The industry has gone through some massive changes in the past several years, with more changes to come. During the National Settlement Services Summit in San Antonio, executives from four title insurers talked about tough topics like cybersecurity and eClosings, as well as their thoughts on the future of the industry.
Mary O’Donnell, CEO and President, Westcor Land Title Insurance Co., was joined by Jeffery Bluhm, Executive Vice President – Manager, Agency Services and Administration, Old Republic National Title Insurance Co.; John Hollenbeck, Executive Vice President, First American Title Insurance Co.; and Patrick Stone, Chairman and CEO, Williston Financial Group.
Cybersecurity
Arguably one of the biggest threats to the industry today comes from cyber hackers. Almost every day, we hear reports of another wire transfer that was intercepted, another email address that was compromised. Even the Consumer Financial Protection Bureau (CFPB) wrote a word of caution on a recent blog post.
“Technology will more than likely evolve to the point where it will help minimize cyber attacks, but we all know the challenge is that cyber criminals are always way ahead of the rest of us,” Bluhm said. “There are websites out there that you can go to and for a nominal amount of money, somebody will sell you a package that tells you how to do this stuff. It’s really scary, but it’s reality.
Stone agreed, stating, “If you look at where the majority of hacking is coming from, it appears that it originates in St. Petersburg, Russia, the Czech Republic or China. The interesting thing about that is hacking in Russia is not a crime. There are actually start-up companies in St. Petersburg that recruit kids out of college to come and work for them to hack the United States.
“This is not something that is going to go away,” Stone continued. “This is not something that is amateur hour. It is very professional and very profound and will continue to happen. The biggest risk to us is probably not the hacking of our systems, but the hacking of Realtors who we do business with. Most Realtors use iPhones and they use very easily accessed systems like Hotmail or me.com or AOL and so, consequently, their transactions or their communications on cellphones are hacked continuously. A criminal will assemble a lot of information about a transaction you are handling and if the Realtor exchanges information that they can discern the names, the file number, the legal address, then they can send you an email instructing you that they can’t come to pick up the check, or send it to such and such address.”
Education and training are keys to protecting your office, they all agreed.
“It all starts with awareness and education,” Bluhm said. “Cyber criminals recognize that humans are the weak link and if you are not in your business today educating your people and reinforcing your teams about cyber awareness in general, please start doing so.”
He also recommended having someone come in and evaluate the strengths and weaknesses of your company’s system.
Stone said attendees may be surprised at how susceptible their staffs are to email phishing schemes out there.
“We’ve done this on a sophisticated basis a couple of times,” he said. “When we started doing it, 40 percent of our staff was opening up attachments they shouldn’t have opened up. Now we are down to six percent. It’s way too much, but it’s a tremendous improvement. We are a human business and our staff is busy and unless you really make it a point to teach them to be careful and reward them for being careful, you are going to have a problem because you are going to be hacked more and more.”
The best thing to do, on a transactional level, is simply picking up the phone.
“Your biggest and best protection is to educate your staff not to react to anything except to verify any instructions to change instructions,” Stone said. “You need to verify verbally with the participants; you need to train your staff.”
“Right now our best defense is to pick up the phone and call somebody,” Bluhm said. “Trust, but verify. When you verify, don’t verify based on the email, fax or other information you received. Go back into your title or escrow file that has everybody’s original phone number in it. Yes, it’s an additional step, but that additional step may save your company, save your reputation. There is a lot at stake if you don’t trust but verify.”
Hollenbeck also urged attendees to report these attempts to the authorities.
“We are catching needles in haystacks and doing a pretty good job at it,” he said. “But, the rate of these attempts is continuing to escalate. What we really need to do is shut down the crime and we need to shut down the organized crime that engages in this. We need to help law enforcement. The FBI has a site, IC3, it’s an FBI internet crime collection site.
“The truth of it is that a lot of these attempted hacks that we are catching are part of a bigger picture,” Hollenbeck continued. “If we take every single attempted hack and we fill out the forms on the IC3 website for the FBI, it creates a broader database, enabling the FBI to tick and tie IP addresses, cell phone numbers and email addresses. Information on every attempted theft allows the FBI to aggregate the total amount that is at risk. Quantifying the overall size of the problem enables the FBI get the resources it needs.”
O’Donnell agreed, noting that in a recent meeting with the Consumer Financial Protection Bureau on the topic, bureau members were stunned at how prevalent the problem was.
“As an industry, collecting that data and getting that data to our regulators and law enforcement is going to be key,” she said. “No question, we are not going to stop it. If the NSA gets hacked, we are going to get hacked, but having that education process [is important].”
eClosings
“eClosings are a fact,” O’Donnell said. “They are a necessity. We are not going to do closings forever the way they are done today, we are just not. So the question around eClosings and eNotarizations and how are we going to incorporate that into our process, we have to take a lead on that. There are a lot of players that have to come into that equation, our lenders, Realtors, customers, the secondary market.
“What I love when we talk about eClosings and ask those participants, ‘Why isn’t it more common today?’ Everyone does one of these things. Talk to Fannie Mae, they say our industry won’t do it. Talk to our industry, it’s because Fannie won’t do it. Talk to lenders, lenders say consumers aren’t ready for it. So all of those elements have to come together to be successful in that environment,” she said.
“I think the reality is we’ve got to think about a day, and it’s not that far away, where closings will take place remotely, take place through technology,” she continued. “They may take place on your phone. As an industry, we’ve got to embrace that and manage that risk and see where it is going to take us.”
Hollenbeck agreed, saying, “I think where our industry needs to go is to get rid of email completely, especially if we are going to buy homes on iPhones. We need to reinvent our technology in a way that helps us communicate efficiently and more securely with consumers.
“Our industry has changed so much,’ he continued. “Look at what we’ve done in the last 40 years in our industry. We used to have offices in every single county; we had title plants in every county. Where we had plants, they were hand-posted and physical lot books. Then we started to computerize them. Once that happened, we started to share the cost of the plants and came up with joint plants. When we came up with joint plants, people no longer learned how to post and learn to run out legal descriptions before they became title searchers. Change is an ordinary and important part of our industry, but it requires us to adapt.”
One attendee asked the panelists if they were concerned that an increased focus on eClosing would lead to the industry pushing themselves out of business. The answer was a resounding no.
“We have had a very positive and rewarding experience with a large credit union doing eClosings,” Stone said. “Positive and rewarding in the sense that it shortened the closing cycle, reduced the amount of errors. It really was a much more seamless process. Did it reduce our importance? Not at all, the knowledge employed by our employees was still valued by the client. Our employees actually spent more time focused on the client and resolving problems. The process itself actually created an environment where our knowledge was extremely valuable, our underwriting knowledge was rewarded, our escrow and closing knowledge was rewarded. The people involved in it were much more engaged in a positive manner with the client than they were in a typical closing.”
Millennial effect
Another topic the panelists talked about was company culture and customer experience, looking particularly at how to attract millennials.
Hollenbeck emphasized the need to bring the next generation in.
“We’ve totally changed our industry, and it’s made us much more efficient, but we haven’t completely figured out how to replace the knowledge,” he said. “If you look at the population of employees in our industry and look at the demographics, in the next five to seven years, we are going to see many experienced people retire. How will we replace their knowledge? The problem is not unique to the title industry, but we need to work on it.”
In terms of recruiting millennials into the industry, Bluhm said it was important to provide them with an opportunity to contribute to the business.
“They want an opportunity to contribute,” he said. “They want an opportunity to make a difference in whatever it is they are doing. They are passionate; they want work/life balance. It’s our role to keep the generational transition and succession of the industry going, to engage them and try to find out what are their passions, where do they want to make a difference, and try to provide them that opportunity to contribute. If you do that, you help minimize the risk that your agency will no longer be relevant and you can continue on for decades and decades and generations and generations, knowing that something that you are a part of has endured. The value you provide is going to be required for a long time, unless there is a drastic change in how real estate is purchased and mortgages are made in this country. I just don’t see that happening.”
In addition to recruiting employees, it will become even more important to provide a great customer experience to these up and coming millennials. O’Donnell noted that in a study the American Land Title Association did a few years ago, it was discovered that the majority of homebuyers didn’t find out about title insurance or the settlement process until late in the process, yet wished they would have. She said those who did get the information sooner had greater satisfaction with the settlement process.
“So I think one of the things as we move forward and start looking at the millennial buyer or Generation Z is how are we going to get that message out? How are we going to talk about who we are in a way that someone will actually look at?” O’Donnell said. “One of the things we have got to be looking at is that move from B to B to B to C-type environment. How do we communicate who we are and what tools are we going to use to do that?”