With the Real Estate Settlement Procedures Act and Dodd-Frank, the mortgage industry should probably consider renaming the good faith estimate to something like a guaranteed fee certificate.
That might mean scores of data vendors offering to complete fee quotes for their area of expertise on the GFE would need to seriously evaluate their willingness to guarantee the data they deliver.
It’s probably not a popular idea to title insurance vendors currently scrambling to fulfill data requirements and tolerance levels surrounding the GFE. Yet amid these new regulations focused on giving consumers a GFE they can sink some teeth into, guaranteeing the fees is not the real concern.
It is easy to quote higher title and settlement fees and “guarantee” actual costs will be less on a final closing statement. But, to guarantee the lowest title and settlement fees up front, requires putting a highly complex analysis into practice without sacrificing accuracy.
There are many details to manage and data to mine and interpret. All of this has to be scalable and available at the point of sale and accurate on every transaction. Even with Dodd-Frank and RESPA in play, the true disparity between low and high title premiums still remains an unknown among our industry, legislators and consumers.
Through a comparative analysis of the potential and available title premiums a single consumer can qualify to receive, regardless of residential policy type; there is a significant value to getting more detailed in preliminary evaluation. The instinct is to make assumptions, not to bother consumers with too many questions. But cost savings is powerful. In delivering a best possible option to borrowers, should our industry take some time to ask the quick questions needed to get lower premiums on their behalf?
In absence of any statistical study performed and just looking at the filed rates, how many variances on reissue calculations might apply?
In a majority of states each underwriter files their own rates and qualifications for credits such as reissue, or even unique credit opportunities like military discounts, senior discounts and more. Then there are more rate filings by these same underwriters in these same states. Those rates are commonly referred to as “alternative rates.”
Alternative rates can also be described as bundled rates, or bucket rates. They typically apply to refinance (reverse may apply too) transactions and go up at specific loan amounts. For example 0-100K is one rate, 100-250 is another tier. All of the underwriters have different rates, different points at which a tiered rate changes and different qualifications to apply these rates. They have smart names too, but these are usually filed specifically to address large volume loan originators who need to offer lower title premium pricing based on the amount of business they deliver to their set of title insurance vendors.
Now, if underwriters apply their own reissue qualifications and their own discount percentages in filed rate states, then there has to be something illogical in making assumptions.
What if an estimate is made using the title insurance alternative rates? Could we apply those across the board?
Well, first assuming a lender can qualify (size, coverage, volume, close ratios considered) to offer “alternative” rates and then assuming the transaction qualifies, (a new list of qualifications) how many deviations are we from the lowest rate to the consumer?
I checked that one too. In fact, some underwriters can and do reserve access to alternative rates for reasons of risk or competitive market advantage. And, in some loan amount brackets, some states and counties, the reissue rate or other discounts may be lower.
So, clearly, going to a single underwriter will not serve this purpose. They can offer only their rates. What about using individual agents to gain access to all of the rates?
Individual agents would have to manage relationships with every underwriter, maintain remittance minimums and claims ratios sufficient to keep each happy — and be approved by all to offer all rates. Not a likely event.
More likely is that originators will explore the relationships of their agents and in the future begin asking for their vendor management teams to ensure full representation of all underwritten rates across their network of providers.
So why work so hard to make estimates and assume facts when it doesn’t seem possible to do this the right way? Because it is an evolution.
Until we find other options there is currently just one delivery solution with all of this data that is able to give the GFE back its validity, shoring up the values associated with good, ole’ fashioned borrower disclosures and consumer advocacy.
Cynthia Waterman is executive vice president and co-founder of TitleHound, a product of NexGen Compliance Solutions, that seeks the lowest cost title insurance rates that are compliant with federal and local regulations.