Title Agency & Settlement Services Market Trends in · • Data scraping • Fuzzy logic • Transaction Management Platforms ... – Survey data collected & analyzed by professional

Market Trends inTitle Agency & Settlement Services

Pennsylvania Land Title Association

The Homestead

June 5, 2006

Joe Casa, Founder and Publisher

October Research Corporation

3

Future Trends

1. Mortgage fraud

2. Predatory lending

3. RESPA Reform (consumer shopping, packaging)

4. MLS Ownership/access

5. AfBA – CBA’s Title insurance rates

6. Realtor commissions/FISBOI

7. Immigrant markets

8. E mortgage

9. GSE Reform

10.Public record access

4

Future Trends

• Market & customer needs– Packaging continues as centerpiece of lenders & builders

• Unique bundles

• AfBA Offerings

– High technology integration• Data scraping

• Fuzzy logic

• Transaction Management Platforms

– Title & settlement technology• ASP vs Desktop.

• VMC OMF vs title production

• Costs to get connected

5

Future Trends

• Products and Services– Full title products to lose share as a % of total market

– Market bifurcation & segmentation

– Substitute and low-cost products in demand • Balloon, refis

– new note only requires endorsement

• Underwriter substitutes

– Unique bundles requirements emerging

– VMC services needed in purchase markets• Pest & home inspection, surveys

6

Future Trends

• Consolidation in all sectors– Settlement services, mortgage, real estate

● 25 important companies in each segment

– Small and large firms best positioned• Local agency strategy should differentiate

on consumer closing experience

– Commodity-like markets emerging• How do you differentiate?

• Rates increase– Refi continues to normalize

– Equity stable but cost pressures continue

– Purchase markets strong

7

Future Trends

• Good closing experience at a premium– Critical path to success

– Market pressure on closing costs will ease

– Chicago Tribune

• By one estimate, three out of every 10 mortgage settlements have at least one error. The mistakes cost the lending industry millions of dollars that some say are passed on to homebuyers and sellers as excessive fees. Errors range from poor spelling to mistakes in calculating escrow payments for property taxes. Escrow errors often involve use of an outdated assessment rate by the closing agent, attorney, or escrow company to determine how much money the borrower will pay each month, together with the mortgage payment.

8

AfBA Markets

– Competitive positioning • Title companies, law firms, settlement services

– New earning streams • Realtors, originators and builders

• Revenue per transaction >$250

• Expanded product model >$500

– Enhance consumer experience• Wachovia, Citi, BA,

– Process improvements – Risk mitigation• Lending Tree, Quicken, E Loan

9

In the Cross Hairs

• Regulatory Environment– RESPA Reform

• GFE Lite

– State CBA statutes • NY Settlement

• DOI Initiatives

• GLB passes banks on DOI rules

• Outside business vulnerability*

– Plaintiff bar*• Class action (Ohio)

• Disclosure and steering claims

10

Research Results

– Origination Data

– Transaction Management Efficiency Report

– Title Agency System

– National Mortgage Origination Survey

– National Closing Survey

– Independent Title Agent Survey

– Title Agent Technology Study

11

785 785 859

1450 13101048

2215

2885

3945

29203120

2340

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E

In M

illio

nsOrigination Volume

12

58.6%63.1%

72.0%

51.7%47.8%

42.1%

2001 2002 2003 2004 2005 2006YTD

Re-fi Share of Mortgage Originators

13

44% 47% 45% 47% 48%

74% 77% 80% 83% 87%

2002 2003 2004 2005 2006

Top 5 Top 25

Mortgage Share of Top Originator

14

Impact of Transaction Management Systems on Title Agency Costs

(Purchase transaction)

30%30%8%44%33%33%24%

2.3 hrs.137 min.4 min.9 min.99 min.15

min.11

min.TMS Savings

TMS Savings Per Transaction


min.35

min.TMS


min.47

min.Traditional

Total Time

(hours)Total Time (minutes)

Escrow WarehouseProcessorCloser

Title Plant

Order Entry

Process

15

Impact of Transaction Management Systems on Title Agency Costs

(Refinance transaction)

27%27%11%56%29%33%11%


min.3 min.TMS Savings

TMS Savings Per Transaction

4.1 hrs.247 min.44 min.8 min.145 min.

30 min.

20 min.

TMS

5.6 hrs.338 min.49 min.19 min.203 min.

45 min.

23 min.

Traditional

Total Time

(hours)Total Time (minutes)

Escrow WarehouseProcessorCloser

Title Plant

Order Entry

Process

16

Home Equity Market Value

All sub prime and prime on loans greater than $200k LTA Title Insurance/closing

Used on best customers with scores above 630 Short title/property reports

Used on best customers with scores above 630 Deed Report

Usage Assumptions

2,808,146,362 8,707,277

2,513,574,972 $750 3,351,433 LTA Title Insurance/closing

187,454,520 $70 2,677,922 Short title/property reports

107,116,869 $40 2,677,922 Deed Report

Total Value Avg. Price # Transactions Title Product

Based on 5.9m prime home equity loans originated and 2.8m sub prime loans.

17

Title AgencyTechnology Adoption

(Refinance Before/After)

21%21%15%46%34%-8%

$3.21

$4.75 $8.62 $10.29 $0.92 ($0.63)Tech Savings ($)

$12.06

$17.78 $48.07 $12.06 $1.80 $8.57 Tech Install

$15.27

$22.53 $56.68 $22.35 $2.72 $7.93 Pre-Tech

Post PackagingEscrow

OfficersClosing

DeskReadingExam/

Municipal

Order/ Data Entry

18

Title AgencyTechnology Adoption

(Refinance Before/After)

13.40%26%0%6%0%27%

$29.71 $0.44 $0.00 $0.04 $0.00 $2.10 Tech Savings ($)

$191.79 $1.26 $64.00 $0.65 $19.83 $5.71 Tech Install

$221.50 $1.70 $64.00 $0.68 $19.83 $7.81 Pre-Tech

OverallPhoneCouriersFaxesRecordingFunding

19

AfBA Markets

AfBA Financial Model

Title Insurance

Sales 100.0%

Cost of Sales

Information Labor 33.0

Labor (NE) 10.0

Total Labor 43.0

Cost of Premium 5.0

Other Direct Exp. 4.0

Total Cost of Sale 52.0

Gross Profit 48.0%

ABA Financial Model Vendor Services

(Valuation, pest, home)

Sales 100.0%Cost of SalesContractor fee 70.0Labor (NE) 5.0Total Labor 75.0

Other Direct Exp.. 2.0Total Cost of Sales 77.0

Gross Profit 23.0%

Independent Title Agent Survey

21


• Survey objectives

– Profile the independent title agent

– See the market through their perspective

– Learn about their business practices

– Understand their technology usage and needs

– Learn what influences them to do business with others

22


• Survey methodology– 30 minute phone interviews with agency owners/GMs

– Agencies qualified by size and number of years in business

– No direct operations included from top five underwriters

– Survey data collected & analyzed by professional statisticians

– 450 surveys conducted in four U.S census regions• National yellow pages

• Conducted proportionately to agent population

23


Three Volumes

● VOLUME I: Measures and analyzes independent title agents’technology and software preferences, including usage, satisfaction and selection techniques, and future needs.

● VOLUME II: Reports independent title agents’ perceptions and preferences about underwriters, and key business practices.

● VOLUME III: Surveys the largest agency operations in the country; reports their perspectives on the same key technology preferences and business practices as above.

24

Independent Title Agent SurveyBusiness Perspectives

General Agent Survey

Total Office Revenue

<$1 mil.53%$1-2 mil.

35%

$3-5 mil.7%

$6-10 mil.2%

>$20 mil.2%

$11-20 mil.1%

25



Number of Years in Business

2-5 yrs.26%

6-10 yrs.18%

11-15 yrs.12%

16+ yrs.44%

26


Greatest Opportunity in the Next 12 Months

18%

7%

4%

4%

4%

4%

5%

14%

16%

25%

0% 5% 10% 15% 20% 25% 30%

None/can't think of any

Other opportunities

Referrals/good contacts

New/upgraded technology

Lower/stable interest rates

Good economy

Affiliated business arrangements

Growing home sales/new construction

Expand geographically/open new offices

Grow business/increase share & customers

27


Controlled/Affiliated Business Arrangements With Other Companies

Do have CBAs27%

Do not have CBAs73%

28


Most Popular Sources for Industry News

6%

6%

6%

6%

8%

10%

21%

49%

67%

0% 10% 20% 30% 40% 50% 60% 70%

Wall Street Journal

The Legal Description

State/regional Land Title assns.

Settlement Services Today

RESPAnews.com

National Mortgage News

Title News (ALTA)

The Title Report

Underwriters bulletins/newsletters

29


Agency Business Perspectives

30


• Most large agents are open to trying new underwriters. To get their business, the underwriter would have to provide attractive premium splits and fees and bring in new clients.

• Large agency managers were much more open to switching underwriters than smaller title agents.

31


General Survey

Primary Underwriters

12%

3%

3%

3%

6%

9%

9%

10%

13%

15%

18%

0% 5% 10% 15% 20%

All Others

United General Title

Transnation Title

Ticor Title

Old Republic National Title

Lawyers Title

Commonwealth Land Title

Fidelity National Title

Chicago Title

Stewart Title

First American Title

32


Primary Underwriters

20%

4%

4%

5%

9%

9%

13%

13%

25%

0% 5% 10% 15% 20% 25% 30%

All Others

Title Resources Guaranty

Land Title

Lawyers Title

Old Republic National Title

Fidelity National Title

First American Title

Chicago Title

Stewart Title

Large Agent Survey

33


Number of Other Underwriters Used Regularly (Besides Primary & Secondary Underwriters)

None73%

One14%

Two7%

Five1%

Four2%

Three3%


25% Use more than 2

34


Favorite Underwriter(among 39% who use two or more underwriters and have a favorite)

32%

9%

9%

9%

14%

14%

14%

0% 10% 20% 30% 40%

Others

Title Resources Guaranty

First American

Fidelity National

Stewart Title

Old Republic

Lawyers Title

Large Agent Survey

35


Underwriter Staff Member Who Most Influences Favorite Lender Status(among 39% who have a favorite underwriter)

42%

20%16%

8% 8%4%

0%

10%

20%

30%

40%

50%

No par

ticula

r per

son

Account

repr

esen

tativ

eAtt.

/under

writ

ing c

ounsel

Regio

nal m

anager

Title m

anage

r

CEO

Large Agent Survey

36


How Often Are Agencies Asked or Pressuredto Insure Over Certain Items?

Asked sometimes33%

Never asked27%

Asked very often20%

Asked rarely20%

37

Independent Title Agent SurveyTechnology Perspectives

Technology Perspectives

38



Brand of Software by Product

SoftPro

(FNIS/SoftPro)51%

Developed in-house

10%

LandTech for

Windows10%

TSS Title Express

9%

AIM for Windows

(Landata)20%

39


Primary Uses of Software

89%

89%

93%

95%

98%

0% 20% 40% 60% 80% 100%

HUD applications orforms

Escrow & closingdocuments

Order management

Order entry

Commitment & policyproduction


40


Doing business online

• What percentage of your incoming orders and outgoing products are transmitted online via PDF/Data packets (not including e-mail messages)?

● >50% say less than 10% of their products

are delivered electronically

● 12% say up to 20%

● 10% say up to 40%

● 18% say up to 60%

41


A gencies & t heir R ealt o r C ust omers' U se o f Transact ion M anagement Syst em Plat f o rms

U se p lat f o rm11%

D on' t use p lat f o rm

6 8 %

D on' t know/ don' t

know what it is

2 1%

THANK YOU!

Download Presentation @www.thetitlereport.com/plta

[email protected]

330.239.4206

Documents

Title Agency & Settlement Services Market Trends in · • Data scraping • Fuzzy logic • Transaction Management Platforms ... – Survey data collected & analyzed by professional