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The Title Industry: A Sad, Horrible Rumor Confirmed!

By
Real Estate Agent with Integrity Real Estate
I first heard of a direct connection between the American title industry and the vast labor supply in India a couple of years ago. A vice president for Stewart Title mentioned, in passing, that title insurers were using cheap Indian labor to answer customer service questions.  Consumers calling (1-800 #)'s from this country have no way of knowing that the phone is being answered in Bangalore, Delhi, Nagpur, or Pune.  These are just a few of the Indian cities, experiencing unparralleled economic growth, contributing to the country's emergence as an economic powerhouse.

This post is not about India or it's economy.  It's about the validity of the title searches used to prepare the title policies purchased by your buyers.
  It's one thing when relatively benign services are outsourced overseas; it's something entirely different when technical decisions are relinquished to unskilled labor using inappropriate technology.  There's been a rumor passed around the title industry for some time alleging that title searches were being performed online in India for certain title insurers  I've tried in the past, unsuccessfully, to confirm the rumor to post on Title-opoly

Though many jurisdictions have automated their land records, the information is considered completely unreliable for preparing something as important as a title policy.   Automated ownership records are invaluable resources to title professionals who need to confirm a date or a fact found in a title search.  Substantive research must be conducted at courthouses where it's customary for trained abstractors to compare title indexes to other sources of information.  The secondary sources of information are often handwritten ledgers maintained by clerks at various desks, and other unsophisticated records, scattered around administrative buildings.  Admittedly, the process is draconian, but it's all that exists in most states and very accurate once the idiosyncrasies are learned.  I worked as a title abstractor and examiner in Maryland for over 20 years without a single claim.   Maryland was the second state to automate it's land records, in 2006, and make certain information available online, without charge. 

The following disclaimer must be acknowledged before entering the site:

The Clerk of the Circuit Court assumes no responsibility for this site. This website should not be used as a sole source for searching title.  Researchers must check all indices including those at the courthouse.

Now, the news that all but destroyed my faith in the title industry. 
On July 27, 2007, The Economic Times, published in India, featured an article titled "Winning the title bout in style."  The article outlines one of the most horrific and frightful stories that I could have ever imagined.  A certain entrepreneur named M Sanjay Kanth owns a  Bangalore-based company that provides title searches to the American title industry.   The company is partnered with Stewart Title and provides title searches, the work is done in India, to two unnamed title insurers.  There are only five title insurers in the U.S. and Stewart Title is one of them.  Mr. Kanth anticipates creating upwards to 650 jobs, in India, over the next couple of years. 

There's one more alarming fact, the article suggests that the company's title expertise can be found in the person of Mr. Kanth's brother who received 40 days of training while visiting this country.
 

 A couple of thoughts:
  • Many local title companies, yours may be included, now rely on title searches provided by their underwriters.
  • Mr. Kanth's company is apparently providing title searches, from India, for three of five major title underwriters.
  • I'm assuming that the two unnamed title insurers in the article are First American Title and Fidelity National Title since the India-connection ties in neatly with instant title products introduced by them earlier this year.
  • An abstractor performing title research in your local courthouse had to apprentice for three years before becoming eligible for E&O coverage.
  • How can a person qualify as a title expert in 40 days?

I'm saddened, more than angered, by the new development.  As a long standing member of the title industry, I can tell you that a properly researched title is of paramount importance when preparing a title policy. Most people incorrectly believe that title insurers quickly write checks when title claims are filed by homeowners.  It's rarely the case.  A title insurance policy isn't an insurance policy at all.  Technically, it's an indemnity contract which means that your buyer must first suffer a financial loss before being reimbursed.  There's no promise that a homeowner will keep their home, the insurer is simply obligated to reimburse for actual losses up to the face amount stated in the title policy, typically the purchase price.  Title claims cause a great deal of stress for innocent consumers.  Sometimes the stress is emotional, which is costly enough, at other times it's both emotionally and financially devastating. 

Improperly prepared title searches result in title claims.  I know that much for a fact.

I'm forced to concede that title insurers have adopted the perverse philosophy of automobile manufacturers
.  Apparently, a family's suffering can be factored into an actuarial model with compensatory charges appearing on settlement sheets.  After all, human lives are assigned a dollar value and factored into the price of new cars.  The consumer foots the bill, and feels the pain, either way.   Technology hasn't advanced to the point that a title for a property in Boston, Miami, Nashville, or Portland can be properly searched in Bangalore, India, not to mention the lack of credentials of the Indian abstractors.

A question for those of you who recommend title companies to buyers:  Do you know who's doing the title abstracts?

May I suggest that you deal only with title companies that depend on title searches conducted by local abstractors with an E&O policy.  It is after all, a good thing for your buyer and for the local economy. 

In time, perhaps, automation may catch up with the lofty ambitions of Indian entrepreneurs and the greedy ambitions of American title insurers, but that day has yet to arrive.

  

A special thank you to Robert Franco, Source of Title Blog, for bringing this disturbing matter to my attention.

Comments (51)

Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Desiree

I'm in a state of shock after considering the implications of this development.  The technology needed to globalize U.S. title searches isn't anywhere near ready.   It's true that jobs are being lost, but it's important to touch on the public policy concerns initiated by faulty title policies.  

Jul 30, 2007 04:22 AM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Jeff and Sharon

Title insurance and the role of the title industry is completely misunderstood.  I should write more title oriented posts for Active Rain. 

Do you think there's enough interest to make the effort worthwhile? 

Jul 30, 2007 04:36 AM
Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience

Pretty sad, when you consider the outrageous margins that the title companies already enjoy.

This industry is out of control.

Jul 30, 2007 04:48 AM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Tom

The title industry is in terrible shape today because it lacks direction and leadership.  It saddens me deeply, it really does. 

Jul 30, 2007 04:51 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ed:

As bad as our title industry seems, there is nothing wrong with it that couldn't be corrected by a few well placed decisions at the top. There are plenty of good, well meaninged, career minded people left in our industry. Our industry strength has always been to foster a spirit of cooperation amongst the "family" of title people to "get the job done". Many of these excellent workers have become disenchanted with the business. But they are persistent by nature and don't give up easily. Let's use this valuable resource and begin to rebuild our industry one matter at a time.

Fran

Jul 30, 2007 06:14 AM
Chris Lengquist
Ad Astra Realty - Olathe, KS
Kansas City Real Estate Investing

All I'm gonna say is "oy." 

Email me that response.  :)

Jul 30, 2007 11:51 AM
Neal Bloom
Brokered by eXp Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate

Ed,

They were just lazy..but on the other hand the new attorney made things a little too complicated with the authorization part..if that was an issue then why did the first company clear it. They even called my client later to ask if he needed anything..how come now? They were holding things up by debating the issue about why they would not accept the canceled check. My client told me he did not even know he could have picked the title company when he purchased..he said all he did was receive a call to come to a closing..he was uneducated ..he was some how talked into using the sellers title company. He now has learned a lot about RE. I always tell my sellers if they do not feel comfortable..then use their own to do their sellers docs or get full representation.

Jul 30, 2007 11:26 PM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Fran

I'm concerned, now, that the underwriters are working against their agents.   If it weren't for that fact, the industry could fix itself quickly.  Underwriters doing abstracts from India will essentially destroy the title abstracting industry in this country.  My abstractors were important contributors to my business.  

Jul 30, 2007 11:34 PM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Chris

It's a deal.  I'll do it later today. 

Jul 30, 2007 11:35 PM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Neal

Great point about laziness.  There are a lot of people in the industry who don't belong there.  Often, I use the word "unprofessional," but "lazy" works just as well.   I receive title orders nearly every week from past sources or people who read my blogs.  I no longer do title work and closings.  The problem is finding someone qualified to refer the orders to.  There is no one in the vicinity of my office that I trust to do closings even though there are numerous title companies.  It's a sad fact.

Jul 30, 2007 11:42 PM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ed:

Money has become the number one consideration. I agree with you that it is a sad fact that there remain few qualified agents. It demonstrates to me that on the underwriting level they just don't give a damn about their true customer---the consumer. If you ignore qualifications when appointing agents, the agents you appoint (sign up) won't give a hoot either. Outsourcing abstracts is just the tip of the iceberg. Thanks for giving a damn.

Fran 

Jul 31, 2007 01:40 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ed:

You got me thinking. If you build the field, then they will come. You don't PAY for them to come then build the field. We have become an industry of RE-action, rather than action. Design a product and a system that will serve the needs of the consumer, then go forth and implement the plan. Instead they are competing over profit centers. An industry that doesn't police itself, is inviting intervention from outside. Shamefully, we have already seen this beginning to take place.

Jul 31, 2007 02:07 AM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Fran

You are one of the few that understands my message.  It's consumers that will ultimately decide the fate of the title industry, not title insurers, not real estate agents, not lenders.

Jul 31, 2007 02:40 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Ed:

Not bragging, I have personally conducted tens of thousands of settlements. Almost at every closing, I thank the buyer/borrower(s), then the referrer for their business. I have long ago learned on which side my bread is buttered and to whom my responsibility belongs. The one who pays for my services. The insured. The consumer. If I believed in monetary affiliations where would my allegiances be placed?

Fran 

Jul 31, 2007 03:22 AM
Diane Cipa
The Closing Specialists® - Ligonier, PA

Well, flying through these comments, I think it's safe to say that you have done a good job, Ed, making this community sensitive to title insurance.

Folks, when I was writing through First American and using their Fast Web platform the title abstract reports while being performed by humans here in the USA were being typed over night in the Philippines.  So imagine this, Pete in Somerset does a search, e-mails it to FirstAm and they e-mail it to the Philippines where a team types it then sends it back to FirstAm who then e-mails it to me.

Tomorrow morning First American is having their regular conference call with investors and analysts.  You can listen in on the internet through their web site.  I listened to one of these calls a few months ago and it was eye opening.  So much so that I severed my relationship with First American.  Go ahead, listen, and you will hear their business plan which includes at it's core moving operations off shore and closing facilities here in the USA.  

I also expect to hear other interesting news and can't wait.  It lasts a good long time - possibly 60 to 90 minutes -  so expect to be a little bored but the golden nuggets are worth the wait.

Aug 01, 2007 12:07 PM
Fran Gatti
RE/MAX Integrity - Medford, OR
Managing Principal Broker - RE/MAX Integrity

Ed,

Most of my escrows go through First American because they give great customer service.  Would it be appropriate to ask them if the are getting their title abstracts from India and would they know?

Fran

Aug 05, 2007 05:19 PM
Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Fran

It's appropriate to question your title company about any aspect of their product that concerns you.  The marketing representative may be elusive about the India connection.  Call a couple of other title companies to glean a broader perspective of the practices being employed in your market. 

Aug 07, 2007 12:19 AM
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA

"Title insurance and the role of the title industry is completely misunderstood.  I should write more title oriented posts for Active Rain. 

Do you think there's enough interest to make the effort worthwhile? "

 

YES !!!!!!!

 

"I'm concerned, now, that the underwriters are working against their agents.   If it weren't for that fact, the industry could fix itself quickly.  Underwriters doing abstracts from India will essentially destroy the title abstracting industry in this country.  My abstractors were important contributors to my business. "

I believe this to be totally true.

Note that like I guess Fran, we have our own abstract team.   Ours are on payroll, employees.

The more I hear about FA, the more I wish someone would give them a huge kick in the groin.

FA does not underwrite for us, but I know a few mortgage company's that use them for their Title work. Drives me crazy...... as I can easily match their service. Well, legal service.

(Sorry I'm late to this party.)

 

Aug 13, 2007 05:16 AM
Diane Cipa
The Closing Specialists® - Ligonier, PA
Rob:  As chronicled on Radical Title Talk, we canceled our agency contract with First American over quality issues like this and, of course, their TitleSmart product.
Aug 13, 2007 05:23 AM
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ
Diane, My door is open to the first underwriter that respects the consumer enough to contract with agents that do not affiliate. Let's not blur the lines of ethics any longer. Affiliations take money out of the consumer's pocket and do not provide the consumer with proper representations. Thanks,   Fran
Aug 14, 2007 09:24 AM