The real estate closing process is under additional scrutiny after the Treasury's Financial Crimes Enforcement Network found 22,000 suspicious activity reports on title and escrow services filed over an 11-year period.
"The ratio of these reports filed on the industry (which are mandatory) to those filed by the industry (which are voluntary) was about 750:1," FinCen wrote in a July report.
Recognizing as far back as 2001 that warehouse lenders lack a comprehensive ability for evaluating the qualifications and integrity of closing professionals, attorney Andrew Liput developed Secure Settlements.
This week, he announced the official launch of the Parsippany, N.J.-based company and is now armed with a research staff that is busy analyzing data to contribute information to a comprehensive database of closing agents.
The database includes information on each agent's qualifications, background, identity and credentials.
The platform can aid financial firms in complying with the Consumer Financial Protection Bureau's recommendation that lenders evaluate third-party relationships to protect consumers at closing. Liput also is trying to set up the structure with insurance firms to create a type of closing insurance that would protect all parties to the transaction if something related to the closing falls apart.
Liput spoke to HousingWire about the evolution of the closing agent evaluation process. Years ago, he realized the closing process was not being vetted properly from a compliance standpoint. No one really paid attention to who was closing or what they were doing, he recalls.
Liput, sensing a new business model, reached out to warehouse lenders to see if they would be interested in utilizing a comprehensive database of information on closing agents if one were to become available.
He remembers no one wanted to bite at the time, but everyone liked the idea. In fact, banks kept telling him they would be interested and offered advice on what type of product they would like to see.
Using proprietary software, the company lets participating lenders research closing agents that have offered their information for inclusion in the system. In return, warehouse banks and lenders get a risk rating on participating agents to help them maintain quality control at the closing table.
Thus far, Secure Settlement has engaged First Tennessee Bank and Texas Capital as clients that desire this type of closing data.
Liput said the need for standardization and common best practices is the strategic way to raise the quality of the real estate closing process.
"A mortgage closing is typically the single largest transaction in someone’s life, so we want to minimize the potential for fraud and negligence during such transactions," Liput said. "We provide all parties involved in a mortgage transaction the data needed to make the best choice possible when selecting a closing professional — and we provide a uniform standard of care and set of best practices for the benefit of those who work in the closing industry."
The Secure Settlements list now includes 45,000 names of real estate closing professionals. The current data highlights high-risk professionals based on information made available through public records and law enforcement.
Liput told HousingWire that participating lenders will direct their third-party closing agents to the database to register their names and upload their credentials. This allows the lenders to assess the quality of the closing applicants based on the information available in the system.
The idea is to create a national pool of solid closing professionals, Liput said.