How to Build Consistent Title Operations & Avoid Claims | Title Agents Podcast Ep13

If you're facing issues in your business that are limited to our industry, and we need legislative change on it, then the way that we're getting that is through your trade associations. So you need to be active in your trade associations in order to be able to make those change. In a world where change is the only constant, Mo Shamil stands at the forefront, guiding title professionals to not just grow their businesses, but to master the art of innovation. With every episode, you're handed the keys to unlock unparalleled growth and stay ahead of the curve. Get ready for a transformative journey.

Hello, everyone, and welcome to the Title Agent Podcast. I am your host, Mo Shamil, Alltech National Title CEO. Today, we're joined by Nancy Guzman, Esquire, a highly respected real estate attorney and former president of the MLTA, it's the Maryland Land Title Association, with over 35 years of experience. Nancy has been at the forefront of many industry changes and challenges. Get ready for an insightful conversation filled with practical advice and expert perspectives that can help you navigate the complexities of our profession.

Welcome, Nancy. Hey, how are you? I'm doing fantastic. Well, let's start off with give us a little background and your story. Okay, well, I have been a real estate attorney since the mid 80s.

I have over the years developed a specialty in dealing with all those hard to do transactions, usually the ones that other title companies don't want. I deal a lot with real estate investors. I am like, really good at cleaning up issues in the back title that other people don't know how to do. At one point, I was underwriting counsel for a national title insurance company. Sometimes, I can get through things because I know how to talk to the underwriters.

That's basically what I've been doing. Recently, I've decided to start doing some consulting to title companies and help them with their operations and systems. Awesome. You've seen the title industry evolve over the past few decades. What major challenges do title professionals face today that are different from the past?

So, the industry is always evolving, but at the same time, staying the same. What I see is that we have an evolution of technology. We have an evolution of compliance issues. But as far as the day-to-day processes and operations that I see in title companies, for the most part, they're still doing it the same way we did it back in the 80s. I see this not just in our area, but all over the country.

It's like people got stuck on the processes. What they don't realize is that your processes have to evolve also because you have new, more complex issues. You have more liability. What's happening is that a lot of people are not realizing that some of these new liability issues that have come up are not covered by their title insurance. Now, they're stuck with their E&O carrier.

Then, they find out that they didn't notify the E&O carrier timely based on what was in their policy. Now, the E&O carrier is saying, well, we don't have to cover the claim. So, I'm seeing this evolution, but I'm also seeing people stuck in the past. That's a problem. Yeah.

This is something the show is all about, is really honoring the legacy and then really teaching the title professionals how to evolve and adapt technology. Let's dig a little deeper into this. I'm very passionate about it. Lily has said honoring the legacy, but how do we move forward? How do we become more efficient, adapt technology, automation, and just be more efficient and work smarter, not harder as the industry can.

Yeah, absolutely. One of the things is having quality control in your office. What does that mean? So, quality control, making sure that before anything leaves your office, whether it's via email or going to this table or whatever it is, that another pair of eyes is looking over it. We are a very, very detail-oriented industry, and it's very easy for details to get lost in the process.

And so, it's important to make sure that a second pair of eyes looks over everything, whether it's your CDs and your head ones or your binders or your policies. It scared me for a second that every email has to be reviewed. I'm like, there are like 500 emails in a transaction. Your documents, your documents. But it's also having consistency in your systems.

So, I've been in offices where each processor processes their files their way, and there's no consistency among the people in the office as to how things get done. That creates liability because if not everybody's doing the same thing, and you don't know what they're doing, then you don't know whether that could create a claim later. What do you think the cause of that? I'm obviously talking the DMV or the East Coast where it's very highly fragmented. I'm pretty confident it does not happen in the West Coast when you have these big mega title agencies.

Well, no, I think that it does happen all over the country. I think that oftentimes we hire somebody who has experience, and we just trust that their experience is that they do it right, and we just let them do it the way they like to do it. When I had my last title company, I had a strict set of policies and procedures, and they had to follow those. Whenever I hired experienced people, they came in and they pushed back. Well, I've never done it that way before.

Well, I want everybody in my office doing it the same way. So, you're going to have to adapt if you want to work here. I was in this one office where everybody's doing things differently, and one of the processors, even our side docs, our internal docs that we put out, each person is using a different set of internal docs going to the table. And one of the processors, the compliance agreement, she always puts out the one for the lender instead of the one for the title company. So, now the title company is not protected on that compliance because the wrong document was sent to the table.

Based on your experience, what message or how can you advise managers and how can to build that consistent processes and systems? And how do you have those conversations? Obviously, it's better early on before you hire a person than after the fact. So, I do a lot of business consulting outside of the title industry as well. And one of the things that is very recited often is look at McDonald's, look at your franchises.

And you can go into any McDonald's anywhere in the country. The world. Or the world. And you are going to get the exact same thing down to how many pickles are on your sandwich and where they're placed on the sandwich. Okay?

And that creates consistency for the customer. And they know that anytime they walk into McDonald's, they're going to get the exact same. You should have that in your title company, that whenever anybody walks into your office, and if you're a multi-office company than any one of your offices, people are going to get the exact same service every time they come in. It creates consistency. And your customers and your clients are going to appreciate that and come back.

It also helps you avoid liability issues because if everything's being done the same way every time, then you're not going to have a problem. And here's a liability issue people don't think about. And that is if you terminate an employee. And I had to terminate somebody at one point, and she filed an unemployment claim, and I told unemployment, I said, look, I have written policies and procedures. She signed off having read them, and she didn't follow them.

And it specifically stated that this particular incident would have grounds for immediate termination. I was covered with unemployment because I had that in my policies and procedures. So it protects you from things that you don't think about. And it also protects you from things that you might think about. So if you have a way of handling wires, and you can have a problem with either a wire that didn't come in properly or a wire that didn't go out properly, but you have that system set up properly, then you're probably not going to have too much of an issue if somebody tries to sue you.

Especially when it comes to funding, that's the one spot where you cannot freelance or deviate. Yeah, exactly. Exactly. So if you know that your systems are being done the same way every time, you're reducing your liability, you're also reducing your costs. So think about all of those rejected recordings that are costing you money.

Or if something's left off of a HUD one or a CV. Yeah. As a past president of the MLTA and an active member of various industry groups, what advocacy efforts are you currently involved in to protect both top professionals and consumers? I am very active with ALTA and their advocacy issues. That's American Land Title Association.

Somebody doesn't know the abbreviation. Yes. I'm very active with them and I jump on things. What committee are you serving on? Right now, I'm on the membership committee and I'm on the homeowners outreach program committee.

Oh, I think I've been on it for a few years. And I'm on several subcommittees as well. Oh, I'm also on the marketing work group. So can you give me just a couple of minutes on each? Obviously, membership, you want more members and why is that important to the industry?

Membership in your land title association and you should be active in both your state and the national. Your membership there is where you're going to be able to make change at a legislative level. So if you're facing issues in your business, And I'm on several subcommittees as well. Oh, I'm also on the marketing work group. So, can you maybe just a couple of minutes on each, obviously, membership, you want more members and why is that important to the industry?

Membership in your land title association, and you should be active in both your state and the national. Your membership there is where you're going to be able to make change at a legislative level. So, if you're facing issues in your business that are limited to our industry and we need legislative change on it, then the way that we're getting that is through your trade associations. And so, you need to be active in your trade associations in order to be able to make those change. So, as a membership committee, I'm trying to not just recruit members, but make sure that we are providing the members of the association with the things that they need.

One of the things that I was involved in creating was a program where they sponsor some of the smaller agents to be able to go to their conferences, because their conferences are expensive and smaller agents can't necessarily afford it. And so, we've created a program so that people can get there who ordinarily would not be able to. So, the HOP, or the Home Ownership Outreach Program, is educating the consumer? Yes. We all do, as an industry, do a poor job of educating the consumer.

Do you want to dive a little deeper on this? Yeah. So, the HOP committee works on educating the consumers on title insurance, what it is, why homeowners need it, and what the title company is doing so that you never have to make a claim on that title insurance policy. And so, that's basically what the HOP committee does. They're also branching out now into educating people about some of the settlement processes that occur also.

Awesome. I don't want to get the whole push for Fannie Mae and Fannie Mac for a penny letter. I don't know if you have anything to say about that, or how you feel about it. Fannie Mae had backed off of it, and then all of a sudden, they got the ear of somebody in the White House, and they were back on it. Congress is, as a whole, and bipartisanly, I guess that's a word, Congress is not really in favor of this.

Congress understands the importance of title insurance, and they also understand that when Fannie Mae's accepting these attorney opinion letters, or these alternate products, whatever they are, that they're not really protecting the people that they think they're protecting. And probably the biggest risk is the lender, especially if you give an opinion letter to a lender, they want a title agent to be more responsible and will carry the risk. Now, you don't have that underwriting title insurance policy to put as a backup for the agent. Well, and it's also, I don't see a whole lot of attorneys jumping on this. The liability.

Because of the liability to the attorneys. I mean, our malpractice carriers are not going to want us doing this. And so, we're going to have to charge a lot of money to do it. So, we're not saving anybody any money doing an attorney opinion letter. That was my personal assessment, because our industry is very labor-intensive.

It may not come across, like the general public, lenders, realtors, they may not see it. But it's a very expensive labor force, very highly knowledgeable, very skilled. So, it's going to cost a certain amount of money to do a transaction to be profitable, whether it's title insurance or not. If there's no title insurance, we're going to have to up our fees or escrow fees, whatever those may be. Right.

Exactly. Exactly. So, the problem is that they're only doing this on refinances of low-risk loans. Well, your low-risk loans are your people in your higher socioeconomic categories. So, if you're trying to help the people who are middle-to-low income, this isn't doing anything for them.

So, how can title agents get more involved in industry advocacy to help shape the future of our profession? Join your state land title association, join American Land Title Association, and become a member of TAN. TAN is Title Action Network, which is run through ALTA. And you do not have to be a member of ALTA to be a member of TAN. But when legislative issues come up, they will send out emails to everybody with a pre-programmed letter so that you can send a letter to your state representatives in Congress or at a state level.

And you can send out these letters and make our voices heard. Unfortunately, we're the smallest piece of the real estate industries, so our voices get heard the least. The realtors and the mortgage companies have a much louder voice than we do because they're bigger than we are. Awesome. You mentioned the importance of addressing internal challenges in a title company operation.

What are some common operational issues you observed, and what strategies do you recommend for overcoming them? One thing you mentioned earlier is being consistent and having systems and processes that are consistent across branches and employees. What other things have you seen, the challenges or risks that people may not be aware of? When you have a rejected recording, especially in Maryland, I think Maryland is one of the worst states to record. Well, it depends on which county you're in, but yeah.

But when you have a rejected recording, not only is it costing you money, but it's also putting the title insurer at risk because the date of that policy is the date of recording. And anything that gets recorded between the time that you issued your title insurance commitment and your policy, that's going to be covered in your policy. So when your recording gets rejected, there's an opportunity for another lien to get thrown in there in between. So that's a problem. And how you avoid that is you have somebody who puts the recording package together, and then you have somebody else who goes behind to make sure that all the I's are dotted, the T's are crossed, the checks are correct, and all of those things.

Always going to have some that get rejected, but you can minimize it. The other thing is to timely get it back out. I've been in offices where I've seen a stack of files on the floor that is like hip high, and they're all files that were rejected recordings. So for the audience in other states of the country that may not be, have no idea what we're talking about, so Maryland is about 28 counties, that might as well be 28 states. Each county has its own way of doing things, and like literally sometimes to record documents may take six months or a year, two years sometimes.

It sounds insane. If you're in California or Washington or Texas, but it's really cost us literally hundreds and hundreds of thousands of dollars in the last 20 years, probably seven figures to be honest with you. Yeah, absolutely. Mistakes and errors. The other thing is banking errors, because again, you need to have somebody who was coming behind and looking that.

But I have gotten caught a number of times where I had put out a preliminary CD and it had everything in it that it was supposed to, and then somehow when we went to print the final to go to the table, taxes had been dropped off, or some other big item had just like computer glitch, it dropped off, and we didn't collect for something that we needed to collect. And then now you're going to try to get it back. No, yeah, it literally then becomes poor customer service. Like literally you got to eat a lot of times, cost of doing business, it's a lot easier to eat that few hundreds or a couple thousand dollars versus trying to chase after it. It just kind of makes the company look bad.

It does. And also, it's costing the company a lot of money. And for the smaller title companies, that can be devastating. Absolutely. What other issues, challenges, or risks or blind spots for title agents that you see by consulting and advising companies that you want to share with the audience?

How your title insurance commitments and policies are put together. What does that mean? Aren't they supposed to be all the same way? Yes, they are all supposed to be the same way. A lot of people do not put enough things into their requirements section.

Other people put too much in their requirements section. I've seen exceptions that were repetitive. So you might have the same exception six times worded differently each time. They don't know where to put second and subordinate liens and they get put in incorrectly in their binders and policies. Wouldn't that be a big risk?

If you don't put the information accurate, then the policy may not have proper coverage? Absolutely. And here's another real big problem is just copying. So you get an abstract and it says restrictive covenants, library and folio, or book and page, wherever you are, okay, or instrument number, and you just copy that without looking to see what those covenants are. Well, then you get into things like the, now I can't remember, but we were just talking about this, Val.

The front foot benefits, like in Maryland, something like that? No, well, the front foot benefits are one of them. It's a whole different language for it. Yeah. Right-to-list covenants that people were recording, where this real estate company was recording covenants saying that the seller had to list the property with them.

If you're not looking, then you don't know they're there and you're just listing it as an exception and you're moving forward, but you were required to clear that prior to closing. That's a requirement, not an exception. Correct. Well, the… Front foot benefits, like in Maryland? Something like that?

No, well, the front foot benefits are one of them, but… It's a whole different language for… Yeah, but the right-to-list covenants that people were recording, where this real estate company was recording covenants saying that seller had to list the property with them. Right-to-list agreements, yeah. Mm-hmm. If you're not looking, then you don't know they're there, and you're just listing it as an exception and you're moving forward, but you were required to clear that prior to closing. That's a requirement, not an exception.

Correct. So, what's the difference between a requirement and an exception? Literally, we're kind of dumbing it down to people that may not… Okay. Requirements are things that need to be cleared prior to closing, prior to the issuance of a policy. Like?

Give an example? So, paying off a mortgage. Okay. Okay? So, you have to pay off the mortgage.

You've got to make sure the taxes are paid. You've got to make sure that homeowners association dues are up to date. Maryland-specific, you've got front foot benefit charges. You've got ground rent. You need to make sure that those things are paid current and cleared prior to closing so that the buyer is not taking over something that they didn't expect to take over.

Exceptions are the things that the title insurance policy is not going to cover, such as future taxes. So, taxes after today are on the owner of the property. The title insurance company is not covering that. Future homeowners association dues. Standard easements and restrictive covenants for your homeowners association.

So, we're not covering you for the fact that the HOA didn't want you to put your fence up and that kind of stuff. So, what steps can title professionals take to protect their clients from pitfalls associated with this kind of, by lack of knowledge sometimes, or consistency. Like, it's really sometimes they're inconsistent. I'm going to say trading, but what else can we do as an industry to bring that consistency and protect ourselves? We can disclose more.

People will provide a title insurance commitment, and in some states and some jurisdictions it's required to provide one in advance of closing so that the buyer can review it. Buyers don't know what they're looking at. And so, sometimes you have to let them know there are front foot benefits charges on your property that you're going to be responsible for. There is ground rent on your property that you are going to be responsible for. Here is the information for who to contact with regard to making payment on these things.

So, your standard utility easements and your homeowners association covenants and restrictions, that stuff you're going to get from someplace else. So, it's not as big of a deal. But those things that are unique to a particular property that are going to require that homeowner to do something that they may not expect, we should be disclosing that up front. Given your extensive experience, what do you see the future of the title industry heading, especially with the rise of digital technologies and change in real estate practices? Title insurance is not going to go away.

Closings are a very local thing. We are still going to be needed. We are still going to be there. We're not going to be put out of business. It's just going to look different.

Lenders are not going to want to get rid of us because they don't want to have to learn all the local standards and practices and laws and such. They are going to rely on us to have that local knowledge and take care of it for them. Purchase transactions. Refinance is becoming more and more easier, more digital, it's more international. But purchase is 100% accurate about how local it is.

Exactly. We're talking front foot benefits. The rest of the country have no idea what that means. Ground bread is even worse. Exactly.

Do you have a favorite quote? Oh, Lord. A favorite quote. I have one and I can't think of it, Mel. How about a favorite book either of all time or a favorite book you just read recently?

I recently read a book. Now you're catching me off guard. It's okay. That's my job. No.

Are you a fiction or non-fiction reader? I am a fiction reader. I have been reading some business development books and I recently read a book that's called Do Good SH!T. You can say it. It's a very, very short little book.

And this woman wrote it saying she was at a point in her life and she needed to make some changes. And she's like, you know what? I'm just going to do what I do in life. And there's no time like the present to just start doing cool sh!t. And so I really like the book.

It's very short. It's a very easy read. But it really inspired me because when we're self-employed, sometimes we kind of get stuck in what I call the quicksand and we can't get out. And we know we need to move in a different direction, but we just can't figure out which direction it is that we should be moving to get out of the quicksand. And it's kind of inspired me to get out of the quicksand.

Awesome. Any last words for our audience? I want to encourage all of those title company owners out there to go back and look at their systems and their operations and make sure that they are doing everything that they need to do to avoid liability. And if not, they need to make changes. That's awesome.

Thank you so much. That's it for today's episode of Title Agent's podcast. I want to extend a great thank you to Nancy for sharing her wealth of knowledge and experience with us. If you found value in our discussion today, make sure to subscribe and leave a review and definitely share the podcast with your network. We'll be back soon with more expert insights to help you excel in the world of title insurance.

Until then, keep striving for excellence in every closing. Thank you so much. And that's a wrap on today's journey with Mo Shamil from the Title Agent's podcast. Reminding you that mastering the art of innovation is key in the title industry's fast-paced world. If you're finding it tough to keep up with the changes and challenges, remember, you're not alone.

Our calendar is open for you. Find the link in the show notes and let's connect. Make sure to hit subscribe to not miss out on strategies that elevate and insights that empower. Together, we'll navigate the future of the industry. I look forward to our next meeting in the upcoming episode.

Keep pushing, keep innovating, and see you in the next episode.