors to a few “preferred/managed providers” who may service all or a chunk of the lending footprint. This is an operational change that started with national and large regional lenders. However, this approach is now being implemented by lenders of all sizes across the country.
You may say, “This looks good on paper, but what about the local relationships between my LO’s and local Realtors?” At CSS, we have addressed this issue with our lender customers by implementing this strategy with refinance loans first. As refinances aren’t Realtor driven, many of the challenges presented by purchase transactions are avoided. We call this process “Centralized Title” as all refinance orders funnel through the same centralized title and closing process.
Benefits of Centralized Title:
Our lender customers who have implemented this approach have provided the following feedback:
- Improved results hinge on establishing formal agreements with each Preferred Provider to achieve the best possible service for borrowers while mitigating risk to the lender.
- The Bank’s due diligence process when onboarding a Preferred Provider of title and settlement services allows all of the Bank’s risk partners to gauge compliance, operational, privacy, and risks before execution of the MSA and SOW and full onboarding. As part of the Bank’s ongoing vendor management process, we meet with each Preferred Provider once monthly to discuss the prior month’s business, discuss performance metrics (SLAs), and to address adjustments that need to be made on either side to ensure a smooth process for Bank clients.
- Operationally, the Bank benefits from the managed engagements in many ways. In executing a refinance transaction with a non-preferred provider, we have learned through experience that those “one off” refinance transactions can be problematic from a trailing documentation standpoint, which can lead to issues as it pertains to delivery to the GSEs. Organizations not held accountable to SLAs as they apply to return of documentation, in our experience, are much less likely to act with a sense of urgency.
- From a Compliance perspective, we look to mitigate risk that can be associated with a “referral” scenario. We utilize documentation that is only intended for the applicants to complete (generally electronically) if he/she wishes to choose an off the preferred menu of title and settlement service providers. We take this risk very seriously in order to protect the reputation of both the first mortgage LOB and Bank alike from the RESPA and UDAAP perspective.
- Lastly, the Bank wants to ensure that its clients receive excellent service at a reasonable price. Only Preferred/Managed Providers are loaded as “white list” vendors that automatically populate when title and settlement fee scenarios are pulled our fee calculator. We generally try to engage with vendors that are able to offer centralized refinance rates, which is of benefit to the client from a cost perspective. For each application, our MLOs access our fee calculator to compare and choose those Preferred Providers that are available to service the refinance transaction. We have configured SmartFees to return the lowest price option in all cases. While an MLO can explore other reasonable options, he/she is trained to match the client with the best value available.
Keys to Successfully Implementing Centralized Title:
- Select 2 Preferred Providers up to no more than 4 or 5 if national lending footprint.
- Put formal due diligence and performance agreements in place with all Preferred Providers
- Discuss and implement the use of the Preferred Providers with LO’s. Unless borrower expresses a preference otherwise, LO’s must choose one of Preferred Providers.
- Define and implement a centralized process wherein all new refinance loans are funneled through one standard ordering process that contacts and places the title and closing order with the Preferred Provider chosen for that loan transaction.
- Measure performance results and conduct monthly operational reviews with each Preferred Provider.