While risk is inherent in all stages of origination, the closing process has a distinctive consideration as lenders and title agents collaborate on sealing the deal. With so many moving parts, risk mitigation is key to ensuring a successful closing.
“The big challenge that lender compliance and ops teams face is they need to manage a network with thousands of closing agents,” said Brian Ostrowiak, senior vice president at Closepin. “Lenders are constantly working with new title agents through their purchase transactions.”
Headquartered in Plymouth Meeting, Pa., Closepin is a cloud-based network that helps closing agents and lenders work together to reduce risk. The Closepin platform helps lenders verify closing agents by validating their licensing, business insurance and good standing.
Closepin aims to make this process simpler for everyone involved. Title and settlement agents who join the platform create a free profile and upload their commonly needed documentation for risk mitigation by lenders, including copies of their insurance, fidelity and surety bonds, licensing and any type of vendor agreements and wiring instructions.
“We are the network through which a lender can manage all their settlement agents and the documentation they need to keep track of,” Ostrowiak said.
With the Closepin platform, lenders can reduce closing-related risk by determining whether the agents are properly insured against the various types of fraud or mishaps that can occur in the closing process.
“We’ve taken a simple approach to provide a reduction in risk in addition to the CPL, which for many lenders is only real line of defense against fraud,” Ostrowiak said. “Our goal for lenders is to do a lot of the heavy lifting and take the headaches away from them on the operational side.”
One of those headaches is to track the constantly changing settlement agent data and documents to ensure accuracy – for example, errors & omissions policies.
As policies expire annually, it becomes difficult for lenders to internally manage the tracking, storage and communication with agents required to keep those policies updated for thousands of companies.
“With licensing and policies, there’s always different expiration dates,” Ostrowiak said. “We set up the agents with automated reminders as those policies are about to expire. The agent is able to self-serve, upload and update their policies as those expirations occur. This allows the agent to manage their own profile and gain the added benefit of centralizing the information for the different lenders they work with saving a repetitive task.
Closepin also provides clarity for warehouse lenders on the agents they’re working with. Being more removed from the transaction in scenarios such as “wet-funding” creates additional risk when third-party agents are involved for purchase transactions.
“We’re taking those individualized requirements of the lender and constantly checking against the agent database to ensure that an agent meets their standards,” Ostrowiak said.
“Many lenders struggle to keep their agent information updated and ensure that documents have not expired. This often leads to less than ideal practice of relying only on the CPL, or checking their warehouse lender’s approved lists in the hopes that thorough vetting is being done by those parties.”
Closepin also aims to greatly reduce the cost of compliance by adopting a unique “co-op model” with their network, he said.
“Most lenders have similar requirements of documentation, and our network enables us to leverage this to keep information updated,” Ostrowiak said. “Instead of requiring the same docs to be submitted and verified over and over again, we provide lenders access to the data in our network. Agents added or verified for other lenders may give us everything we need to compare against your own requirements. This translates into a huge cost savings.”
Recently, Closepin has seen increased activity surrounding the use of remote online notarization (RON) in the closing process, particularly as the COVID-19 pandemic’s social distancing requirements have driven a need to reduce face-to-face interactions.
“One of the biggest requests that we’ve gotten from our lender partners is to identify agents who are RON capable,” Ostrowiak said. “One of the things that we’ve done for many lenders is adding a designation section in the profiles where an agent can designate their different notarizing capabilities. We have a few different definitions in there, such as RON or hybrid or fully digital, and the agent can self-designate what they’re capable of doing and what closing platforms they’re using.”
Closepin currently has thousands of agents in its network and Ostrowiak expects that to expand in the near future. He is also anticipating the growth of the lender presence on the platform as purchase volume grows in a still-strong housing market – along with the risks inherent to the sector.
“Lenders have become more aware of the risks that are out there,” he said. “Wire fraud, for example, is a huge growing problem for the industry. That’s why lenders are going to be more motivated to know more about their third parties, have accurate documents and keep those documents up to date as a part of their auditing process. That’s where we can come in, because we provide the records of those documents and ensure that they are kept up to date.”