15-Day Guarantee Offer Part Of Final Title Policy
GRAND RAPIDS — Lawrence R. Duthler and Thomas W. Cronkright II constructed Sun Title to be a different sort of title agency in the way it provides its services.
“When we first got into it, we really didn’t know much about title. We knew the fundamentals, but from the operations of a title company, we didn’t, and everything was reverse engineered,” said Duthler.
To explain how Sun Title is different, Duthler used the examples of the company’s award-winning office space, arranged to make customers comfortable, and its mobile closing units that allow closings to happen anywhere.
“It’s one of our greatest strengths of the company — taking everything from the customer’s point of view versus the title company’s point of view.”
Another example of this customer-oriented approach is Sun Title’s 15-business-day guarantee. Duthler explains: “Fifteen business days from our receipt of the recorded documents from the registered deed, we will issue that final title insurance policy — or we will staple the closing fee to the final policy when we send it to you.”
“We were getting this feedback from our clients saying this has become a big issue,” Duthler said, of the long turnaround times that recently have become common.
“The way it works is that, basically, you conduct the closing where everybody signs all the paperwork, and the most common documents are the deed, transfer of the ownership, the mortgage and the lender’s note for the new deal. Well, those get sent off to Kent County for recording. Those things are then returned, once they are recorded, to the title company. Each county is different; Kent County is really good at getting things turned around.
“One of the big reasons documents aren’t getting recorded or final policies aren’t getting issued is because it’s the title companies’ fault. They just haven’t had it on their radar screen.”
Cronkright said that the shift from quick turnaround to a process that can now take up to three or even six months came about a year ago.
“The cause of the shift was last summer, when underwriters actually started underwriting the titles again. We went from the land of 24-hour turn times of title commitments and underwriting,” said Cronkright. “You could conceivably bring — and we’ve done this — bring a loan application in, in the morning, and close by the end of the next day. There was not a lot of scrutiny that went into that underwriting process. It was basically a rubber stamp … .”
Jeffrey S. Dionne, partner and loan officer with Dionne Reilly & Associates, gave his take on the changes. “I think you have a monumental struggle with a lot of these properties, due to the fact that they’ve been foreclosed on and have so many legal documents to them. It’s a huge process and you just lose days and days and days.”
Scot Reilly, also a partner and loan officer with Dionne Reilly, elaborates, “The problem is, you’ve got this bottle with a cork in the top. (Title companies) have so much going through them right now, and they’re not staffed properly. So you’ve got all this volume coming through this funnel and it’s not getting out efficiently. I mean, there’s so many things that people try to pull in this business now. It’s worse than it was before.”
Duthler said the subprime market was a strong catalyst for the recent changes.
“With the subprime market, there was this insatiable appetite for these securitized mortgages, basically where Wall Street would buy almost anything that was coming out of these lenders as long as it was rated,” said Duthler. “There was this huge appetite for buying these mortgages, and if it didn’t have the title policy attached, they would still buy it and say, ‘Just give me the final policy when you get it.’
“So because of the appetite and the loose standards that Wall Street had on what they would consider a properly bundled group of mortgages, there was a lot of slack in there. Now that spigot has been shut off, and they’re only buying very precise (packages).”
Sun Title looked into the issues of delayed final title policies late last fall, with its 15-business-day guarantee following in December. Cronkright hopes that the current struggle faced by the title industry will result in a tighter, purer financing market.
“It’s not that you need more bodies in a department to issue final policy. It’s the fact that you have a lot of risk, because some of these documents have been kicked back, and the mortgage isn’t recorded and the deeds aren’t recorded — and the client probably is completely unaware of what is actually going on,” said Cronkright.
“They don’t have their final policy, but they assume that the documents have been properly recorded. That may or may not be the case. It’s not that they’re not covered there — they have what is called gap coverage … so they are insured — but the underwriters have become keen to narrowing this gap coverage window and holding everyone accountable to say, ‘Look, you have to get these final policies done.’”
Duthler interjected that, in previous years, people were financing so rapidly that in some cases, before a title company could issue the policy, it had been refinanced again for a lower rate.
Cronkright continued, “And we were not immune to everything we’re talking about right here. We struggled with final policy for the first three years of our operations, and it was something that we just kept beating our heads against the walls and saying, ‘Why are we 90 days or 180 days?’”
According to Duthler, in the past everyone was paid at closing and there was no financial incentive for title companies to issue final policy. Now, he said, there are financial disincentives for the lenders; they may get tagged with a fee for every month that goes by without the title policy.
Tracy McGray, operations manager for Sun Title, was an essential part in the reorganization of the “back room,” according to Duthler and Cronkright. The two said that McGray was able to assess the good and the bad, and then reconstruct the workflow in order to accomplish the 15-business-day guarantee, and allow Sun Title to bring all its policies up to date.