Jeanne Johnson & Associates, Land Title Abstracting, Title Searching, Title Exam, Closing, Real Estate Education
Here is a post from a Tulsa, OK paper that is typical of the misunderstanding of the Abstracting Industry. It’s claims are ridiculous, absurd, unfounded and downright annoying. Read it to see why we need to educate the world about our jobs as title abstractors.
As is typical of our industry, we are always engrossed in something. Currently the talk is potential RESPA changes, Fraud, and the Woes of a Weak Market (along with that age old fist-fight about the fairness of aba’s of course.) And these issues certainly do affecting our day to day business lives. But the relationship between the non-affiliated agent and his or her underwriter is a much bigger long-term issue for the agent. Independent agents, who think they can not be replaced by national REI plants, captive agencies or your Underwriter, beware.
I started in the title business in 1976. We believed then that abstracts of title were doomed and could be replaced at any moment with title insurance, or something else. We were right – it just took about 20 years longer than we thought. (Things changed a lot slower then.) In those days, the insurer insured the policies and the agent brought in the business and sold the policies. Today, with technology, things are changing at warp speed. The Underwriter is completely in the driver’s seat and there is no choice, title agents, so get used to it.
Insurers have changed the way business is done. The public wanted title work faster and cheaper. The insurers accommodated the public. Experienced, long-term agents with high quality standards were forced to undermine their standards in order to compete. The thorough, thoughtful search of the past is gone, replaced by a quick and dirty rendition put out with a cursory title search, i.e. risk underwriting.
The independent agent that was once the cornerstone of the title industry is disappearing, partially due to the surge in affiliated businesses that shepherded the business away; partially due to a very poor market; and also because Underwriters have been growing by gobbling up agencies and turning them into branches. Underwriters today are no longer dependent on local agents. The days of title underwriters worrying about quirks in each county are gone, again, risk underwriting. And in the future they will be even less dependent, as technology and electronic recordings allow information to be recorded and made available within minutes, perhaps even with little human intervention. Moreover, due to high agency defalcations and the claims in the last few years, it makes sense. Underwriters can have more control over day to day operations. Plus, by replacing an agent’s traditional title plant with the underwriter’s superior Real Estate Information (REI) technology, adding flood information, tax information, assessor information, maps and more it becomes salable as many products instead of one.
Yes, I believe the days of the independent, non-affiliated title agent are limited. But then again, I thought abstracts would be gone overnight, and it took 20 years.
A serious discussion needs to take place as to the future of the industry. But what about today? What do we do?
I was in a smaller population county in Nebraska yesterday (2-20-08). County seat, Wilber, population 287. I was in the Register of Deeds office. It was a welcome step back in time. There were no guards, or metal detection devices scanning me as I walked into the Courthouse. I was doing local research. I walked in, said I was a certifed abstractor and would like to look at some titles. The Assistant Co Recorder showed me into the record room. I asked if the books were grantor-ee or set up by Sec-Twp-Rge. They acknowledged the tract index books. I pulled the appropriate tract index, and within a few minutes had all of the documents that I was looking for on hundreds of acres and millions of dollars of property. The books are the traditional, individually typed index pages. Older pages were encased in plastic covers to protect them. Photocopies of original documents were well organized and maintained. They explained there was an off-site duplicate copy in case of disaster. Exactly what you would hope for from your local county recoder.
Then on to the Court Records. I looked up the Last Will and Testament and was able to determine 4 generations of owners with the same first and last names, but different middle initials. Great-grandfather, passed onto sons and grandsons, etc, all with variations of a name. Cleared up all those various different wives names in the chain of title. It was quite a trip.
This County has no real estate records online. This County has no real estate records even on computer. And abstracts, I was told, “hardly exist any more in this county. Title insurance has taken over. To do title work, the local abstract company has a part time employee who goes to various Courthouses to pull the documents.” The county employees were very knowledgeable and very helpful. They knew the family and a bit of the history. It was like going home, in a way. They even called ahead and told us the best place to eat lunch. The Wilber Hotel is a great place to eat.
Ten years ago, who would have believed the sleepy little Title Insurance business could be the subject of an amazing true crime book. Yes, we’re all reminded daily of the problems in our industry: greed, fraud, forgery, gluttony, sub-prime lending, phoney appraisals and more, but now here’s a real life tell-all.
A Family Cursed: The Kissel Dynasty, a Gilded Fortune and Two Brutal Murders uncovers classic Title Mafioso. The author, Kevin McMurray covers the life of two wheeling-dealing brothers. Andrew Kissel was convicted of forging mortgage deed releases and other fake documents to subvert millions in order to live an excessive lifestyle.
But Fidelity National Title recognized Kissel’s mortgage scam. By searching title to property, Fidelity found several active mortgages on property being used as collateral to secure a $6 million mortgage loan. Kissel gave Fidelity falsified mortgage releases to show the loans were paid off. Creating the bogus documents was as easy as the click of a mouse, McMurray accurately writes. Had it not been for a thorough Title Underwriter (You’ll have to read the book to find out how they figured it out) Kissel would probably still be perpetrating his real estate fraud. He was charged with federal bank fraud obtaining tens of millions in fraudulent loans from banks and other institutions.
I am an avid reader of mysteries, etc. but this one really hits home not because it’s just plausible, but because it happened and continues to happen every day.
I was talking to a very seasoned contract title examiner recently (one who has been in the business of doing overflow exams during the refi-season as well as difficult sale exams for many years.) He works for a variety of Title Agents, who underwrite for each of the major underwriters. He was saying how difficult it is to keep track of how each Agent wants their title commitments done. Apparently each claims that their Underwriter has different standards on how to examine title. Some never examine behind a recorded plat. Others go back 2, 3 or 4 owners. Some want 40 years on a sale, but only 2 owners on a refinance. Others just categorically ignore easements and restrictions (even on a sale) and only look for and show liens.
What has the industry come to? In talking with Title Insurance Agents across the country, and with independent contractors for those agents, it is clear that liberal shortcuts are being taken (I am told, with the sanctioning of the major title underwriters) when examining titles and almost everyone is confused. I personally think that the search standards have become too weak, and that Underwriters and Agents alike will likely pay a price for the lack of quality coming out in title policies. A few years ago, ALTA said that one in 6 files had title problems, and then it changed to 1 in 4, then to 1 in 3. (They no longer declare how many files have problems.) When is the last time you picked up a file without a title problem?
There is clearly confusion among Title Agents – where do the Underwriters stand? There is no consistent message. What do you think is most important to you and what do you think is most important your Underwriter: Bringing in every possible deal so you have enough volume to keep your Agency Contract (even though your gut says “should I really be doing this or working with this customer?”); Turning the product out within 24-48 hours (regardless of quality?); Keeping fees low but high enough to make a profit(and what about RESPA and fee mark-ups?); Cutting long-time seasoned staff and contracting out exams to perhaps less competent staff to keep expenses volume-related(Ouch)? It’s a conundrum.
The Underwriters have been slow to tell us their long-term wishes and plans or us. Some wonder if the Underwriters aren’t trying to force out small Agents and replace Agents with Super-inexpensive contract staff from overseas – it is certainly happening.
I think it would be most helpful if the Underwriters would admit that in this day and age they are no longer trying to find and eliminate problems. Title Insurers have rather become a risk-underwriting type of insurance. The Underwriters’ real focus seems to be keeping expenses as low as possible. But tell us, please, if that means we should take short-cuts in abstracting and change the way we old-timers were taught to do business. And tell us, please, that if you will be using off-shore staff to post title plants, what does that mean? We need to know where we fit in.
It is clearly incomprehensible that with the 3,000+ counties in the U.S. and the hundreds of thousands of places to search (with probate, taxes, assessments, Courts, Cities, Townships, hundreds of types of judgments found in all sorts of locations, that the classic American abstractor that we have known for decades will be obsolete. No, I can’t believe that.
But we are scared and confused. We don’t understand. Please Explain.
Your Thoughts and Comments Appreciated….
FULL abstracts of title still exist. In many parts of the Midwest, each and every recorded document is “abstracted” into a book that is “continued” every time a property is sold, and handed off from owner to owner.
While some of the large Underwriters and Real-estate-company-owned title companies have tried hard to get rid of abstracts, the Bar Associations and many other knowledgeable people want to keep them. They are history, they represent the essence of title. In my opinion, the abstract is still the ideal information product. It shows every document - every easement- who holds it, what it is for, when it will expire, and its exact location. The same with Restrictions, Deeds, etc. I still love the traditional abstract, and those who take the time and care to prepare such an awesome product. A full abstract tells “The whole recorded truth.”
I believe the reason that some want to get rid of abstracts is that it is faster and cheaper to do without them. We all love faster, cheaper. But more importantly, without an abstract, there is no evidence of the fact that many searches being done today are of horribly poor quality. The poor quality of the search is then translated into the poor quality of the title product given to the homeowner.
I am also saddened by the shortcuts taken on title commitments. I had a call from a real estate agent the other day who asked my opinion on concerns he had on a title commitment from a large affiliated business title agent. His buyer was a Sr. VP for a major company, buying an Owner’s Policy on a very costly home. In looking at the commitment, I saw exactly what he was talking about. The areas of greatest concern for me were:
1) The Commitment specifically excluded any coverage assessments for Utility, water, sewer… and other assessments levied PRIOR to closing against current or prior owners, even though they DID charge the seller both for an “assessment search” and for an “evaluation” of that assessment search.
2) The policy generically excluded “Covenants, Conditions and Restrictions,” which I believe are one of the MAJOR reasons one buys an Owner’s Policy, especially in the swank area where this buyer was purchasing. (Seems to me the title agent was just too lazy to do his job.)
3) The policy generically excluded “Utility and Drainage Easements of Record, if any.” Again, I think the Title Industry owes it’s customers some kind of due diligence for a decent search. After all, wouldn’t YOU want to know if there was an easement in favor of six different parties over your property to get to the lake and park their boats? Or a 50 foot pipeline across the middle of the back yard? YIKES.
4) They did catch one recorded easement. (After all, the property was Torrens.) But, even after it was specifically requested, the Title Agent absolutely refused to provide any assistance as to its location (although they did charge for a plat drawing and inspection that did not show the easement.) How sad. After all, if you can’t figure out an easement, what the @%#! are you doing in the title business?
These (non-abstract) mini-searches and resulting title policies do, however, fit the current risk-underwriting philosophy, which is “Take all the short-cuts you can. Go for quick and easy (forget the quality that is due the homebuyer) and then let the Homeowner take the “hit” when easements, restrictions or assessments become a problem. No wonder the title industry is being chewed up and spit out by the media.