Whispers

I posted this article on Title-opoly earler today and thought that it might be of interest to some.  Keep in mind, it's my personal opinion. 

Last week, First American announced the release of a new product named TitleSmart.

TitleSmart equips lenders with the ability to procure a title commitment within minutes at a refinance "point of sale". From the press release:

In initial testing, TitleSmart delivered a title qualification or title commitment - protected by full title insurance - in less than 1 minute on more than 63 percent of refinance loans in 44 states. Beta testing will begin this month with two top mortgage lenders, and several other lenders have integrated TitleSmart into their strategic plans for 2007.

As an industry, we have yet to evolve to a point where accurate title information is universally accessible without much effort or cost. Every abstractor knows that even the most innocent appearing "bring to date" can become a nightmare quickly.

First American has intentionally designed a product that will put untold numbers of title companies and abstractors out of business. How could anyone deny this fact or argue otherwise? Refinance business is an important source of income for most, if not all, title companies. The universe of business options for title agents is quickly approaching zero.  The previously anointed trinity of realtor, loan officer and title agent has been usurped by a new trinity of superior technology, title insurer and national lending source.

A company as large and intelligent as First American wouldn't have publicized an innovative product like TitleSmart without a full analysis of its capabilities and application, or lack thereof. Apparently, First American executives have decided to offset losses from questionable standards with profits from volume business. It reminds me of the automotive industry placing a calculated price on a human life.

Another interesting analogy is the accepted practice among title insurers of paying higher commission percentages based on volume alone. Why don't insurers negotiate "splits" from the perspective of an agent's claims history? A certain pattern of thinking among title insurers begins to emerge.

Perhaps, TitleSmart represents the natural order of things in a new economy derived from technology and transparent efficiency. Still, it's disturbing for me to realize that a trusted underwriter somehow used the policy income generated by agents to create the vehicle of demise for many agents.

Another excerpt from the press release:

It might even become difficult for some lenders to remain competitive without (TitleSmart) it.

The pioneering concepts underpinning TitleSmart are of no benefit to First American agents. The product is visible evidence of a corporate mentality intent on monopolistic control without concern for future premiums from title agents. It appears that quality title searches and competent examination skills offer a statistical "up-side" that's inferior to retail income potential.

There's more to this story for certain. Read between the lines and subtle whispers of future scenarios resonate. If the traditional approach to writing title policies has lost importance for First American, then it's safe to predict a trajectory path aimed directly at the purchase "point of sale" for TitleSmart or similar products. Why wouldn't this underwriter partner with lending sources to target organic services to realtors?  It's possible, but we need to extrapolate a step farther before attempting to answer.

See Pat Kitano's post, "Cyberhomes.com - a Title Insurance Company now has a Consumer - facing website with a 1999 - style name."

The (5) major title underwriters have quietly amassed a startling degree of financial and political influence, not to mention managerial talent. I suggest that TitleSmart is an insertion point for First American into retail markets that will expand in time to include the business of selling homes. In the past, we've seen real estate brokerages integrate vertically to capture the profits of settlement and title operations. What would keep a powerhouse like First American from opening direct real estate sales offices nationwide? Nothing, the market is lucrative enough to justify the effort and expense! When this occurs, First American will joint venture with large lenders to champion "consumer-centric" products and business models unlike any conceived before. Think about it, a company with the resources of First American could immediately re-invent multiple list systems and the primitive practices that have hampered the overall industry for generations. Change is happening quickly and the rate of change will only accelerate.

TitleSmart represents the inception of an evolutionary tract that will ultimately place title underwriters in direct contact with consumers at the retail "point of sale." (Fidelity National's product, Cyberhomes, is proof that other insurers are gently positioning for visibility.) Regrettably, scores of innocent and trusting title professionals will suffer as a result.