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Closing

The drive to digital in the title industry

Title industry embraces technology from production through closing

The drive to digital

The title industry has used artificial intelligence and automation in various parts of the process for many years. Title production software companies have made great strides in automation that eliminates re-keying and the transferring of data from one application to another.

More and more companies — including underwriters, third-party vendors, and business process outsourcers — have started offering title production automation and using technology to improve the digitization of records. Additionally, companies are using automated reconciliation to complete this task in a timelier manner and address issues more effectively. Finally, title and escrow companies have automated communications such as email, reminders, confirmations, and notifications into title production systems.

Aside from title production, the title and settlement services industry has implemented technology and platforms that track the progress of the transaction, provide secure communication, and offer digital, intelligent closing experiences.

Automated title search engines

In the past, a title company wanting to adopt automation needed a custom software build, had to change their workflows around a new process, and provide training for their examiners to use a new interface and procedures. Tools now exist that connect data sources, enabling title reports to be quickly delivered. To help improve the title search process, many companies are using artificial intelligence and machine learning combined with underwriting guidelines — to search traditional and non-traditional property data sources.

This approach augments the traditional search and exam process and can be combined with a traditional title production platform to reduce exam time and increase accuracy. In certain types of transactions, this can expedite loan underwriting and result in faster closings.

Digital title review process

The title review process is another area where title companies are using technology to reduce the time to close. Using a digitally enhanced title review process, companies can provide title reports that give borrowers clear curative actions and turn times. This workflow streamlines curative efforts. This type of technology can route title documents into categories based on a grading system. Outstanding title issues that need to be cleared are identified so that the title company can explain to the customer how those items will be cured.

Intelligent document routing

On occasion, lack of communication or miscommunication with lenders can pose challenges, or a lien release may simply get lost in the significant paperwork facing staff. There are now intelligent document routing platforms that improve accuracy for automatically routing mortgage payoffs. AI solutions can extract the necessary information in documents, read the content and route the documents to the correct file without manual interaction. This AI functionality can provide greater accuracy and give companies the ability to effectively handle more transactional volume without additional personnel costs.

Protecting against wire transfer fraud

On the fraud front, the Internet Crime Complaint Center received 467,361 complaints in 2019 — an average of nearly 1,300 per day — and recorded more than $3.5 billion in total losses from business email compromise (BEC) schemes. Additionally, COVID-19 has created new global cybersecurity threats, with the number of registered fraudulent emails and text messages spiking by nearly 700% in the early days of the pandemic. These BEC scams often lead to wire transfer fraud. According to the FBI, there were 11,677 victims in 2019 with $221 million in losses due to wire transfer fraud.

In March, the FBI is expected to release wire transfer fraud data for 2020. Title and settlement services companies have taken many steps to combat this problem, such as using secure online portals and real-time identity and account verification platforms for protecting money. In 2019, the American Land Title Association formed the Coalition to Stop Wire Fraud and has run several digital advertising campaigns to raise awareness with consumers. ALTA also has worked with Congress to push federal agencies to focus more on real estate wire fraud.

Review of closing documents

In the past, reviewing closing documents has been an extremely manual process. Escrow or closing employees “stare and compare” to verify data and fees. This is another repetitive process that can be automated to help deliver accurate settlement statements. Technology in this area can reduce errors by reducing touch points and automatically reconciling data from the lender’s Closing Disclosure into the title production system.

Digital closings

The use of remote online notarization increased 547% in 2020 when compared to 2019, according to a survey ALTA conducted of vendors that offer this technology. This increase can be attributed to heightened demand for RON during the COVID-19 pandemic, coupled with the fact that 29 states have passed permanent laws authorizing the use of RON. Today, RON is being utilized most extensively in Florida, Texas and Virginia. Additionally, use of this technology is trending up significantly in Midwestern states. A decade ago, Virginia became the first state to enact a RON law and Texas approved RON legislation in 2017. Adoption of RON in Florida has been rapid since the state passed legislation in 2019, the survey found.

ALTA has advocated for federal legislation that would enable RON in all 50 states with minimum national standards. In collaboration with the Mortgage Bankers Association, ALTA has prepared model legislation that provides the framework for states to adopt an online remote notarization process. Over the summer of 2020, ALTA, the MBA and
National Association of Realtors developed a draft model emergency notarization order — which was supported by Fannie Mae and Freddie Mac — to help create uniformity and provide legal certainty for use of RON in states promoting social distancing measures. The title industry has been at the forefront in developing standards for digital closing options that have the appropriate safeguards and authentication process to protect consumers while ensuring the notarizations provide certainty and effective constructive notice under state law.

Due to the COVID-19 health crisis, the need for digital transactions and use of remote notarizations has increased. Having these principles provides a strong foundation for the use of various types of remote notarizations going forward. ALTA’s Title & Settlement Agent Registry identifies title and settlement companies that can perform RON closings. Closing companies that offer RON are designated with a small graphic icon, making them easy to identify in the ALTA Registry. In addition, software has been developed that identifies the different types of digital closings that are legal and available in each state.

Post-Closing

Innovation is also happening after the closing as companies are finding ways to streamline repetitive and manual post-closing processes. Some applications include advanced automation capabilities aimed at consolidating quality-control tracking information relevant to all stages of the post-closing process, from scanning and separating packages to identifying recordables and integrating all shipping phases. Direct integrations with title production systems allow companies to deliver, track and update post-closing files securely in real-time without the hassle of multiple logins.

Continued drive to digital

Companies in the title and settlement space have always had to balance the technology capabilities of many partners involved in the real estate transaction. The title and settlement services industry continues to orchestrate change in the real estate transaction, with the goal to end the siloed approach and deliver a collaborative transaction that best serves the consumer.

This article was pulled from the HousingWire Magazine April issue. To read the the rest of the issue, go here.

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