Why “instant title” is a misnomer for mortgage lenders

In today’s high-rate environment, lenders are looking for innovative ways to optimize and automate processes for maximum cost savings and efficiency without compromising on the consumer experience. HousingWire recently spoke with Matt Regan, EVP of Transaction Management Systems at Flueid, about the need to redefine “instant title” to focus on adding value to loan evaluation and decision-making rather than just delivering the title commitment faster.

HousingWire: In a world where “instant,” “on-demand” and “fast” experiences are becoming the expectation, what should lenders really want from “instant title?”

Matt Regan: Right now, the market equates instant title with receiving an on-demand title commitment. Conceptually, the idea makes sense. A faster title commitment should equal a faster closing, right? Yes and no.

By this definition, instant title today would shorten turnaround time by about one day for a title commitment on a standard file. While reducing the time it takes to close a loan by a day is nice, shouldn’t we be trying to shave off a week or more instead?

What’s more important than turn time is the timeliness and context of the data. What if “instant title” meant having “instant access” to curated title data in a simple, digestible format within moments of qualifying a borrower?

That intelligence allows the lender to proactively address curative issues in concert with other early-stage workflow steps. When received early, digestible title data can let you win back those couple of weeks that are lost when property or consumer issues pop up after receiving the title commitment. With this reimagined workflow, the lender doesn’t have to go back to the borrower, repeat workflow steps, change up timelines or modify the terms of the loan.

We at Flueid are re-focusing the narrative on timeliness and context: How can title data provide the greatest lift in the loan underwriting process? Through the “instant awareness” on the condition of title.

HW: What are some of the key property or consumer insights that, if known earlier by the lender, could lead to a more transparent process and better borrower communication?

MR: A recent study by Arizent found that “49% of borrowers said faster closings would have resulted in a better experience,” but they are also placing stronger emphasis on  “more transparency, better communication and greater access to technology …beyond the initial application process” because “collecting, submitting and resubmitting information” is a huge pain point.

With that in mind, imagine you are reviewing a loan application. Halfway down, you are alerted that a vested owner was found on title that may need to be added to the loan application. And that your consumer has a $5,000 federal tax lien that will need to be paid off with the loan. And there are other primary and secondary mortgages tied to the consumer.

By moving these title insights upstream into the POS or LOS, lenders are empowered with relevant and purposeful information to make decisions about the loan and how best to process it before ordering title. You know from the start if there are problems, where they are, and how much effort and time it’s going to take to get them resolved. You can ask questions and gather information from the borrower in one step. And most importantly, you avoid surprises, late-breaking requests or timeline changes.

HW: How do title data and insights help reduce costs and long cycle times for lenders?

MR: According to McKinsey’s analysis of ICE Mortgage Technology’s 2021 Origination Insight Report, between four to five loan underwriters touch every file during loan underwriting. And according to the Mortgage Bankers Association, loan production expenses are up to approximately $11,000 in Q3 2022 and include a net loss of $624 on each loan. Those are significant costs and process requirements, not including the number of touches by the title agent, title underwriter and signing agent, among others, in the fulfillment and closing workflow.

A title data-centered approach to loan underwriting and transaction management is designed to eliminate fragmentation and drive greater transparency and awareness from the moment the borrower is engaged all the way through closing. It does this by making a lender’s systems of record smarter and ensuring you and your title partners are working from the exact same information.

This allows you to perfect your pipeline and push off costs until identified items are verified. Your team can prioritize files that have no title issues and are clear to close. You can eliminate files that would later fall out, saving you time and resources equal to approximately $1,500. And you can make proactive workflow decisions based on the level of loan underwriting expertise needed to address any alerts/exceptions and what will require support from your title partner. That’s how the full power of title data is realized to optimize the transaction and deliver the best possible experience for everyone involved – from your management, as you cut costs, to your team of loan officers and processors who know what to tackle and – ultimately – to your borrower(s).

HW: How does Flueid use title data to optimize both lender and title workflows?

MR: Our patented platform, Flueid Decision, is designed to bring purpose-built title data and workflow insights to the start of every residential real estate transaction. For lenders, Flueid Decision lets you check title at loan application and use the data and key alerts to engineer a more optimal workflow. Then when title is ordered, the platform helps Flueid-fueled title partners easily produce and deliver a title commitment that matches the information provided to the lender for an accurate and efficient process. Title wins by decreasing cancel ratios and expediting their processes.

Lenders win by providing the consumer with a seamless process while reducing cycle times and costs.