While it was expected that 2022 will be a slower year, the alacrity at which the market cooled was unexpected. Several title firms experienced a fall in volumes as demand from homebuyers fell. In addition to reduced purchase volumes, rising mortgage rates also meant a drop in refinance. Experts believe challenges in the title industry will continue in 2023.
While the industry has faced its share of market slowdown, one major challenge in the title industry in 2023 is a modern one. Considering that consumers demand more of digital home-buying process, a lot of the processes have moved online. This has made transactions more vulnerable for issues like hacking, ransomware attacks and wire fraud.
As per the FBI’s Congressional report on business email compromise (BEC), in 2021, the Internet Crime Complaint Center (IC3) received BEC-related complaints. The claimed losses exceeded $2.4 billion, much higher than the $360 million in claimed losses recorded in 2016.
In April, Fannie Mae announced that it would be accepting written opinion letters from an attorney in lieu of a title insurance policy in limited circumstances. As this alternative becomes more popular, title experts believe it could lead to misinformation being released, especially by those that see an alternative product as a competitive threat.
Among the many challenges in the title industry in 2023, one will be dealing with an aging workforce. Attracting and retaining young, fresh talent has been a top priority for the title industry for long. The industry today is data-driven industry and it is necessary that agents understand data which means they need to be digitally-savvy. This likely also means more influx of younger talent will be required.
To battle the many challenges in the title industry, title firms are exploring revenue from different sources. This includes other mortgage products such as home equity lines of credit or HELOCs. Last spring it was observed that a lot of lenders switched to HELOCs which meant the majority of volume for title agents too are releated to a HELOC product. While HELOCs were always there, they are now becoming more relevant.
Title companies that are diversifying are likely to sustain the challenges in the title industry. These companies have already been around for the long haul. They are finding it easier to handle the challenges as they decide to diversify. The last year has taught most title companies that you cannot dedicate all of your business to one particular market and you will need to diversify.
To deal with the issue of wire fraud, education and prevention is paramount. Title companies need to be alert because consumers can’t be expected to educate themselves on this problem. The aim should be to ensure everyone is aware of the risks.
Another focus should be clearly communicating when and how the closing will be conducted. Attention should be paid to things like two-factor authentication to ensure funds are being sent to the right place to prevent people from becoming victims of wire fraud.
As title companies invest more in robust technology, they will be able to reduce costs. Over the last 10 years, there have been significant investments around automation and using machine learning and AI in various title products. Though these technologies require investment, over time, they bring higher efficiency and reduce prices.
Attracting younger talent is another way of dealing with the challenges in the title industry. Big or small title firms across the country have started offering internship programs, which has led to the cultivation and retention of new, younger talent.
Another effective way to face challenges in the title industry is to partner with third party companies who can offer outsourcing services. By associating with these partners, title agents get access to expert teams for services like tax report, title attorney services, robust technology ats well as good turnaround times. Besides, title agents’ staff can focus on their core tasks to develop new business while letting the partners do the heavy lifting.
At PrivoCorp, we offer end-to-end Title support services to Title Agents, Underwriters, Attorneys, Lenders and Vendor management companies. We can help companies order title search reports, tax reports, analyze the financial implications of the loan, offer title attorney services, arrange for the transfer of property rights and even acquire mortgage policies if needed, all within a quick turnaround time and at affordable cost.
