Outsourcing

Title Work sent to India

As many of us know, Land Records in the US are now routinely sent to India and the Philippines to be input into our computerized public land records.This is a video of some vintage (14 months old) showing the progress of one India firm with over 600 employees doing over 100 processes in all 50 states it says. An interesting overview for all in the title industry, showing the growth in outsourcing the title  industry overseas and the many companies involved. See video at UTube here.

Foreclosure Mill Sold to China

Read more at  Bloomberg News

Attorney David Stern made about $146 million when he sold his non-legal foreclosure business to a company originally formed to do business in China, according to a regulatory filing. The non-legal foreclosure businesses are paid fixed fees for work, such as $400 for title searches, according to the regulatory filing and Stern’s remarks at the investor conference, as quoted in the securities lawsuit. Profit, of course, depends on cutting costs and boosting volume. The business is also reported to be supported by an operation in the Philippines that provides data entry and document preparation, according to the filing. The company was renamed DJSP Enterprises.

Are Abstractors to Blame for Offshoring?

by Robert Franco | 2008/11/26 | Source of Title, Used with Permission

A couple of recent (Source of Title) posts regarding offshoring have stirred up some controversy.  Sunil Ojha started a blog defending the practice of searching titles from India.  In Misunderstanding and Clearification (sic) of Same and Resolved Your Real Issue, OJha explains why offshoring makes good business sense and how it can be done effectively.  Whether you agree or disagree, the real question is why is anybody offshoring to begin with?  There is no doubt that offshoring cuts costs and that is attractive to companies looking for any advantage in today’s business environment.  But, abstracting was always a localized practice that required a particular knowledge of state and local real property laws to produce a reliable product.  Why would anyone trade quality for savings?  More importantly, have they? 

Source of Title Blog ::

Let’s start with a basic premise that it is possible to reliably search an online title plant.  I am the first to say that I have some doubts about online records, but it is possible.  The real problem that I have with online records is that not all of the information we search is available electronically; thus, the so called “thin-title” plants are incomplete.  However, title plants are the norm in some parts of the country, and even required in some places.  If they are complete, there should be no problem using them for abstracting purposes.

So the real difference between searching a title plant from India and searching a title plant locally, is the skill and knowledge of the abstractor.  As I have stated many times, there are vast differences between the states that have a huge impact on the status of title.  I believe that I have a strong understanding of the real property laws in Ohio, but I would never even consider tyring to do a search in another state. 

Some of the biggest differences between the states could be dower, community property laws, state Medicaid recovery laws, recording statutes, etc.  Anyone can find deeds, mortgages and liens, and report their volumes and pages, and recording dates.  That is the simple part.  But, understanding how those documents affect title is what makes the local examiner such a value to the industry.

I think it is a given that just as I would not be competent to abstract in any state other than Ohio, a searcher in India could not be competent to search multiple states.  It is conceivable that an Indian searcher could learn one or two states, and develop a sufficient level of competence.  Varun Sharma points out that this is exactly what they do in India (see comments).

There are different teams working on different states doing online title searches all at the same time and they are trained on state specific laws and nuances because they are experience in conducting searches in that particular State only.

Even then, it takes several months or even years of on-the-job training to really develop the necessary skills to become a competent, professional abstractor.  I would imagine it would require even more time for someone in another country, who is completely unfamiliar with our laws and culture, to grasp the concepts.  Based on a previous statement made by the head of an Indian outsourcing company, I have my doubts about the quality of training they receive.

Just when Mr Kanth was wondering about the next steps, he met the president of a title company based out of Baltimore in 2003-2004. He told Mr Kanth that there was a refinance boom in the US which resulted in a huge backlog in terms of production. Incidentally, his brother M Sujay Kanth, who is now the COO of ESS, happened to be in the US to explore business opportunities. They took up this opportunity. This was their first break. They met with the title official and looked at the process. “Initially, we had no clue of what was going on and it was very hard to grasp. We took it as a challenge and Sujay got trained in their office for about 40 days after which we started the transition to my India office from 2004,” the doc said.

 

Forty days of training is hardly suffient.  Regardless, to assume that searching titles from India is worse than using local abstractors, it must also be assumed that all local abstractors are well trained and educated in their state’s real property laws.  I believe that is a fallacy.  Basically, there is no difference between a search completed by an unqualified local abstractor and one completed by an unqualified Indian abstractor – except the latter is cheaper, of course. 

Before I continue, let me first acknowledge that there are still some very knowledgeable, local abstractors who provide very valuable services in this industry.  However, I believe that has become more the exception than the rule.  Many abstractors learned to abstract by trial and error, an online course, or from another searcher that doesn’t have the proper knowledge of abstracting.  I believe that this started with the “equity loan,” or “current owner,” searchers.  Once upon a time, they were used to provide very basic information for non-insured products.  Then, they slowly began to expand into “full searches” used for issuing title insurance.  I will never forget the first time I heard one of these searchers say “a full search is nothing more than a really good current owner with a chain of title.” 

Soon, the title industry began embracing current owner searches for title insurance purposes.  Current owners were much cheaper because these searchers, mostly out of ignorance, were taking shortcuts that a professional abstractor would never consider.  As the title industry began to lower the standards for its search requirements, the unskilled searchers flourished.  For better or worse, these over-simplified searches became the norm and everybody wanted them cheaper and faster.  The demand for skilled, professional abstractors dropped dramatically. 

Today the line between “searcher” and “abstractor” is blurred and the two terms have become interchangeable.  I wonder how many abstractors are really qualified to provide reliable title evidence. 

With the modern technological advance of electronic imaging, a title plant can be used to search titles from anywhere in the world.  If the local abstractors are really just finding documents and copying down pertinent information on a report, without a true understanding of the impact of those documents on the title, why not have that function done in India?  It is certainly cheaper… and since they can search around the clock, it is probably faster.

I do not agree with the practice of offshoring.  As Pat Scott said (see comments), “The title search is the foundation of the industry.  It is not a clerical task to be outsourced.” However, it would seem that the depth of knowledge of the local abstractors is not what it used to be.  If the industry were to suddenly stop offshoring and begin demanding quality abstracts, there would be a lot of local abstractors out of work, just the same.  The problem is that there is no way to know which ones are well qualified.  Because there are very few states with any sort of meaningful licensing, anyone can call themselves an abstractor. And, many who probably believe themselves to be professional abstractors just don’t know how much they don’t know.

My basic point is that the level of skill and knowledge between the average local abstractor and the Indian abstractor are probably not as far apart as you may think.  Title searching has been dumbed-down for so long that there are probably few left who care to educate themselves beyond what is necessary to copy recording information from filed documents.  There being little difference between the services provided here in the USA and overseas, it is not that hard to see why so many companies are offshoring title searches.  By failing to maintain a superior knowledge, the abstractors have probably made the offshoring decision much easier for those who chose to embrace it.  It basically turns on an issue of costs and profits.

Again, I am not saying that there aren’t still good, local abstractors out there.  I am merely pointing out that many of them have noticed that they are losing work to cheaper, untrained, incompetent competition; not just in India, but right there in there own counties.

Robert A. Franco
SOURCE OF TITLE

Iowa Stops Access to Online Public Land Record Documents

by Robert Franco, Source of Title

Reprinted with Permission

 

Website Stripped of Sensitive Information

The governing board of the Iowa Land Records Website chose to restrict all access to records maintained on the site after a public backlash led to concerns by lawmakers and residents alike. Last week, the site indicated that it would ignore the request of Governor Chet Culver to block access to the records because many contained sensitive information like Social Security numbers.

Yet, officials indicated that its previous actions had failed to reduce fears of identity theft and privacy concerns and, thus, suspending access to the records was necessary.

Visitors to the site discover a statement from the operators indicating that “…until further notice all document images are restricted and cannot be accessed through this Website.” Phil Dunshee, one of the site’s project managers, said in a press release that access to the records would be suspended indefinitely.

“Recorders sincerely regret the disruptive impact this will have on people in the real estate industry,” Dunshee said. “It’s really the last place they wanted to go, but at this point, I don’t really think they have any further choice.”

Despite providing useful information to real estate professionals, many expressed support for the actions undertaken by the site’s operators.

“As mortgage lenders, we are seeing more and more identity theft on credit reports, so it’s imperative that Social Security numbers be redacted from those old documents,” said Christy Allison, the president of Iowa Mortgage Association, in an interview with The Des Moines Register.

Culver and Michael Maurro, the secretary of state, both had their Social Security numbers listed in documents that were maintained on the Website. After learning this, Culver asked the site to remove his information and block access to documents containing people’s private information last week. The site attempted to block access to thousands of records that contained sensitive information after receiving his request, but apparently failed to adequately do so. Thus, the operators decided to shutdown all access this week.

As the Pendulum Swings

I sometimes feel that life in the title industry is like life in a soap opera! Times are always either TOO good or TOO bad. We are always looking to hire, or looking to fire. For those who follow the Title Industry as a whole, lots of news arrived May 1st as the status of the industry swung once again the 1st quarter. There were a few positives and certainly many signs of corrections made. Here are some updates:

TradingMarkets reported that Title insurers as a whole again saw significant job declines, down 12.1% from March 2007 to 87,100. Title insurance employees saw weekly earnings fall 5.4%
HousingWire said LandAmerica posted a net loss of $24.2 million in the 1st quarter. The company cut 300 employees during the quarter, and has cut staffing by 25.4 percent of staff since the start of 2007. The company’s lender services division, that houses default outsourcing businesses, posted pretax earnings of $10.1 million, with increased demand for its lien monitoring, appraisal, foreclosure and reconveyance services as a driving factor. No surprise here. Meanwhile, it reports Stewart Title revenues at fell 25.9 percent, driving a net loss of $22.3 million for the first quarter.
However, First American posted a small profit in spite of the fact that its revenue fell 22 percent. Factors contributing to the poor revenue stream were the obvious decline in the number of title orders closed, decreases in the average revenue per order (housing prices are dropping after all) and the reduction of certain agency relationships (certainly a good thing.) On the other hand, profitable results demonstrate that the company made deep cuts to its expenses in the 1st quarter including salary and other personnel costs, which, according to PRNewswire, were down 26 percent from the same quarter of 2007. Also, First American’s information services group, that supplies information on defaults also had significant increased volume.

Yet, Demotech, reports that the financial solvency of the industry as a whole has rarely been better saying

2007 results provided dramatic observations for the Title insurance industry, with premiums decreasing by 14 percent as losses increased 32 percent over 2006 results. While the recent financial challenges are not to be minimized and recent forecasts point to a long and slow recovery, from a historical perspective, the Title industry remains near its peak. Since 1995, the industry increased its Direct Written Premiums and Policyholders’ Surplus an unprecedented 228 percent and 129 percent, respectively. This broader perspective reveals a cyclical industry in a down cycle, but also reveals an industry that is maintaining exceptional financial stability and is still near record performance.

For those of us who have seen the pendulum swing over the last 35 years, this swing in the market is nothing new. However, we have never seen mortgage defaults at such extremes, or the immediate horizon so bleak. Many in the trade will move on to other occupations – by choice, or not. Much of this will actually improve the industry, by weeding out the week and inexperienced, and illuminating for Underwriters those title agents who were problem children because of their ethics, or rather lack of ethics. Have we hit bottom yet? Who knows, probably not. It still looks depressing out there. But, being an optimist, I look forward to a sunrise with better times. As the proverb says…and this too shall pass.

Title Insurance Abstractors and Examiners – Who is in the Drivers seat?

I struggle, I believe the world is flat. With computerization, the world has become one. I know that we can and are significantly cutting the cost of posting title plants outside of the US. I know that with a solid education system for title plant personnel, outsourcing of title plants to other countries can produce an excellent product at an excellent value.

I also know that with 50 states, 3143 Counties, Parishes or Independent Cities and tens of thousands of taxing authorities in the USA, a “thorough” title search can only be compiled at the local level. There are just too many nuances. Did you know that a parking ticket is a lien on the land in some jurisdictions? Ever heard of an airport lien? How about sidewalk liens, ditch liens, impact fees? Every jurisdiction – federal, state, county, township, city, village jurisdiction has its own rules and regulations. Every jurisdiction – federal, state, county, township, city, village has its own politics that will not allow complete sharing of information. The shear quantity of information (at this point in time) together with local politics (possibly forever) does not allow the possibility of a complete, thorough and accurate title search without local intervention.

We still need a competent local title abstractor and a competent local title examiner to do the traditional solid title work that used to be the norm. The key here is used to be. What I think does not matter. Abstractors and title examiners are just passengers in the car. The title insurance underwriters are driving. We are just going along for the ride.

The title insurance underwriters decide HOW they want to insure real estate. The title insurance underwriters decide if they can best make a profit by becoming risk underwriters. The underwriters decide if outsourcing of title plants will occur because it is cheaper and their duty is ultimately to their shareholders. The underwriters decide if outsourcing of title examinations, commitments and title policies will occur because it is cheaper and their duty is ultimately to their shareholders.

A serious discussion needs to take place as to the future of the industry. But what about today? What do we do?

Are Artificial Intelligence and Outsourcing our Competition?

The Real Estate Market has crashed. Most of our abstracting, searching and examining work is now foreclosures or other serious title problems. The Title Underwriters have cut their biggest expense – staff. So there should be some opportunities for us. Why – because Underwriters LOVE volume-related expenses – i.e. if they don’t have an order, they don’t have the expense.

But it seems to me that the Big Five have changed our Industry. They are no longer looking for the quality many of us are used to providing. (Funny, we thought quality work done in the best interest of the consumer was our goal. We thought identifying and solving problems to keep title losses low was the goal.) But our Underwriters have become risk underwriters, not risk-avoidance underwriters, and they are looking for cheap. While they don’t openly advocate cheap, they are quietly changing to overseas outsourcing.

To be honest, for some reason, I don’t have a problem with Title Plants being posted outside the U.S. so long as- it is just the Indices; the actual documents are available online to look at; and the quality of work is good. Perhaps I am a fatalist. After all, Public and Private Title Plants all over the US have successfully been posted outside the Country for years. The County Administrators point to the cost savings and the volume-related expense. And I remember times when the Public Record in the Recorders office was behind, like way behind, like a year behind. That was a nightmare. So, posting it outside the Country caused them to catch up and stay caught up. That is good. Original Document copies were sent via internet, input (overnight US time) and returned the next day. Fast is good. Quality – not too bad. Perhaps not as good as done by seasoned staff, but current. And that is worth a lot, especially in the crazy market we had. And, as county administrators advised, it meant recording fees did not have to continue to rise, and they did not have to fight for tax increases to keep hiring and training staff to keep up with the heavy-volume market.

But now I see the fairly simple mass data input being combined with “Artificial Intelligence” (AI) where some believe a computer can ID the problems from the data input records to do most of the underwriting and create title work. Enough so that they claim they can do most titles without needing human intervention, or at least minimum human intervention. So back comes the outsourcing. It would seem to me that using staff in India, China, the Philippines in combination with AI are taking our profession down a new path. I do not believe that quality title abstracting, title searching, title examining, or title insuring can be done in 15 minutes by artificial intelligence with a minimum of oversight. Quality can only be accomplished with the human intervention of someone who is extremely familiar the specific location of the property being searched. There are just too many State, County and Municipal issues. What is customary in one state is a problem in another. Laws vary, laws change. Title Standards vary and change. The use of Artificial Intelligence, Outsourcing title abstracting and exams, and Title work in 60 seconds is an insult to the industry and damnation of the product.

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