Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with John Hillman, CEO of Palm Harbor, Florida-based Nationwide Title Clearing to talk about the changes his part of the industry has experienced, and why he feels optimistic about 2015.
Q: How has the role of the service provider changed in today’s market?
A: Quite significantly. Now that the federal regulators have made it clear that third-party service provider compliance is the responsibility of the lender, we find that it is even more imperative that compliance, standards and oversight be top priorities. They certainly are for our clients.
This has led to a significant increase in testing and auditing. Clients audit us, we audit our own vendors, and they audit theirs. In this environment, our clients are checking that all vendors are audited, down to the last vendor used, even three or four levels down. The role of service provider is now a role that must approximate very closely the same standards applied in the client shop.
At the same time, we’ve seen our own role in the mortgage process go from little more than an afterthought for the lender to a highly compliance-driven necessity that absolutely impacts their ability to control risk. That has driven price, as a contractual consideration, much further down the chain.
Q: What differentiates NTC from other service providers in the document production space?
A: Over the many years that we have been in this business, we have addressed and resolved every possible issue related to mortgage loan document production. Our experience is unmatched. There are a surprising number of issues that can arise in this area and the industry now realizes that, which makes our experience valuable.
At the same time, we’re very careful to provide a level of service that exactly meets our clients needs. Clients can’t afford a shoddy product, but neither can they afford to pay for a level of detail or depth of research or service that they don’t actually need.
This is a key aspect of our value proposition and we want to make this very clear: lenders and servicers need to work with a vendor who can deliver in accordance with current and correct standards for a given service. It takes experience to know where that line is in our industry, especially in an environment where regulatory and investor requirements are changing. Missing that target is something we, internally, do not allow to happen.
Q: What are your predictions for the future of this industry?
A: The mid-term elections are over now and we once again have a Republican majority in Congress, which should begin the pendulum swinging back away from stricter industry regulation, but that’s not a foregone conclusion. Even if we do see our elected officials backing away from some of the Dodd-Frank machinery, it would take years to unwind.
We don’t see a return to pre-crash levels of government oversight anytime soon and so do not expect to change our compliance-focused approach to the business. We hope to see some compromise reached with regard to the correct standards being applied to all segments of the industry, however, but expect our industry to remain under the regulator’s careful watch for some time.
We’d also like to see some incentives offered to consumers in order to rebuild trust and desire for homeownership. Getting American consumers back to the closing table is the very best thing we can do for our business and the economy in general.
Over the very long term, we predict the large bank gobble-effect will come to an end, re-establishing the playing field for all participants. Once regulators reach down to the middle and lower tier mortgage banks and servicers and standardize the rules they must play by, we expect to see significant growth in these tiers.
Overall, I’d say we have a cautiously optimistic outlook for the future.
Q: Your own firm has seen some significant growth, featured recently in our own HW Fast50. What has led to NTC’s growth?
A: Good fortune and a great team of people who had the courage and foresight to be part of the change, instead of part of the resistance. It allowed us to create products and services that helped our clients bring clarity to the chaos.
But is also has to do with reaching a point in our own evolution as a company where we had to make a choice, either to drive our own future or be driven by the powerful winds of very rapid change. It can be scary raising your sails in a storm, but ultimately its far more rewarding to drive your own change. Our people realize that and I’m very proud of what we’ve accomplished thus far.
Q: Your company recently hit a milestone, with nearly 70% of the documents you touch being electronically recorded. How has e-recording affected compliance?
A: Well, it’s not about the money, at least not initially. Neither NTC, nor our clients actually save very much money by e-recording. But when you take into account the downstream effects of failing to record documents timely, then the savings become glaringly apparent.
E-recording affects compliance directly. What would normally be a 30- to 90-day recording process is cut down to single-digit days, in some cases less than 24 hours. Dealing with such long timelines could force a company like ours to struggle to maintain a 95% compliance record. That won’t work. Being at the forefront of e-recording initiatives is one major reason we are regularly attaining above 99.5% statutory and service-level compliance in document production..
But beyond that, e-recording makes retention and tracking of files exponentially easier and safer. While mistakes will still occasionally occur, taking the paper out of the equation is a great leap forward and very worthwhile. We will continue to do all we can to help our industry continue to focus on the e-recording trend and enjoying its benefits.