Ron Frasier, a title industry veteran and CEO of title startup Atlas Title, has been watching the commission lawsuit saga closely.
“If the costs associated with homeownership and buying a home at a macro level is coming into question, it is hard to imagine that, that doesn’t bleed into settlement services,” Frasier said. “The same dynamics that are questioning the value [and costs] of a Realtor, regardless of which side of the transaction they are on, are going to lead to questions for all other things associated with buying a home.”
It’s easy to see why Frasier is concerned. In recent years, the value proposition of title insurance has come under attack following Fannie Mae’s announcement that it would accept attorney opinion letters in lieu of title insurance, as well as Fannie Mae and Freddie Mac’s title waiver programs, which were eventually scrapped.
“If the overarching school of thought is that it just costs too much to buy a house, then everybody associated with that process, I believe (to some degree), is going to have to face questions about the cost of their service,” Frasier said.
Despite his concerns, Frasier does not view this as an imminent threat. Instead, he is focusing his efforts on potentially having to adapt to where Atlas Title’s business comes from.
“Potentially, the seller’s agent may have more of a voice than they historically have had in terms of recommending a title provider,” Frasier said.
Chuck Cain, senior vice president of the national agency division at FNF Family of Companies, also sees this as a possibility.
“It is going to change how title companies market their products and services,” Cain said. “They will have to get on that listing side of things, which will be much harder as it is an earlier point of sale, as no one has even looked at buying the house yet.”
Regina Braga, president of Res/Title, sees the lawsuits potentially leading to a world where lenders may play a larger role in the buy side of the transaction, and that excites her.
“This is now affording an opportunity to the title agents and lenders to work more directly with the end-consumer without that extra layer of the buyer’s agent, who is always sort of dictating the flow of the transaction, from the standpoint of the end-consumer,” Braga said.
As a result, Braga said she is preparing her company to become more consumer-facing.
“We used to sell certain tools to the agent by telling them they would be great for their buyer, but now we may have the opportunity to bring those tools right to the buyer,” Braga said.
She also sees this as a great opportunity to educate consumers about title insurance, as well as the overall flow of the home-buying process.
“It is on us to be educated about why title insurance is important,” Braga said. “We are in a world right now where a lot of costs and value are being called into question. And part of that is economic stress and part of that is how easy it is to access information now, and that puts the responsibility on us, as industries that are impacted, to make sure we are educating consumers.”
Industry professionals are also anticipating changes in the types of joint ventures and affiliated business agreements (ABAs) populating the title space.
Over the past three years, the title industry has seen the rapid proliferation of title and real estate JVs and ABAs, however, many industry professionals believe that mortgage and title JVs and ABAs will become more popular if the number of real estate agents shrinks due to the outcomes of the commission lawsuits.
“I think there will be a drive toward residential mortgage lenders who either have a JV title firm or are part of an ABA with a title firm,” Cain said. “For many years, refinance transactions have been the major source of business for those JVs, but I think if a buyer’s agent isn’t involved, there will be a greater push for the lenders to capture the purchase transaction at their title affiliate.”
While Marx Sterbcow, managing attorney at Sterbcow Law Group, believes the industry may see more title and mortgage JVs, he also feels that if real estate brokerages hope to survive a potential hits from the commission lawsuits, they will need to rely on ancillary services.
“Back in 2008, when the [housing] crash took place, the only think that kept real estate brokers’ doors open was ancillaries,” Sterbcow said. “There is a lot of money there and the ones that typically go out of business in slow markets are the ones that don’t own ancillaries.”