The information which follows is in the form of a report on the recent ALTA Technology Forum. This report provides a "bully pulpit" for a case we have been trying to make for some time - that communications, connectivity and the Internet are revolutionizing the way we do business.

We feel it is our responsibility to inform you, our clients, of these developments. We’ve said it again and again and again, and this may be our last chance to warn you. You must act now to remain competitive.

Below, the leaders of our industry will tell you that the time to innovate is now, and those who hesitate will be left behind. The Forum made it clear that soon is already becoming now.

Before we proceed with the report, we'd like to mention that Standard Solutions has been quietly laying the groundwork for the upcoming revolution. We have created new technological tools that provide communications abilities to help you to streamline your business and provide better service to differentiate your product in an increasingly competitive marketplace.

Our ssLIC communication package provides the communication infrastructure needed to connect traditional network software programs (such as Standard Conveyancer and various loan origination systems to each other and the Internet.)  ssLIC can put you in touch with your clients and service providers, online.

Significantly, ssLIC can also be used to provide Internet connectivity for almost any program including our competitors' software products, particularly forwarding status information to your web site server.

We have added Internet specialists to our staff to help settlement agents - our clients and others - with the development, hosting and advertising of their own web sites. This eliminates the need to start from square one with a developer who does not know the title and settlement business.

We are creating Internet software for fully automatic web posting of file status information for lenders, brokers and borrowers, directly from your SC system. (This will also be available for users of our competitor’s programs. )

We have other exciting Internet-related capabilities in the works, including online document delivery … Please contact us if you are interested in learning more or if you have exciting plans of your own. 

Overall Impressions of the ALTA Tech Forum

The Internet revolution has hit the title and settlement industry. Communications and connectivity tools were on everyone’s mind at the conference. Internet based systems and tools were pervasively present. Electronic commerce was the hot topic. Internet and E-commerce educational sessions drew the most interest and the largest audiences by far, with these sessions overfilled and others sparsely attended.

New England must catch up fast. Only a handful of New Englanders were present among hundreds at the conference. New England continues to lag behind the rest of the country in use and acceptance of advanced communication tools and Internet technology. This is in part due to the preponderance of independent attorneys, small law firms and title companies handling title work in this area.

One reason our area has gotten away with this so far is that the national providers’ attentions have been focused on other regions. This is about to change and we cannot afford to ignore the national trends any longer.

Renewed Emphasis on Service Quality. Providers large and small are refocusing on improving quality of service to customers to attract and keep business in a competitive market. Technology factors heavily in their plans.

New Competition Looms. A plethora of new competitors are on the horizon, many of whom will use technology to compete aggressively against independent title agents. There are two main groups of new competitors:

Title Industry Players want to expand and go vertical:

Title Underwriters have deep pockets and the ability to finance technological innovation. They will struggle to maintain good relations with their independent agents while they compete in the changing marketplace by delivering services in new ways.

Major Law Firms and Title Companiesare flush with cash from recent good times and looking to expand. Many are using or plan to use technology as a competitive edge. Connectivity will make multi-office companies more manageable. Economies of scale and new marketing and communications techniques will concentrate more business in fewer hands.

New capital sources are eyeing the title and settlement marketplace:

Realtors^® are well-financed moving aggressively to take vertical control of the industry.

Lenders are seeking more control of the entire process to lower costs and earn new income. Internet lending is all the rage and capturing a larger share of the market.

For the first time, investors from outside the industry are moving in on the cash flows of the industry…

Internet marketing firms are showing interest. (Well-financed and savvy, their technological prowess could present a fast-moving threat. )

(Conclusion: There may be a shakeout of technically unprepared small firms when the shift to electronic commerce takes hold in New England. )

Timing is the Key to the Redistribution of Wealth. As some providers gain market share through technological initiatives, others will inevitably lose. Those who arrive first will have a much greater chance of success.

National Direct Marketing is a growing trend. Many new players are targeting and marketing to lenders on a national scope.

Newly Vertical Market. Many former niche players are seeing the opportunities in offering a wider variety of services, and are looking to market services outside of their traditional niche. Example: Realtors are attempting to take more control of the closing process to sell a wider variety of services.

(Conclusion: New, large scale, national providers may perceive a competitive opportunity in our region. )

Size matters. In most of the United States, title or escrow agencies with dozens of processors are common and there are far fewer offices as small the average New England law firm or title company. This is responsible for a relatively slow rate of investment in technology here.

Digital Documents. Online delivery of documents will become more important as a competitive product differentiation tool. Some western settlement companies already let borrowers and lenders review notes, mortgages and HUD-1’s prior to the closing.  

Online Status Information. Another important value-added service. Online status information saves staff time and makes it easier for lenders, borrowers and sellers to check the status of their transaction.  Even the dreaded broker will expect online access to information.

Online Closing Instructions. This year the borrower will appreciate online information as a distinctive added service.  In years to come, online information will become commonplace and expected of settlement agents.

That was then…. For some time our position has been that the big connectivity breakthrough is just around the corner, but probably won’t be this year.

…. This is NOW. Based on what we’ve seen and heard at the Tech Forum and elsewhere, it looks like this year will hold unprecedented change and challenge for all of us. It is likely to be the year of the big breakthrough.

One-stop shopping is up for grabs - now. It seems that everyone wants to own the whole bundled services pie. Several providers were demonstrating technology that, if used by agents, would take away much of their control of the transaction, particularly the sale of additional services.

It’s Time. No one has yet cornered a significant portion of the market and the exponential growth is still to come. There is still opportunity for those who act quickly.

Be First. Being first counts for a lot… once buyers get used to a certain source Internet inertia will set in and they will be unlikely to change to another source.

 

Underwriter Executives See A Connected Future

A general session featured senior executives of several national underwriters: (LandAmerica, First American, Stewart, Fidelity and Old Republic) and their views of the industry’s future technology-wise.

One view. Their views of the future were strikingly consistent. Though each executive put his own spin on the topic, there was complete agreement as to the main points.

Connectivity : New communication techniques, particularly Internet connectivity and information delivery, will be a major tool to improve service, reduce costs and bring in new business.  

Declining Margins: New Internet-based competitors are appearing who will compete successfully on price, bringing down the average income per transaction for settlement agents.

Bundled Services: New competitors will arise who will offer lenders and other clients soup-to-nuts service. Everyone else must now do the same to compete.

All politics (and settlement work) is local: The local aspect of the business relationships in our industry is important and may be what saves the independent title agent from "Wal-Mart-ization".

Independent Agents: Two executives specifically supported the future role of independent title agent.

Quotations of Note from the Underwriter Execs (In alphabetical order as presented at the conference)

Charlie Foster, Chairman and CEO of LandAmerica: "Technological superiority was once the key to relative success. Now it is the key to survival." (In regard to title and settlement technology) it has often been said that in the land of the blind, the one-eyed man is king … New technically astute competitors are sizing up our marketplace and livelihoods (with both eyes wide open)."

Gary Kermont, President of First American: Gary spoke at length about First American’s new technical tools. "Underwriters will continue to use technology to compete to attract good agents," he said He also emphasized the local nature of the real estate closing process and the importance of independent agents. "Agents will become increasingly important as maintainers of local business relationships."

Stewart Morris, President and Chairman of Stewart Title: Stewart also described his company’s technological initiatives. "The pace of change is picking up. Those who adapt quickly will survive." (Mr. Morris left the audience to contemplate the fate of those who do not adapt quickly.)

Pat Stone, Chief Operating Officer of Fidelity National: "Average fees are declining. Productivity and workflow-based, single-seat transaction management are the answers."

Randy Yeager, Executive Vice President of Old Republic National"I think I will drop the Y from my name so next year I can speak first … The real estate industry is about to undergo its first real paradigm shift"

Other Trends on the Horizon

Electronic Signatures. 47 States have passed or are considering legislation to offer protection for electronic signatures similar to that now provided for "wet ink" signatures. Enabling legislation is before the U.S. Congress and passage in some form is likely.

Conference Buzzwords

Transaction Management - The players with the best technical tools will be able to seize the role of "transaction manager." The transaction manager will have the ability to control the pipeline for future sales and sales of additional services. One thing that was very clear at the Tech Forum is that the sophisticated players had as their ultimate goal the capture of vertical control of the sales pipeline. The transactions manager’s role is the brass ring of the title industry.

The Closing Experience - The quality of the overall closing experience for borrowers and other parties will become the defining element of settlement agents’ service and will become an increasingly important competitive factor. We need to expand our thinking beyond the careful handling of legal issues and realize that delivering a pleasant experience to all participants is the new key to product differentiation.

Bundled Transactions - New competitors will arise who will offer clients one-stop shopping for a variety of services. To remain competitive, agents are seeking ways to be the provider of that bundled transaction to their lender clients .. or at least earn a fee for the referral.

Software Consolidation - The long-term trend toward consolidation and acquisition of software vendors continues. Most of the national software vendors are now owned by title insurance underwriters or their parent financial services firms. Most national underwriters own one or more software ventures. There is a growing trend toward acquisition of regional software providers by underwriters and national software companies. Lenders, law firms and title companies are partnering closely with software developers to gain competitive advantages.  

"Team Up for the Bundle" - (Stewart Morris’ phrase) To remain competitive, settlement agents must begin "teaming up" with providers of other services to provide a competitive offering while each player focuses on its core competencies.

Single-Seat Transaction Management - Taking one-stop shopping to a new level where your clients have no need to look elsewhere for services. Many industry players are planning to scoop up business by offering a wide array of services.

Transaction Fees - There is new trend towards transaction-based fees for services, software and turnkey systems. Technology providers realize the income potential of their products and want in on the cash flows.

Wild-Eyed Opinion: Multi-tier marketing methods may develop. Many industry players want to own the whole bundled services pie. Most title agents at the forum were skeptical of buying into technology at the cost of giving up control of the transaction to a third party. We believe what eventually prevails may be a multi-tier business model that shares proceeds fairly with those who generate the business.

 

Conference Summary and a Plug for the Home Team

Much of what was said in the conference can be summed up by two of the phrases mentioned above: Transaction Management and the Closing Experience.

By using innovative marketing and production techniques, taking control of and managing the closing process, and providing quality service and one-stop shopping, you can remain competitive as everyone seeks to expand their share of the entire industry. This trend goes beyond technology to every aspect of the settlement process.

A new focus on quality … especially providing all concerned - lenders, borrowers and sellers, brokers and other attorneys … with a pleasant and efficient Closing Experience is the key to making your office stand out as a quality provider.

It used to be a title industry maxim that you could only reasonably be expected to provide two of these three things: Fast, Good & Cheap.

Today's technology gives us the power to deliver all three. Soon, the marketplace will demand nothing less. Those who want to remain competitive must provide a quality product, more quickly and at a lower price.

Standard Solutions is a leading advocate for change to prepare New England for the upcoming revolution. We can help you stay ahead of the pack. For your Internet solution, contact us at techpower@standardsolutions.com.