Compared to other industries, the title insurance field has been slow to embrace technology. Although all of the nation's leading title insurers have comprehensive Websites, electronic ordering and processing programs, and various technological initiatives in the works or under development, the inherent nature of title searches and analysis processes may sometimes defy technology.
"If you surveyed the country, you would find that most areas are still doing it the way they did 100 years ago," says Ed Burton, vice president and central region manager for Chicago Title Corp. "The industry has not advanced with technology as much as you might think."
As title insurance companies begin the task of insuring a purchaser's or lender's interest in a particular piece of real estate, their first chore after receiving an order is to pore through public records and historical documents to determine the legitimacy of ownership and the insurability of a particular borrower or buyer.
Needless to say, this process becomes more complicated than conducting a basic credit check or confirming who holds title to a particular property. A myriad liens and other legal and regulatory factors can come into play, especially with commercial property transactions, where special coverages or endorsements may be necessary. Legal requirements and procedures differ in each jurisdiction of the country, adding further complications.
All of this points to the difficulty for the industry to create a one-size-fits-all model for computer-generated search and analysis for complicated commercial transactions.
On its Website, Chicago Title & Trust gives a basic list of some of the most common hidden risks that can cause loss or create an encumbrance on title - false impersonation of the true owner of the property; forged deeds, releases or wills; undisclosed or missing heirs; instruments executed under invalid or expired power of attorney; or mistakes in recording legal documents.
Those are just the basics, which makes it easy to understand why a title insurer needs not only to search, but also to properly analyze the findings of the search to best determine what type of coverage the title insurance company can safely afford to offer. Bottom line - it's a question of risk management.
Bucking a static bureaucracy To a large degree, title insurance searchers face a dilemma that is out of their control - they can only be as automated as the county in which they are searching for information. While county records in many major metropolitan areas have now automated in some form, there are many pockets of the country where public records may still have to be accessed manually, according to Burton.
"Thirty years ago searches were manual, conducted right from the courthouse using various indices," says James E. Kilgallon, senior vice president/director of national title services at Irvine, Calif.-based Fidelity National Title Insurance Co. "Now more indices are automated, as most courthouses are on some kind of computer system."
But Burton says that searchers sometimes still have to pull track books and in some areas may have to look at microfilm to locate necessary documentation. Another problem for searchers is that county records are organized by property grantor or grantee rather than by property, says Bill Blincoe, vice president of business and technology consulting at Chicago Title.
Blincoe says searches are generally easier to conduct in larger markets where Chicago Title or other major underwriting companies maintain or share access to title plants, where public records are input into a computer system and organized by property rather than by a person's name. This helps reduce the chance of error that frequently comes from searching by name - many of which are common - and can cause confusion when searching general liens against a property. Kilgallon says sometimes 600 to 700 judgments can be found against one common name.
While title plants make a search easier, they also require a great deal of expense related to daily maintenance and reorganization of data, Kilgallon says. He says Fidelity National is involved in nearly every type of title plant arrangement possible.
"Certain states require you to have title plant access instead of courthouse searching," he says. "In some areas we have a joint title plant that we share with other companies, and in Philadelphia we have a private plant access agreement where we search from public records. We spend a lot of money, time and effort building title plant records so that the output is quick and economical because it is maintained on a geographical basis."
"When we build our own index, we gather more information to help us avoid having to have someone look at the historic document source," Blincoe says. But commercial real estate requires more work than a transaction involving a single-family home. "Commercial property is much more complex than residential, because typically there has been more transaction activity and more documents relating to financings and lease records that all have to be looked at carefully," Blincoe says.
Kilgallon says while residential searches basically reflect the public record and involve mostly liens and monetary incumbrances, a commercial search involves issues such as access, rights to access, uses of other parts of a property and reciprocal easements, just to name a few. "Every document has to be examined for its effects on the balance of the commercial property," he says, adding that commercial transactions also involve the insuring of many estates, such as the ownership estate, leaseholds and sub-leaseholds.
After 30 years in the business, Kilgallon is familiar with many search problems and complications. For example, in Philadelphia, high-rise office buildings often posed an insurance risk for possibly violating the commonly held word-of-mouth ordinance that no building be "taller than Willy Penn's hat," he says, referring to the statue of William Penn in the heart of the city.
Blincoe says that shopping centers often pose the most difficulties of all commercial property types for title insurers because they have multiple tenants and leases as well as easement issues (a non-possessory right of the owner of one parcel of land to use the land of another) involving parking and public areas. In general, says Blincoe, "Commercial property customers are much more sophisticated and usually require extra coverage relating to zoning or an environmental endorsement, which all means more work."
Burton says Chicago Title has internally developed software for a basic package of papers and the firm is beginning to see the legal and lending communities both begin to embrace e-mail as an effective communication tool and accept electronic-delivery options. Nevertheless, technology is not as organized for commercial property as it is for residential transactions at this point, he says.
Blincoe says that this may all be changing soon on the commercial side. "We are currently handling an order to insure a 500-commercial property portfolio, and the client wants all of the policies and commitments delivered electronically. Technology is moving in the commercial area very fast," he adds.
>From zero to two gigabytes Even e-mail came slow to the industry, says John M. Hollenbeck, national title processes director at First American Title Insurance Co. in Santa Ana, Calif., a major national underwriter. Hollenbeck says First American only began building e-mail capability in 1995. But today the company has more than 13,000 registered e-mail users and moves approximately two gigabytes of data - the equivalent of thousands of messages - daily.
"We are using a tremendous amount of technology to reengineer and improve the process," says Hollenbeck. "Historically, title insurance has been a high-volume/low-margin business. But now technology can reduce cycle times and cut costs and provide a significant amount of upside by reducing expenses by cutting the cost of production."
According to Hollenbeck, First American's goal in terms of automation and reengineering is to become the first company in the industry to create a completely integrated system which allows its products and services to be electronically ordered, routed, processed and delivered to any customer, anywhere, on any computer platform. Hollenbeck says First American also intends to increase operational efficiencies and profitability by dramatically reducing production costs on a "per-order" basis.
The linchpin to First American's technological initiatives is its "substantial investment" in establishing a wide-area network that links all of its branch offices and headquarters and allows the company to run various production applications to centralize production in various locations throughout the country. The company began building the wide-area network in 1995, and currently more than 350 First American offices in the United States are linked. That number is expected to grow throughout the next few years, Hollenbeck says.
This wide-area network "is the backbone of our plan to create end-to-end connectivity and system integration," he says. "The network is not a software application, but rather a well-planned series of data communication lines into a frame relay cloud."
Through its wide-area network, First American is using an Internet-based interactive ordering, routing and delivery system called FASTWeb. FASTWeb is accessible through First American's home page (www.firstam.com) with a user name and password. Through FASTWeb, a customer can access information and order title insurance, closing services, home warranty, appraisal and flood determinations. Set up by zip code, a customer can find exactly what is available for a particular property location.
"The idea behind FASTWeb is that a customer can send First American an order electronically through the Internet by simply filling out information in a few user-friendly screens," says Hollenbeck. "Once in FASTWeb, the order is routed to its proper destination for fulfillment." Additional FASTWeb features include order status updates via e-mail and, in certain areas, customer service information online.
The FAST Title and Escrow System (FAST) is a fully integrated system that links to the firm's escrow trust and general accounting services. The browser-based system, which runs on Internet Explorer, allows for data to reside in one location and be accessed from anywhere, which in turn allows First American to centralize production without foregoing a local closing.
"This is a new concept for the title industry," says Hollenbeck. "Any of the big underwriters used to have hundreds of branch offices controlling production, support and sales. The future is about centralizing. Having a browser-based technology allows data to reside in one location and be accessed from anywhere. This not only allows for centralized production but also lowers the overall cost of technology as changes in data can be made from a single location."
Closing faster connections By communicating with FASTWeb, the FAST system can accept orders and supply order status information directly to customers. It allows for what Hollenbeck calls "single-seat" title production, creates a centralized back-office operation and automatically launches FASTSearch without any human intervention.
FASTSearch is a computerized searching process that automates the collection of information used in the title examination and production of title evidence. After accepting an electronic order from a customer, it accesses information repositories, including address normalization software, tax searches, property indexes, general indexes, starters, documents, maps, legal descriptions and potentially other databases.
"In a perfect FASTSearch scenario, no human intervention would be required from the time an order is electronically received until the time a completed search package is printed," says Hollenbeck. "This includes pulling land title records from an image repository based upon a prediction made by the computer of the documents to be considered by the title searcher or examiner."
The program must be written county by county, because each county in the United States has its own unique set of computer systems to access. Currently, 15 First American offices are either already using the FASTSearch system or will be implementing it in the near future, while another 15 counties in the Western United States are in line for development.
In the past, a searcher would go to a number of different computer systems and run many chains of events to assemble a search package, says Hollenbeck. Now, the FASTSearch technology has the computer compile relevant records and also do the analytical work necessary to determine liens and vested ownership and actually make decisions. All of this can happen in six minutes as opposed to the old-fashioned method taking hours or even a full working day. Once the package is presented, a title examiner has the opportunity to decide if the software program made the right decisions.
This July, First American conducted more than 26,000 searches using the FASTSearch methodology. In the last year it has been used for approximately 20% of the firm's total production, according to Hollenbeck.
Several years ago, Chicago Title set up a National Business Group (NBG) designed to pool local resources to better centralize the more complex transactions of its national customers, knowing that "in the world of multi-site real estate transactions, nothing is ever typical or routine," according to Chicago Title's Website.
Chicago Title also offers a product called OrderNET, an automated ordering software that is a PC-based Windows application. A customer's computer dials toll-free into a central server which routes the order to the appropriate business unit for fulfillment. It allows electronic ordering of appraisal products and property evaluations; credit products and services; flood zone determinations and monitoring; and title service and property reports, and searches all from one common system.
FlexNet from Fidelity National takes a similar approach. Through Fidelity National's Website (www.flexnt.com), customers can access FlexNet, a state-of-the-art fully integrated closing service software, which electronically connects all service providers involved in a closing and provides customers with electronic order entry, customer-to-closing connectivity and access to one-stop shopping for bundled services including title insurance and escrow; real estate tax services; credit services; flood compliance; foreclosure services; appraisal service; and document and recording services.
While many of the intricacies of title searches and underwriting are the arcane domain of attorneys, the title industry overall is "a growing business," Kilgallon says, and one that is increasingly relied on not just as an issuer of insurance but as "a provider of information services regarding real estate." And while Kilgallon concedes that title insurance processes are "a dry way of doing business," he says it is nonetheless exciting in terms of witnessing the changes and growth taking place within the industry.
Chicago Title's extensive Website (www.nbgweb.ctt.com) confirms that title insurance companies are playing the role of information providers. Besides easy-to-access areas covering databases, state data, endorsements, directories and bulletins, the site has an entire section of articles written by company employees for use by other employees and customers - a veritable encyclopedia of title insurance issues.
The site balances such topics as "An Overview of Easements," "A Primer on Riparian Rights" (which relates to ownership issues involving waterfront property), and "A Checklist of Liens Affecting Real Estate" with an item from "Dear Abby," which the newsletter authors of the site admit is not their "usual source of information about real estate."