Looking back on 2017, a lot has happened in the title business. New studies offering industry insight, fresh regulatory activity, important court decisions and emerging technologies all figured into the year. Here’s a look back at four important news stories and what’s happened since then.
Insight into the Title Industry
The continuing need for consumer title insurance education was made clear by several studies and news stories last year. In February, a new buyer survey revealed that one in six homebuyers were unaware that mortgages involve closing costs. The survey of 1,000 recent homebuyers concluded that new “Know Before You Owe” TRID regulations haven’t yet resulted in more educated buyers. The report noted that many of the younger buyers surveyed were surprised by closing cost fees for title insurance, as well as for mortgage insurance, appraisal fees, taxes, bank fees and points.
Several 2017 news articles likewise revealed that real estate professionals can always do more to help buyers answer the question: “What does title insurance cover?” In June, we noted how a first-time buyer in Canada was sold a home without its fenced-in backyard, which rested on a separate plot. The buyer had purchased a lender’s policy but not an owner’s policy, which left him struggling to sort out the matter.
In another article, an attorney working in natural resources and environmental and commercial law detailed how many rural land buyers lack a full education on the limits of standard title insurance coverage. Many policies intended for homeownership do not offer protection against problems important to rural landowners, such as mineral interests, environmental contamination or land use restrictions.
Regulatory Changes Come and Go
With a new, more business-friendly administration in the White House, the regulatory environment began to shift in 2017. Action was taken regionally as well as nationally. In March, a Texas business group began lobbying for a change to state law that would have deregulated premium rates for the state’s title insurance industry. However, the group has so far faced an uphill battle, including resistance from trade groups and state legislators.
Meanwhile, in New York, Gov. Andrew Cuomo announced a new series of strong “anti-inducement” regulations targeting “improper expenditures” and alleged “kickbacks” in October. By December, the implementation of the new regulations stalled, with the New York Department of Financial Services announcing the rule change had been pushed back to February 2018.
Nationally, a bipartisan push began taking shape in October to change part of the Consumer Financial Protection Bureau (CFPB) “Know Before You Owe” TRID rule dealing with fee calculations on Loan Estimate and Closing Disclosure documentation. The strict requirements of the original TRID legislation had prevented accurate fee calculation for simultaneous issue title policy customer. The new regulation would address that and other issues.
The CFPB watchdog agency itself changed in 2017, as Director Richard Cordray announced his early departure from his six-year appointment due to end in July 2018. Over the years, Cordray had faced harsh criticism from Congress over CFPB decisions. Today, the future of the regulatory body remains uncertain; both Cordray and President Trump named successors to Cordray’s Directorship.
Notable Title Court Decisions
Last year also saw several noteworthy court decisions concerning the title issues and the title insurance industry. In February, a “Star Wars” performer lost out in a California appeals court case involving a four-lot development venture in Tiburon, Calif., which went sour. The case was notable for its complexity and decades-long timeline.
As was the case in 2016, last year Illinois was again at the center of an important title industry case, this time involving real estate attorney fees. It was another protracted case, originating in 2006, with a Cook County judge determining the title firms had broken no laws by compensating legal counsel. The Appellate Court reached the same decision and a deadlocked decision last year by the Illinois Supreme Court meant the lower ruling still stands.
Finally, a U.S. District Court in Florida sided with a commercial real estate title company in November, in what was dubbed a “Hail Mary” lawsuit. A successor lender had attempted to recoup losses on the purchased debt of a vacant lot in Fort Lauderdale, Fla. The court decision was important to the wider title industry because the plaintiff sought damages of more than the title policy’s $5 million cap on damages.
Leaps Forward in Industry Technology
Lastly, 2017 was another big year for leaps forward in technological advancement in the title industry. In 2016, it was electronically recorded documents that were gaining acceptance, with a one-millionth eRecord milestone reached in Iowa and eRecording networks expanding to 28 states.
In 2017, digital real estate transactions went from eClosings to end-to-end eMortgages within the year. With no documents to “wet sign,” a North Carolina homebuyer last year became the first complete a 100-percent eClosing in May. The transaction still required a live notary and access to legal counsel during the closing, but remote digital notary services are under development.
Another even more radical technology making headway in real estate is blockchain technology. This is the type of distributed ledger technology (DLT) behind cryptocurrencies like Bitcoin. However, the software has some potential applications in real estate, including increasing speed and security of transactions, automating parts of the transaction process, eliminating the need for transaction third parties, and even allowing for fractional and incremental homeownership. Looking ahead to 2018, experts say blockchain technology could be implemented in MLS and title record procedures.
A new year is upon us, but that doesn’t mean the end to the stories that mattered in 2017. By all estimations, consumer education on title insurance will remain a key concern of professionals, we can expect more impactful regulatory changes and court decisions impacting our industry, and technological advancement will continue to march ever forward. New stories may await us this year, but for now, we’ll have to wait and see what surprises 2018 brings.