Following the challenging days of the 2008 collapse, title companies found themselves impacted by a perfect storm of consequences: an increase in claims, slowed government searches of records, transactional drop-offs, increased competition and rising purchases by investor groups more likely to use the services of real estate attorneys and brokers. In such a climate, title companies have needed to be astute with regard to their banking relationships – seeking bankers who provide security, responsiveness and creative business solutions for a myriad of situations.
Among the most important services banks need to provide title companies are:
- Rapid wiring capability – with title companies frequently executing 150 to 300 settlements a month it is vital that title professionals can rely on a bank that seamlessly processes wire transfers. Additionally, title companies need to be able to view such transactions in real time virtually and by different users who must have access to specific accounts with the ability to generate reports in multiple formats.
- Customized care – with transactions now frequently outside of “one size fits all” approaches, banks for title companies have to provide flexibility as well as a willingness to be available 24/7 with empowered decision-makers.
- Products and services that are designed to enhance and extend profitability such as cash sweeps that funnel idle funds into active investment accounts or apply such funds to pay down lines of credit balance; accounts receivable management to ensure that collections are made expeditiously and credited same day whenever possible; remote deposit links are crucial as are electronic debit payment capability
- Investment counseling – many jurisdictions require title companies to hold their investment accounts in municipal or government bonds or in FDIC insured accounts. Tile company banks should be in a position to recommend investments that are safe with the liquidity necessary to optimize interest earned daily.
- With the rise of defalcation claims by agents and claims because of theft and fraud, title companies need to be safely reliant on bank services that specifically protect escrow accounts and detect fraudulent activity or unauthorized debits immediately.
- With title companies so focused on all forms of real estate, banks that offer profound expertise in real estate valuation, transactional range (debt-to-equity swaps, debt restructuring, refinancing transactions, mezzanine financing deals, other deal combinations and traditional deals as well) are a most desirable partner. With many title companies operating within a locally circumscribed area, banks that have a historic and broad understanding and experience with the local real estate scene offer immeasurably important advantages.
Today, with title companies bracing for the new Consumer Protection Bureau (CFPB) rules, there are also heightened reasons for banking relationships that focus on rapid response and accessible decision-making. Among the new rules anticipated, for instance, will be the qualified mortgage (ability-to-pay) rule, a provision related to high-cost mortgages, a rule impacting loan officer compensation, new servicing standards, an escrow rule about impounding accounts and tax insurance, and another appraisal guideline related to high-cost mortgages.
As title companies seek to accommodate to new levels of regulation as well as complex deal making and more cautious approaches to title searches – some of which are even tied to land use, zoning, energy and mineral rights requirements, finding the right bank can often be a major driver of success. Title companies cannot risk costly and cumbersome delays in processing internal transfers or in stop payments. And, they need a bank that will step up and deliver whatever additional lines of service they may require – from collection, wiring and closing services to escrow, tax and recordings. Having a banking relationship that is comprehensive, customized, responsive and flexible is a critical component to title company profitability now and in the future.
By Ronald K. Wills, Vice President, EagleBank Corp.,Bethesda, MD