An industry downturn is when leaders find out the real capabilities of the companies they have built. It’s easy to show a profit when sales are high, but when the tide rolls out the dangerous rocks appear.
In the title industry, like the rest of the home finance industry, the real dangers are high operating costs that come from inefficiency.
As the market contracts, experienced title agency executives can feel the shift and know exactly what it means. They’ve seen this before and know what it will take to succeed as the business changes around them.
In most cases, they will seek to automate more so they can accomplish more with fewer FTEs. But unlike downcycles of the past, there are new opportunities for streamlining operations and cutting costs through technology that didn’t exist before.
New opportunities for the title industry
Title company automation is a mature technology offering and it has been in existence for at least the last two industry downturns. What’s different is the new tools that are providing incremental automation within the title company’s existing systems.
These new tools and techniques are allowing title company executives to deal with lower volumes and maintain profitability. Efficiency is a step function and each step along the path to a more efficient process brings with it advantages, some that are unexpected.
For years now, executives seeking efficiency were steered to new automation. Companies invested millions in big platforms that promised to take the manual labor out of the process. No platform was completely successful in achieving this goal.
The industry is at the point now where title company work is managed through the use of one of a number of large platforms that together handle the bulk of all transactions in the industry. Despite this, the mortgage and title industries employ thousands of individuals who simply review, process and approve complex packages, which can consist of 500 or more pages of documents.
As a result, when volumes rise, title companies deal with capacity issues by hiring more people. When loan volumes fall, they reduce capacity by laying off staff. This has resulted in a workforce that never fully commits to the company because they know when the cycle turns, they’ll be gone.
Getting employees to work at a higher level is an ardent desire of most of the companies we have interacted with in this space. But as long as people are hired to fill automation gaps when volumes rise, they will surely be let go when volumes fall.
Title company executives need a better solution that will give them the efficiency lift they expect from automation by filling in the gaps left by their core transaction management platforms, but in a way that is easy and affordable to implement.
This is an even bigger ask for smaller companies who actually need this solution even more than their larger competitors. While larger firms have the time and resources to implement solutions and wait for the return on investment.
For smaller firms with fewer resources, end-of-month processing is a recurring crush that keeps them focused on the present and makes it more difficult to plan for future needs. They are rooted, by the ongoing needs of their companies, in the past.
Larger firms tend to be more comfortable with the longer time frames required to implement new technologies. They also have the internal IT resources to make sure those implementations go as smoothly as possible. Even so, executives running these businesses have no interest in long, expensive, difficult integrations.
And so we see title companies continuing to struggle with inefficient workflows that put too many people on the line, take too long to complete and cost the company too much money.
Avoiding software problems before investing
But we are not suggesting that title companies just throw off their legacy software investments and rush to market to buy something new. That can be a big mistake.
Even when the title executive finds a solution they like, they must steer clear of three critical errors that will quickly pull all of the benefits out of the new implementation, while it leaves in the costs.
These are the deal killers that should prevent a title company from moving forward.
Deal Killer 1: Rip and replace
When a major technology platform isn’t living up to the promises made during the implementation process, it can be tempting to throw it over in favor of a newer platform that makes better promises. While there are certainly times when a company must consider ripping out and replacing mission-critical software, the beginning of a downturn is not the best time.
Deal Killer 2: Difficult to configure
Working in a mature industry, we expect to see software that is mature and has been dialed in to provide maximum efficacy for users. Much of the software we see made available to title companies fits this description. Unfortunately, the needs of small- to medium-sized agencies are different. If the software requires the developer to configure it for use it opens the door to problems, including cost-overruns and long implementation times.
Deal Killer 3: No AI built in
Any product that doesn’t make the best use of the newest technologies should not be considered a solution for today’s challenges, to say nothing of the future hurdles title companies will be called upon to overcome. Artificial Intelligence is now reliable and customizable and should be part of every agency’s next technology investment.
Title companies cannot count on their primary technology vendors to provide a solution that will help them become more efficient during a downturn. What the industry needs is a collection of tools that can fill the gaps in the title company’s larger platforms that can be implemented quickly without months of analysis.
Fortunately, these tools are available today. Successful title companies will seek them out and implement them to gain the efficiencies they will need to survive in 2023.