Trtle News •Volume 81, Number 1
Center Spread Cover Story 2002 ALTA Directory ofTechnology Products & Services Once again, this annual directory is chock full of information on technology vendors and which ones offer the products you are looking for. Pull out the poster-sized directory and keep it for reference throughout the year. The 2002 directory lists 26 vendors featuring 66 products. You can also meet many of these ven dors in person at the ALTA Tech Forum, February 17-19 in New Orleans.
12 26 Technology Comer Inside the Industry XML to Digital Signatures ALTA's New Expanded Where Are We Going? Coverage Policies by Andy Hand by Clifford L. Morgan Several not-so-new technologies have Both policies provide new and excit the promise of changing the way we ing coverages. Learn what is covered do business. This article examines by these new policies and why they two that are receiving a lot of atten are just what the doctor ordered for tion from the title industry. our industry. 16 30 Running Your Business Inside ALTA CJ"; h TA News How to Tum Your Sales Team Abstracter & Title Agent Survey ~ Into a Profit Center Focuses on Technology ~ h TA Events Calender by Darryl Turner by Mark A. Bilbrey and Do your sales people spend more time Richard W. McCarthy C) 6 servicing existing clients than they do The 2001 Survey has special emphasis C:: Government &Agency News prospecting for new business? Maybe on the title business and technology. 34 your commission structure is to blame. See how your title company compares ~ ~ MERS Discover why? on the use of personal computers, the Internet, title plants, automated clos ~ 36 20 ing systems, and electronic access to Member News Issues Focus public records. Succeeding New cO 38 World of Joint Ventures ~ Marketplace by Timothy L. Amos C) 40 Discover a banker's perspective on ~ Membership Directory Errata Sheet bank affiliations with title insurance 44 agencies and how they present an 2001 Title News Index opportunity to develop a new market ing and delivery channel for title insurance business. www.alta.org Title News 1 A Message from the Title Insurance Underwriters Section Chair
Ai'I E RI CAN LA"NiJTITL B Promoting Our Industry -Ai$oC1..\TION here was a column recently in USA Today about the ongoing boom in refinancing Members Call Toll Free: 800-787-ALTA mortgages. A lender in the article was discussing the reason for delays-and guess Members Fax Tol l Free: 888-FAX·ALTA T Visit ALTA Home Page: www.alta.org who he blamed? Us. E-Mail Feedback to: [email protected] He said that customers have faced bottlenecks with title companies who are Title stretched to the limits. This is consistent with the constant efforts by virtually everyone NEWS to reduce closing costs by first focusing on our charges, usually among the smallest at Publisher: James R. Maher Ed~or : Lorri Lee Ragan, AP R closing . Why is it always us? Layout/Production Manager: Christina Rizzoni @2001 American Land Title Association While I don't believe that all of the delays in the system fall at our feet, there are Title News is publ ished bi-monthly by the American Land Title some issues for us out there which could explain this attitude in some cases or may Association, 1828 L Street, N. W. 1 Su ite 705 1 Washington, DC 20036. U.S. and Canadi an subscription rates are $3 0 a year (member rate); $48 a year (nonmember rate). create such a problem in other cases.
For subsc ription information, call 1·800·787-ALTA. Send address changes to: Title News1 ci rculation ma nagei; at the above stated Consolidation Issues address. Our industry has, like others, gone through a lot of consolidation. All on the belief that Anyone is invited to contribute articles, reports and photographs concerning issues of the title industry. The Association, however, reserves the rig ht to edit all material submitted. Editorials and bigger is better, economics of scale, and all of those kinds of reasons. articles are not stateme nts of Association policy, and do not nec essarily reflect the opin ions of the ed itor or the Association. I suggest there is another side of the equation . More consolidation equals less
Reprints: Apply to the editor for permission to reprint any part of diversity, which may in fact result in less ability to flexibly meet a the magazine. Articles reprinted with permiss ion must carry the 11 following credit line: Reprinted from Title News, the b i~mon t h l y quickly changing market's needs. magaz ine of the American Land Title Association." This may in fact be what the USA Today writer was referring to ASSOCIATION OFnCERS President in blaming bottlenecks on us. With fewer agents to respond to the Frank P. Willey, Fidelity National Financiaf1 Inc., Santa Barbara, CA President-Elect need , maybe our consol idated industry has contributed to those Stanley B. Friedlander, Continental Title Agency Corp., Cleveland, OH bottlenecks. Treasurer Mark Winter, Stewart Title Guaranty Co., Washington, O.C. Chair, Finance Committee Mushroom Attitude Michael F. Wille, The Title Company, Inc.1 La Crosse, WI Chair, Title Insurance Underwriters Section As an industry, we have done a poor job for many years in Charles J. Kovaleski, Attorneys'Title Insurance Fund1 Orlando, FL Board Representatives, Title Insurance Underwriters Section presenting our case (our value proposition in current consultant Gary L. Kermott, First American Title lnsurance Co., Santa Ana, CA speak) to our various audiences-the public, the lenders, business referrers or Rande K. Yeager, Old Republic National Title Co., Minneapolis, MN Chair, Abstracters and Title Insu rance Agents Section regulators. The only time we talk about claims is when someone questions why our
Mark A. Bilbrey, Warranty Title and Abstract, Inc. 1 El Reno, OK Board Representatives, Abstracters and Title Insurance Agents Section claims rate is so low. Gregory M. Kosin, Greater Illinois Title Co., Chicago, IL We should be proud of our ability to pay claims and we need to actively, not only Kenneth Lingenfelter, President & CEO, Metropolitan Title Company, Howell, Ml reactively, tell our claims story and the story of the work we do to keep our insureds Immediate Past President
Cara L. Detring, Preferred Land Title Co.1 Farmington, MO claims-free . ASSOCIATION STAFF This sad state of affairs applies to all of us, whether as a trade association , as an Executive Vice President ...... James R. Maher Director of Research ...... Richard W. McCarthy underwriter, or as an agent. None of us has done a good job in telling our story before Director of Education ...... Patricia L. Berman we have to because someone is asking questions. Can we "afford" to promote our Legislative/Regulatory Counsel ...... Ann vom Eigen industry? I would flip it and ask can we afford not to? Director of Information Systems and Technology ...... Kelly Throckmorton, CAE All of our former customers and referrers now are partners in our business and are all Director of Meetings and Conferences ...... Liza Trey blowing their own horns to their various audiences. I'd suggest to all of us that if we are Director of Communications ...... Lorri Lee Ragan, APR Director of Marketing and Membership ...... Alice Baldwin seen simply as a derivative service with no independently established case-value Director of Finance & Administration ...... Mark E. Hernick proposition- we may deserve being characterized as the bottleneck or the excessive Grassroots Manager ...... Robert C. Blume! costs that we know we are not.
Charles J. Kovaleski
2 January/February 2002 www.alta.org ALTA Sues Radian ALTA has filed a lawsuit in Orange County, California, on behalf of its California members against Radian Group, Inc. and two of its subsidiaries, Radian Guaranty, Inc. and ExpressClose.com. In the suit, ALTA is seeking an injunction prohibiting Radian from offering and selling in California a mortgage impairment product ~ ~ ... known as "Radian Lien Protection" (RLP). fAllnmltllle Rnance &Planing Mealiil Qmmlltee - In addition, ALTA is seeking monetary damages on KeyWest, R. WashilgDI, D.C. behalf of a class of all licensed title insurers and title 13-15 insurance agents in California. Further, the suit seeks a Large_...... , llpl1Rler court order prohibiting Radian from selling any other R.Myers,R. 22-24 forms of mortgage impairment products that constitute Relnsu111'1C8 Committee Bmer Creek, co title insurance without approval from the California ,....., 13 Insurance Commissioner. The suit alleges that Radian's Internal Aldlors MeelBJ ...... unlawful sales of its RLP product interfered with the title Atlanta, GA 18-11 industry business relationships with mortgage lender ALTA Annual C4Jwanllon 15 The Breakers Holel customers, resulting in substantial lost revenues and rw: Boani Meeting Palm Beach, FL irreparable harm to those relationships and the title New Orlen, LA industry and its product. 15-18 llllllllllar Finally, the complaint alleges Radian has falsely 4-6 ALTA Board Meeting Tiiie Counsel Fall Meeting advertised its product and seeks to require Radian to New Orleans, LA New Orleans, LA replace its product and the earlier ExpressClose.com 17-19 product with title insurance policies. AlJA Tecllnolo!FJ Forum 2002 Affiliated ALTA's executive vice president, James R. Maher, said, New Orleans, LA Association "To the best of our knowledge, the Radian product and 18-19 Conventions similar mortgage impairment products that are currently Forms Committee Meeting Fllnlly being sold (unlawfully in our opinion), are title insurance New Orleans, LA 14-16 Alaska in that they insure against undisclosed liens. But none of these products measure up to traditional title insurance. :': Apll They don't clear up title defects. They don't guarantee a Title Counsel Spring Meeting 7-9 Galifomia right of access. And, they don't pay attorney's fees to Montreal, canada 10-12 Tennessee represent insureds in establishing the priority of the .., mortgage or validity of title to the subject property. May 5-7 2-5 PUnetk> Those benefits can only be obtained through traditional ALTA Federal Conference 3-4 NewMexico title insurance sold by insurers who, unlike Radian, are washington, D.C. 3-5 Oklahoma 5-7 Iowa licensed and regulated as title insurers by state insurance 17-22 19-21 New Jersey authorities. Thus, there is a great danger to lenders and Anooal lntemal AudilDrs Meeti!g borrowers who may be misled into believing that what KeyWest, FL .... they are getting from Radian and other sellers of similar 6-8 TeXE mortgage impairment products is comparable to standard ...... 9-11 Pennsylwllia 19-21 20-22 Arkansas title insurance." Systems QJmllilee Meeting For more information on the lawsuit, contact Jim Bo&ton,MA Maher at [email protected], or 1-800-787-2582...... www.alta.org Title News 3 Reach Your Spanish Market ALTA Hires Public Relations Firm r One of the goals of the .Affiliated ALTA 2001-2003 Strategic Association Plan is to educate lenders, builders, realtors, and con Conventions, cont. sumers about the value of .... title insurance. To fulfill that 20-23 Virgilla goal, ALTA has hired 23-25 ()8glll Boisseau Evans & Associates, 27-~ New England Inc. public relations firm to TBO Soul! DakDla work with us for the next two years. ...., The ALTA Public 11-14 llmis Relations Committee sent 14-16 Michigan out RFPs to four public rela 18-20 Utah tions firms to work on this project. Boisseau Evans was selected due to their under standing of the title insur 1-3 ance product. They have --1-3 worked with LandAmerica in 7-10 Richmond for ten years on a 8-10 variety of public relations 8-10 projects. !J-11 Rich Patterson, ALTA's 18-21 PR Committee TBD Now you can explain the value of title insurance to your Chair, and president of Connecticut Spanish customers. Two of ALTA's most popular Attorneys Title Insurance _...... marketing brochures have been translated into Spanish. Co., Rocky Hill, CT, feels 5-7 Misaolri "Why Title?" and "House of Cards" are both used to the timing is right for this 5-7 W8shinglon campaign. "For a few years 12-14 lndllllll explain title insurance to potential clients. The brochures now, there has been a 12-15 Dixie are available for sale in bulk, and have space on the back momentum building that has 12-15 MmylaOO for members to stamp their logo. For a sample copy of been negative towards the 15-18 Ohio 18-20 Nebraska these brochures, contact Lorri Ragan, ALTA's director of title industry. We really can not be quiet any longer-we 19-22 Wisconsin communications at: [email protected]. must tell the story about the TBD Kenlucky value of title insurance and TBD Colorado More Members what we do as a living. This TBD Nevada PR campaign will help us do Visiting ALTA Web Site that." ...... Boisseau Evans is currently 6-9 Florida In one year's time, ALTA's Web site has seen a big leap in drafting press releases and TBD Arizona viewership. In October 2002, the site had 325,499 hits other pieces to be used for and 49,170 number of impressions. The site had 6,900 these audiences. ALTA will also rely on the state associa users. Compare that to October 2001, with 705,000 hits, tions to help with the educa 85,300 impressions, and 7,261 users. tion campaign. Have you visited the site lately? The home page is For more information on the campaign, contact Lorri updated daily with important news for our industry. Ragan, ALTA's director of ALTA news, government-related news, and industry communications at: news. Go now! www.alta.org [email protected], or 1-800-787-2582.
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www.alta.org Title News 5 State Regulatory Money Laundering required currency transac Act Affects Title tion report or traceable Action on Radian Issue thereto." Therefore, a title Companies company closing a transac As you may be aware, ALTA has filed suit against Radian tion that failed to file the The recently passed anti required currency transac and its subsidiaries, Radian Guaranty, Inc. and terrorism legislation, known tion report could poten ExpressClose.com, seeking to prohibit them from selling as the USA Patriot Act, tially be subject to severe includes a section on money their mortgage impairment product. To read more on the forfeitu re penalties. laundering that will have an lawsuit, see the article in the ALTA News section on Section 352 requires impact on the title industry. financial institutions to page 3, or visit the ALTA Web site at www.alta.org to see Title III of the act, "The adopt anti-money launder the press release and complaint. International Money ing compliance programs Laundering Abatement and ALTA's position is simple: The Radian product, like all that reflect minimum Financial Anti-Terrorism Act requirements that will be mortgage impairment, is title insurance. In more than 30 of 2001,": deals with money developed by the Secretary states, title insurance is a "mono-line" insurance product, laundering by modifying of the Treasury. Title laws relating to "financial meaning a company may not be licensed to issue any companies will presumable institutions," including title other form of insurance and obtain a license to sell title be required to develop compames. such compliance insurance. Radian isn't licensed to sell title insurance. Several provisions appear programs. Likewise more than half of the states have a definition to affect title companies most To see a summary on directly include the follow of title insurance that requires a search, something not this act and its affect on ing: Section 372 which inherent in the Radian and other MI products. Most of our industry, go to authorizes the forfeiture of www.alta.org/govt/issues/ the major housing markets, including California, Texas, "property, real or personal, of 01/11 15a.htm. Florida, New York, and others have one or both of these property involved in the regulatory restrictions. Consequently, ALTA feels offense of failing to file a confide nt that most regulators will agree that Radian, a mortgage guaranty company, and many other property casualty insurers offering MI products are in violation of state insurance statutes and regulations and may not offer these products. Here's how the states come in on this issue so far: Florida and Texas have taken positions against Radian. Previously, Pennsylvania and Illinois had issued cease and desist orders against ExpressClose.com's MI product. And, California and Illinois are currently considering the question and we are hopeful of a favorable result. ALTA will be sure to keep you updated on this issue and its implications for our industry. For more information on the lawsuit, contact Jim Maher, ALTA's executive vice president at [email protected] or 1-800-787-2582.
Senator Bill Frist(R-TN) (center), Chainnan of the National Republican Senatorial Committee and the only heart transplant surgeon in the Senate, takes time out with ALTA board member Greg Kosin, president of the Greater Illinois Title Company, Chicago, and Ann vom Eigen, ALTA's legislative and regulatory Counsel, at the Republican Senate Celebration held this past November at the National Building Museum in Washington, DC.
6 January/Rlbruary 2002 www.alta.org Possible Changes in State Controlled Business Statues A recent court case is likely to lead to additional challenges of state controlled business statues. In Association of Banks in Insurance et al. v. Duryee, the banks alleged that the Supreme Court decision in Barnett and the Gramm-Leach-Bliley Act preempted Ohio prohibitions on licensing applicants whose "principal purpose" in obtaining an insurance agent's license would be to serve "controlled business" of the parent. The Ohio Land Title Association and other insurance agents groups, intervened in the case on behalf of the Congressman James Sensenbrenner (R-WI) ( seated), Chairman Ohio Insurance Commissioner. The District Court of the House Judiciary Committee, pauses for a photo with granted judgment in favor of the banks on June 19, 1999 ALTA members Toby Tully (r), president Fidelity Land Title, Ltd. in a very broad opinion. Jefferson, WI, and TIPAC Chairman Mike Wille during a sched The insurance agents associations appealed that uled meeting with the Chairman at his office in Brookfield, WI this past August. judgment to the Sixth Circuit. On November 1, 2001, the Sixth Circuit issued its ruling affirming the two challenged holdings of the District Court, concluding Ginnie Mae to of the Federal Housing Administration, the that the "principal purpose" test is preempted because it Compete with Veterans Administration operates to prevent national banks from selling insurance. Fannie & Freddie and the Rural Housing Service. The Sixth Circuit remanded the case to the District Senator Wayne Allard (R According to Roukema, Court on the corporate qualification requirements issues, CO) and Rep. Marge the goal of the legislation Roukema (R-NJ) have intro so that the District Court can determine whether those is "to create a healthy and duced legislation to permit vibrant debate about the requirements are not preempted by the Gramm-Leach Ginnie Mae to guarantee future home ownership Bliley Act. securities of certain conven opportunities for our citi tional mortgages purchased For more information, contact Ann vom Eigen, zens pursuing the by Fannie Mae and Freddie ALTA's legislative/regulatory counsel at: American dream." Mac above an 85 percent [email protected] or 1-800-787-2582. loan-to-value ratio, up to the ----- conventional mortgage loan limits already established by existing law. This guarantee is conditioned on these hybrid mortgages meeting certain guidelines established by Ginnie Mae and insured both by private sector mort gage insurance and the Federal Housing Administration. Currently Ginnie Mae mortgage-backed securities are based solely by govern out for a photo with Senator Russ Feingold (0-WI) during a ment insured and govern fundraiser the Wilie's held for the Senator at their home in ment guaranteed mortgage Lacrosse this past August. Senator Feingold is a key conferee loans made under programs on the bankruptcy bill. www.alta.org Trtle News 7 Highlights from ALTA 2001 Annual Convention
ALTA 2001 ANNUAL CONVENTION Marriott's Desert Springs • Palm Desert, California OCTOBER 10-13, 2001
ALTA's newly elected president, Frank Willey (center), vice chairman of Fidelity National Financial, Inc., Santa Barbara, CA, enjoys the Palm Desert climate with the new ALTA board.
Cara Detring, president of Preferred Land Title Company, Farmington, MO, and ALTA's 2001-2002 president, shows off the presiden tial crown given to her by ALTA staff.
David Lanier, senior vice president - director of training for LandAmerica Financial Group, Inc., Richmond, VA, announces the new CD-ROMs offered by the Land Title Institute, during a skit with the Education Committee at the Opening General Session.
of setting up affiliated business arrangements.
8 January/February 2002 www.alta.org Thank You Sponsors! Five of ALTA's past presidents take time out from the convention schedule to talk about old times. From left to right are: Malcolm S. Morris, Stewart Title (1997-98); Joe Parker, Parker Special thanks and recognition Title Insurance Agency (1998-99); Bill Thurman, Gracy Title Company (1990-91 ); Don to our convention sponsors: Kennedy, First American Title Insurance Co. (1983-84); and Parker Kennedy, First American Title Insurance Co. (1993-94). Data Trace Fidelity Financial Global Data Services LandAmerican Micro General SMS SoftPro Corporation
Darryl Turner, the keynote speaker of the Opening General Session, outlined his for mula for profitability for title companies. (See his article on page 16.)
TIPAC chairman Mike Wille (left), president of the Title Company, Inc., La Crosse, WI, congratulates Mike Pryor, C.E.0. of Lenders Title Company, Little Rock, AR, and TIPAC state trustee from AR, on achieving the greatest increase in participation in fundraising in his state.
www.atta.org Trt!e News 9 Erin Brockovich, of movie fame, inspired the audience with her story on getting Pacific Gas and Electric Company to make the largest legal settlement in U.S. history to the residents of Hinkley, CA, infected by PG&E's toxic chemicals.
Diana Nichols, executive director of the Kentucky and Indiana Land Title Associations (left}, Mike Nolan, Northern Ohio area manager, Chicago Title, OH (center), and Bill Gowan, president and manager, Helena Abstract and Title Company, MT, enjoy themselves in - yes - a committee meeting!
Several lucky members were selected by the Closing Banquet band to participate in that dance favorite: YMCA! Good job!
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KEMP ES KEMP ES is part of the Kemper Insurance Companies, which has 2000 revenues A KEMPER COMPANY totaling $4 .8 billion and assets of $9.4 billion . Kemper is rated "A" by A.M. Best, www.kempes.com Standard and Poor's and Moody's. technology corner XML to Digital Signatures Where Are We Going? by Andy Hand
e ave all hear the buzzwords, productivity potential of the EDI, XML, 8 digital signatures. organization followed. We have What does it all mean? This article now crossed the bridge to industry s designed to give a brief productivity. In this phase we share introdu tion to these topics. If you important business data with have tt~ded any of the industry partners outside our walls. The technology shows in the past 12 traditional solutions of fax, mail, months you have heard these and courier are giving way to a new technologies referenced. They are platform of electronic intriguing, but what do they mean communication. the data from how that data will be to you and your business? I can't We know today the title industry presented. Below in Figure 1 is an completely get rid of the alphabet is seeing greater competitive example of how XML data is soup terminology that dominates pressures. Some published reports represented. In this simple example the technology industry but I can have stated title revenues were we see weather information. Token do my best to make these down 12-13% in 2000. Although pairs identify the data and make it understandable. the most recent refinance boom has readable. By using an agreed-upon For years people have talked added cash to the coffers, this is a format to pass information, we can about the "paperless office." With short-term cycle, not a long-term share our business data with one or all of the discussions, industries solution. With labor still a major more parties. have failed to make significant component of the balance sheet, we headway in this area. As a society, search for new technologies that
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Generalized Markup Language, of the standards organizations and a public key to validate the SGML and Hypertext Markup their Web sites. If this topic is of signature and that the document Language, HTML). HTML, the interest, I recommend learning has not been altered since signing. language used to represent many of more about what each of these With federal and local government the Web sites you view, is simple groups is doing and how that might legislation, the path is being paved and good for delivery of affect you. for digital signatures. This gives documents, but has fixed tag sets and limitations that raise the cost of Organization Web Site building sophisticated Web sites. REIPA/AARTI www.reipa.org SGML has great power but lacks MISMO www.mismo.org standardization and style sheets, RETS www.rets-wg.org and is complex to build. Where ACORD www.acord.org text and HTML took traditional LegalXML www.legalxml.org allowed us to format it turning the Property Records Industry Joint Task Force Internet into a huge library, XML (PRIJTF) www.prijtf.org can take that same page and turn the Internet into a huge database. It is XMI.:s ability to separate the You may ask, "haven't we done the parties the ability to affix their data from the presentation that this already with EDI?" While it signature, to an electronic makes it so useful in today's world. was true that we did not see wide document removing the need for Coupled with the use of style scale implementation of the paper. Viewing, signing, and sheets, the same business data can Electronic Data Interchange storage of the original document is now be viewed in different ways by (EDI) in the Title Industry, the electronic and can happen online. applying these style sheets. One original work completed years ago In Figure 2 (see next page) is a example of its use is to publish is being leveraged in the XML diagram that shows the flow of the order data from your production initiative being completed by the signing process. Once delivered, system to the Internet. It is then Mortgage Industry Standards the document is validated and viewed on one or more of the many Maintenance Organization approved by the Certificate transaction systems such as (MISMO). XML, with its lower Authority. Close YourDeal.com. cost of development and When accepting a signature as a deployment, will see greater use in legal entity we must know that the Standards Organizations the title industry document has been intentionally From the property listing until signed and that the signer cannot recording, many different parties Digital Signatures- later claim it is not his/her touch the order and its data. A New Method of Signing signature (known as non Through each traditional vertical The second technology that is repudiation). Digital signatures are market-realtors, lending, getting some attention is digital based on positive identification of settlement services-there are signatures. A "digital signature" is the signatory, a reasonable organizations looking at the data one that makes use of Public Key assurance of his or her intention to and business requirements of those Infrastructure (PKI). This is a apply a legal signature and secure using the data. In addition to technology that uses a key pair, knowledge that the signed determining the data that is going (known as public and private keys), document is unchanged since it was to be shared at each stage, these to create a unique and binding signed. groups are working on how the signature to a document. This When the parties come to sign data is passed throughout the differs from an "electronic their documents, they will read the transaction, reducing the error signature" which is a digitized documents on the computer in the factor, and the redundancy of handwritten signature. A third signing room. This computer re-keying the information. party, known as a Certificate would either have a smart card Above is a chart that shows some Authority (CA), is then able to use reader or USB port to accept the
14 January/February 2002 www.alta.org technology corner
signer's private key. With the key FIGURE 2 placed in the computer's device, the Sign parties could then indicate they wish to sign the document in front of them. When they do so, they will then be prompted for their ~ PIN. After successfully providing Create document Hash code cr..tes • Sien bah code ualllC Append the •l&ned huh unique dlettaf flnprprlnt -.cler's PRIVATE key code to document the PIN, the mathematical of ortglnal document calculation is performed and the Deliver legally binding signature is affixed to the document. Any changes after that will invalidate that signature. The document is now passed on to the county recorder for validation and storage. The Mall electronic envelope recorder, along with the CA, would to recipient validate the signature and verify that the document has not been frequency equivalent to today's pen changed since signing. Legislation and ink signatures. and business practice increasingly This article has given just a brief accept that an electronic document introduction to these two with a valid digital signature carries technologies. Software vendors, the same legal weight as a hardcopy standards organizations, and many document with a wet signature. of you will get involved with Because the documents have been solutions using these technologies completed electronically, all of the that have the opportunity to bring closing documents can be businesses closer together. It is easy transferred to CD and given to the to dismiss these with the failure of parties at the end of closing. Internet businesses, but with the cost savings and reach that the What's Next? Internet can give us, companies are There are many challenges facing finding revenue models that mix the title industry. XML and digital with the traditional to give us a signatures are two technologies in bright future. this industry that will continue to take shape in the next 12-24 Andy Hand is vice president of months. These are being tackled development for lnfoStream. He is a committee chair for the AARTI with many fine initiatives and will Workgroup of REIPA, a national continue to be addressed as we alliance of real estate software create new development centered organizations seeking to create XML around practical and cost-saving standards for the real estate industry. initiatives. XML will show up in This article is an excerpt of his Web sites that look to share presentation at the 2001 ALTA information with your current Annual Convention in Palm Desert. production systems, while digital Andy can be reached at: signatures will eventually become a [email protected], or 1-800-877-7667. common part of the real estate landscape and appear with the
www.alta.org n~e News 15 running your business How to Turn Your Sales Team Into a Profit Center by Darryl Turner
It has been said that the highest many came in because of the actual paid people in America are in sales. results of specific efforts of one of It has also been said that the lowest your employees. This is what paid people in America are in sales. commission is really all about. What is the difference between the First, let's look at determining two? Most say that it is their new business. Most title performance. In many cases that companies have little idea how might be correct, however in the many of their monthly orders are title industry it has more to do with actually new. What is new? What the poorly established methods is old? Great question. By my satisfied on your P&L statement, used to design and pay out standards, a new order is an order new orders have more of a gravity commission structures. that is directed or sent in by profit affect on them than the One of the largest problems in someone who has not sent orders that were used to break even. the title industry is that for most anything for a minimum of six You may say that only 15%, or so, companies, salespeople make the months. The second criterion is of each order goes toward profit. same money each month in spite of that this individual sent other While that may be true up to the the business that is brought in, or business during this six-month point of breaking even, it is not true more accurately, not brought in. window to another title company. after that point. This article, based on my session at In other words, this person's When your expenses are the 2001 ALTA Annual behaviors have been modified by satisfied, a greater percentage of Convention in Palm Desert, CA, one of your salespeople. They have each order's revenue goes toward profit. As you obtain additional business, your expenses do not Money for added results! Not added money for really go up until you reach the existing business. point where additional people or facilities are needed. Therefore, you have increased the potential to will describe in detail how to deal directed that client to your reward your people for bringing with this issue and solve the fixed company instead of where they had this new business in the door. expense/variable revenue dilemma been sending their business. This can also present a problem. that has plagued the title industry When you have determined that New business carries a different for years. this is an order, and that one of level of profit and commission pay There are a number of issues your salespeople should be out potential, while existing related to commissions. Some of rewarded, the next step is to business is designed to carry your which are more easily solved than determine how to motivate positive company monthly and has no others. It is more than just figuring behaviors while not damaging your built-in profit margin to pay a out how many orders have come in. profitability or morale. commission against. In other It is more about finding out how Once business expenses are words, not only is it a bad idea to
16 January/February 2002 www.alta.org running your business
pay ongomg comrruss10ns on amount of their time servicing actually accomplish the goals existing client orders, the worst part existing clients and not enough determined in Step #2. In other is that your P&L simply can't time prospecting for new business. words, are their goals big enough? handle it. It was never designed to. This is typical of salespeople for I have a process of commissions two reasons. First, they probably Step #4 that I recommend that companies spent their first work week with Modify the goals you have devised follow. But, before looking at this another salesperson who spent the in Step #2 if the outcome of Step process, let's look at the definition day calling on their existing clients, #3 is not acceptable. of commission. I think that if thus giving the new salesperson the people truly understand what the wrong impression of the job. And Step #5 word commission means, many of second, salespeople are simply not Determine the secondary them would not ask for it. The trained on how to acquire new responsibility of your sales team. most common definition of business from prospects. They have Once again, the misunderstand- commission is "money for someone been led to believe that they should ing of how the business works and being remotely connected or be paid a commission on the orders the role of salespeople, according to knowing the person connected to a generated by your existing client their daily behaviors, demonstrate transaction." In other words ... base. This is where the problem that their current allocation of time "What is in it for me?" While this begins. is out of balance. The typical definition seems to be the most Remove any misunderstanding salesperson in the title industry common, it is not accurate. when it comes to requirements of spends less than 24 minutes per day Webster's dictionary defines salespeople and their primary effectively prospecting while the commission as "authorization to responsibility-which is new client most productive spends more than carry out a task or a group acquisition! 336 minutes per day in this authorized to perform certain endeavor. Why? Clearly, due to duties." It is not money-related, it Step #2 mismanagement of sales efforts and is responsibility-related. This is a Determine the specific results you goal communication. new spin for most people and want from your salespeople each Make sure your team knows that almost always a reason for some month in relation to their primary servicing existing clients, while salespeople to take a new look at responsibility of obtaining new required, is clearly their secondary their desire to be on commission. clients. responsibility. Before I can truly describe my This may be more clearly called recommended commission "sales goals" or "new business goals." Step #6 structure, it is most important to While most salespeople in the title Determine the secondary results define the actual responsibilities of business have no clearly defined you want from your sales staff each your salespeople. new business goals, these goals are month in relation to their Here is the nine-step process to still a critical necessity in revenue secondary responsibility of servicing establish these responsibilities: and asset management and overall and retaining existing clients. financial responsibility. Step #1 These goals should be met Step #7 Determine the roles of your before any commissions are paid Determine the overall affect on salespeople and their primary out. Some kind of minimum your company if your salespeople responsibilities. performance should be established accomplish the results determined Salespeople in our industry are as a breakpoint where commissions in Step #6. trained improperly from the start. The best breakpoint in most beginning, and it is this mis- cases is the P&L breakeven point. Step #8 training that keeps them doing Modify the desired results you have things that are not their primary Step #3 established in Step #6 if the responsibility. They seem to be Determine the overall affect on outcome of Step #7 is not spending a disproportionate your company if your salespeople acceptable. www.alta.org Trtle News 17 running your business
Step #9: perpetuating commission system additional orders. Establish a compensation system to really is. It is a guaranteed Salespeople are "newness chasers" compliment the required activity continual increase in expenses by nature, which means that they and results of your salespeople in while, by nature, decreasing the like new challenges. It is this desire Steps #2 and #6. human desire to increase that causes them, by nature, to get Since adding new business is the production or revenue! their first directed deal and then primary responsibility of Commission should only be paid move to someone else. This latter salespeople, it should be the on the first three orders received weighted system will motivate primary focus of your new from a new customer and that them to follow-up to earn the commission system. Money for amount should be split with the second and third transactions. added results! Not added money inside closing staff and even the Three transactions should be long for existing business. support staff if wished. enough for the closer to establish Last year I spoke with a county Here is a sample of a simple the needed relationship for effective manager of a title company who breakdown: and strong new client retention. had a salesperson upset because a certain closer was not able to get a SALES CLOSING TEAM TOTAL couple of transactions closed in time for him to make commission. 1ST DEAL 5% 10% 15% The problem was that it was not a new client, but an existing one. For some reason this sales team was 2ND DEAL 7.5% 7.5% 15% being paid on every order closed by anyone on their list of clients. That 3RD DEAL 10% 5% 15% means that they did not even have to call on them to get paid, just have them on their list of assigned Even though you can modify the Mission accomplished! accounts. Sound odd? It is more actual percentage pay out, the The rest of the story is simple. typical than you might think motivations behind the system How do you compensate your team I told him that his company had need to be understood and not for accomplishing their secondary given birth to, fed, nurtured, and modified. The system is designed to responsibility of servicing and pacified a huge monster. Getting feed discipline to the sales team and retaining existing customers? You paid extra income for all deals that closing unit. already do. It's called their base close was not only the foundation While the percentage is more salary. for the "no need to prospect heavily weighted for sales in the mentality," it also created giant latter deals, it is more heavily Darryl Turner is the CEO of National morale problems with the inside weighted in the early deals for the Business Development, which specializes in the implementation of closing staff who felt the closing teams. The reason for that growth strategies for title companies salespeople were being, by their is because most closers are busy. nationwide. This article is an excerpt definition, grossly overpaid. They have little desire to work with from Darryl's presentation during the This is what we call new people and increase their 2001 ALTA Annual Convention in "perpetuating commission." While workload; thus, the heavy early Palm Desert, CA For more this residual income mindset may commission will help in information, call 1-800- 551-2946 be the foundation of multilevel overcoming that. Over the next or visit www.TitleSales.com. companies, it is not even close to two transactions, relationships are being good in an industry that established reducing the need for requires continuing increases in weighty commissions. That money revenue to maintain and feed this can be moved to the salesperson for monster. an entirely different reason It is important to realize what a motivation to follow-up and earn
18 January/February 2002 www.alta.org DEPENDING ON HOW LONG YOU'VE BEEN IN THE TITLE BUSINESS, YOU MAY
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www.edatatrace.com issue focus Succeeding in the New World of Joint Ventures
By nmothy L. Amos
Bank affiliations with title survey of state banking associations insuranae agencies present an showed only 16 states where banks opportunity to develop a new currently engage in title insurance. marketing and delivery channel for This certainly does not represent the title 1ns ance business. the mainstream of the banking Developing this marketing channel industry and highlights the can be beneficial for all participants opportunities to develop new in the industry; however, it requires markets. While these pioneers cooperation, education, effort, and have been successful in their adjustment by all parties to create a operations, the impact of much develop a successful model are most successful business model. Here are larger participation is yet to occur. likely to succeed. As banks continue some key issues to consider. Lingering doubts on the effect of to enter the title business and form the Gramm-Leach-Bliley Act of joint ventures, they are more likely Resolve Legal Uncertainties 1999 (Public Law 106-102) (GLB) to do so with those companies that Before significant bank joint continue. The complex sections on have built a constructive model and ventures or title agency activities state regulation, federal preemption, have a proven track record. can occur, legal uncertainties must regulatory safe harbors, and title Additionally, it is inconsistent for be resolved. Banks, by their nature, insurance carve out are enough to title companies to build joint are conservative and will not make any Washington lawyer's ventures in some states, but oppose engage in an activity unless it can head spin. However, a strong bank affiliations in others. meet bank regulatory requirements argument exists that the net effect Because national banks and and notice provisions. Often, a legal of G LB is to allow title activities, state-chartered banks derive their opinion is required to show specific but push the activities into a powers from different sources, a authority for engaging in an financial subsidiary. separate analysis of each is activity. Additionally, federal laws Reaching a consensus on this necessary. The legal considerations that require particular structures or issue is important if all participants regarding authority for national and state laws that raise additional (title companies, lawyers, and state-chartered banks may be operational concerns can be banks) are to have equal different. disincentives for banks to opportunities to build strong National Banlcs. Financial participate in title insurance marketing alliances. In an subsidiaries of national banks are activities. environment of continued authorized to act as insurance To date, only a few states have uncertainty, only those providers agents for all types of insurance, significant levels of banks who are willing to take the risk and including title insurance, in any participating in title insurance defend the legitimacy of their state (GLB Section 121). activities. Some have been in the actions will succeed in the long Apparent confusion arises since business for more than ten years, term. GLB provides a "carve-out" but most have been in the business Like many other business regarding authority of national for three years or less. An informal ventures, those who pioneer and banks. Section 303 generally
2 0 January/February 2002 www.atta.org issue focus
prohibits a national bank from GLB authorizing financial thereby causing uncertainty. The selling or underwriting title subsidiaries of national banks to effect of federal preemptions for insurance, yet provides a number of engage in all insurance activities, state banks is less straightforward. exceptions. These include activities including title insurance, preempts In addition to resolving any in states where state-chartered contrary New Jersey state law. uncertainty over federal preemption banks are specifically authorized to Similarly, the Kansas Insurance for national bank financial offer title insurance and where Department, in a letter issued subsidiaries, it is equally important "grandfathered" activities exist. February 1, 2000 to Gold Bank to resolve any state-imposed Grandfathered activities occur Corporation, Inc., holds that the conflicts for state-chartered banks. where national banks have engaged GLB preempts certain provisions In response to GLB Section in title insurance activities through of Kansas-controlled business 121(d), the FDIC has adopted Section 92 (12 U.S.C. Section 92) statutes that would otherwise regulations (12 CFR, Part 362) to from a place with a population of prevent the holding company's clarify the insured state-chartered 5,000 prior to the passage of GLB. financial subsidiary from engaging bank's authority to engage in For general insurance sales, Section in title insurance activities. financial activities through a 92 authority was not extinguished, Recently, the Sixth Circuit Court subsidiary that are permitted to a but continues. However, GLB of Appeals decided an important national bank. These activities Section 303 now limits this in-bank case on the issue (Association of include insurance as well as title sales with regard to title insurance. Banks In Insurance, et. al, v insurance. However, many states After the passage of GLB, national Duryee, 2001, FED APP. 0385P continue to have "anti-affiliation bank title insurance activities are [(6th Circuit)] known as the statutes" that prohibit affiliations essentially pushed out into a Huntington Bank case. The case with insurance activities, as well as financial subsidiary or placed in a challenged Ohio statutes that "controlled business" statutes that separate subsidiary of a financial limited the ability of banks to sell further attempt to limit bank holding company. title and other types of insurance. opportunities in the insurance arena The insurance agency activities Importantly, the Sixth Circuit case generally and title insurance authorized for financial subsidiaries occurred before GLB, but specifically. Both types of statutes under Section 121 are not subject arguments post GLB were made. have been preempted for national to the limitations that apply to the The decision rests both on pre- and banks through litigation (e.g., national bank itself under GLB post- GLB grounds. In both Barnett Banks v. Nelson; and Section 303. Section 303(a) provides that "In general, no An informal survey of state banking associations national bank may engage in any activity involving underwriting or showed only 16 states where banks currently engage sale of title insurance." It is an in title insurance. important distinction to make that the general restriction on title instances, the Ohio statutes that Duryee); however, the preemptive insurance activities by national interfered with national bank powers of the FDIC Act for state banks does not reference and does authority pre- and post- GLB were chartered banks have not been not apply to a financial subsidiary overturned. This decision should litigated as frequently. which is expressly authorized to go a long way in clarifying the While only a few states conduct activities that are not ability of national banks post specifically authorize state permissible for the national GLB to sell title insurance chartered banks to offer title bank itself through subsidiaries. insurance, virtually all states have This interpretation of GLB has State Bank Provisions. State statutes that grant state banks been reached in two administrative bank authority to engage in parity with national banks. These decisions. OCC Corporate insurance activities, including title "wild card" statutes are generally Decision No. 2000-14, September insurance, is subject to various state seen to provide state-chartered 2000, holds that the provisions of laws that limit their authority banks the same authority as www.alta.org TitleNews 21 issue focus
national ban.ks and their RESPAlssues mortgage loan, or an associate of subsidiaries. such person, has either an affiliate Sorting out the conflicts for a The Real Estate Settlement relationship with or a direct or state-chartered bank among states' Procedures Act imposes significant beneficial ownership interest of wild card, anti-affiliation, and concerns for any bank title more than one percent in a provider controlled business statutes and insurance activities. At the heart is of settlement services; and (B) measuring the impact of federal RESPA Section 8(a), that prohibits either of such persons directly or preemption under the FDIC rule any person from giving or accepting indirectly refers such business to will be important for state any fee, kickback, or thing of value that provider or affirmatively chartered ban.ks to realize the same for the referral of settlement service influences the selection of that opportunities as national ban.ks in business involving a federally provider. the title insurance arena. related mortgage loan (12 U.S.C. HUD adopted a regulation (12 Legislation in many states is Section 2607(A)). Subsequently, C.F.R. 3500.15) which provides needed to remove these preempted RESPA was amended to permit that a controlled business and conflicting statutes. Until the certain controlled business arrangement is not a violation of clean-up is completed, ban.ks will arrangements that were defined to Section 8 and allows referrals to an continue to begin joint ventures mean an arrangement in which: (A) affiliated settlement service provider through subsidiaries, but at a higher a person who is in a position to so long as: 1) the consumer receives cost to obtain the legal opinions refer business incident to or a part a written disclosure of the nature of necessary to meet bank regulatory of a real estate settlement service the relationship and an estimate of burdens. involving a federally related the affiliate's charges; 2) the
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Propertylnfo.com 235 Land net 1300 TiUelogix.com 10 20 Landtech Data Corp., Royal Palm Beach, FL Landtech Real Estate 800-937-2938 , 9 ' • [email protected], Settlement System www.landtechdata.com RealXchange.com, Orem, UT Escrow Data 10 20 31123 17 13 12 877-895-1202, [email protected], Xchange Tracker www.realxchange.com 12 12 75 I 130 SMS, Orange, CA ISION Title 180 30 70 10 I 16 20 800-767-7832 , Image-Pro Document [email protected], 18 30 18 19 30 5 ' . Imaging www.smscorp.com OMS Title Plant 52 45 22 10 3'. e•Track On-line Order & Tracking System Smart Docs Escrow 32 20 DocNet Escrow 140 700 20 Trust Link Trust 40 210 35 I 470 I 10 25 FasTrax Release 75 5 I• SoftPro Corporalion, Raleigh, NC 800-848-0143, I SoftPro for Windows 257 I 136 I 1120 1 22851 204 I 1099 I 780 I 125 I 91 126 I 43 12 25 [email protected],www.softprocorp.com Standard Solutions, Inc., Malden, MA Standard 800-597-6007 , Conveyancer - 10 [email protected], Millennium Edition www.standardsolutionsinc.com Real Solutions 10 Closing 10 Experience.com Title Support Services, Inc., Annapolis, MD TSS TilleExpress 10 I 460 I 134 I 60 11 I 26 17 888-268-0422, [email protected], www.titlesupportservices.com TitlePac, Inc., Muskogee, OK E & 0 Insurance 20 I 30 I 700 I 100 I 40 500 I 300 I 100 I 20 20 20 10 I 10 800-331-9759, [email protected], www.titlepac.com 2so · l s r 1T126 15 16 8 I• TitleSCAN Systems, Sudbury, MA TitleSCAN Plant+Plus 800-448-7226, TitleSCAN Image 120 I 6 I 1 I 61 [email protected], www.titlescan.com TitleSCAN Web TitleSott, Inc., Winter Park, FL lntertaclose & 800-529-0585, lntellastore for 10 I 20 20 I so 14 • I 6 [email protected], www.titlesoftinc.com Windows UCLID Software, Madison, WI lcoMap V 2.5 877-778-2543, 10 10 10 15 [email protected],www.uclid.com Virtual Desktop, Inc., Dallas, TX Application Service 20 10 20 10 972-960-6400, [email protected], Provider www.virtualdesktopinc.com Web 20 8 I • Hosting/Development Technology 30 12 24 Consulting Email Hosting ao 1 10 I 100 I 25 I 100 I 200 100 American Land Title Association www.al1 1828 L St. NW • Suite 705 • Washington, DC • 20036 • Phone: 202-296-3671 Fax: 202-223-5843 • E-mail: [email protected] Account-based Account-based Transaction-based Transaction-based (Monthly (Monthly Transaction-based Transaction-based (Flat (Flat Rate) Rate) Per Per Concurrent Concurrent User User Per Per User User Per Per Workstation Workstation Other Other ED I I - Proprietary Proprietary ED l -X12 -X12 ED I -VAN -VAN FTP FTP SSL SSL XML XML Integrated Integrated Data Data Export Export Integrated Integrated Data Data Import Import Integrated Integrated Document Document Export Export Integrated Integrated Document Document Import Import Other Other Source Source Code Code Available Available Passwords Passwords I ntegrated ntegrated Imaging Imaging Digital Digital Signatures Signatures Security Security Levels Levels Laser Laser Checks Checks Remote Remote Access Access Integrated Integrated E-Mail E-Mail Desktop Faxing Faxing Desktop Other Other Sybase Sybase btrieve btrieve Paradox Paradox Access Access Fox Fox Pro Pro Lotus Lotus Notes Notes Oracle Oracle DB2 DB2 SOL SOL Server Server Other Other Browser Browser Based Based Lantastic Lantastic Banvan Banvan Vines Vines Novell Novell 5 5 Novell Novell 4 . x x Windows Windows XP XP Windows Windows 2000 2000 NT NT Other Other UNIX UNIX Thin Thin Client Client (Terminal (Terminal Server ; ; CITRIX) CITRIX) Linux Linux Windows Windows 2000 2000 Windows Windows NT NT oA. oA. Window~ Window~ Windows Windows 95 95 Windows Windows 3.x 3.x DOS DOS Other Other VMS VMS MVS MVS OS/400 OS/400 UNIX UNIX Windows Windows XP XP Windows Windows 2000 2000 Windows Windows NT NT Windows Windows 98 98 Windows Windows 95 95 Other Other Mainframe Mainframe Mid-Range Mid-Range - RS6000 RS6000 Mid-Ranae Mid-Ranae - AS400 AS400 Mid-Ranae Mid-Ranae - VAX VAX PDA PDA Suooort Suooort Aoole/MAC Aoole/MAC Based Based Thin Thin Client Client (Terminal (Terminal Server: Server: CITRIX\ CITRIX\ RAM RAM -- 264 264 megs megs RAM RAM -- 128 128 megs megs RAM RAM -- 64 64 megs megs PC PC Based Based -- 500 500 megahurtz megahurtz Other Other Transaction Transaction Management Management Automated Automated Underwriting Underwriting Accounting Accounting - Invoicing Invoicing Discharge Discharge & & Release Release Tracking Tracking Policy Policy Reporting Reporting to to Underwriter Underwriter Manaaement Manaaement Reportina Reportina End End User User Custom Custom Forms Forms End End User User Custom Custom Reporting Reporting litle litle Plant Plant - Starter Starter Posting Posting lille lille Plant Plant - Deed Deed Reports Reports lille lille Plant Plant - Mortgage Mortgage Reports Reports ~ CITRIX) CITRIX) ; ; Tracking Server Server Underwriter Heportmg Forms meaahurtz to lnvotcing RS6000 VAX AS400 Reporting 500 Release meas megs Management Based - - - - Undeiwriting (Terminal x - (Terminal megs - . & Custom "C'Ustom XP NT 98 98 2000 NT 3 95 2000 XP 2000 Based Vines 128 .x 64 264 Reporting 4 5 -- -- -- Support Client Server Client User astic Based X t I tnd'"U'Ser PC RAM RAM RAM End PDA Policy Discharge Apple/MAC Accounting Automated UNIX Management Windows95 Mid-Range Mid-Range Mid-Ranae Other Other Mainframe Thin VMS OS/400 Transaction MVS Windows Windows NT Windows Windows DOS Novell Windows Windows Linux Windows Windows UN Other Windows Windows Windows Novell Thin Banvan Lan Other Browser SQL Other DB2 1-t Q ~ • ('Jq ...... 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However, this controlled entity; and 3) the only any joint venture arrangement. may not be the exclusive method thing of value received from the since some large banks will decide arrangement, other than payment Structuring Joint Ventures to diversify their holdings by for services rendered, is a return on A number of issues regarding participating in several multi.bank ownership interest. structure, ownership interest, and agencies. Smaller banks (under $1 Thus, a financial institution and banking law restrictions are billion in assets) are unlikely to its joint venture partners, whether important to structuring a viable form their own bank agency simply attorneys, other banks or title title insurance activity for bank because of the volume needs of the companies, must be careful to subsidiaries. business entity. These smaller ensure that all three conditions are Venture Types. Several models banks are more likely to form a met in structuring joint ventures for for joint ventures are beginning to simple joint venture with their local the sale of title insurance. emerge. These include single bank bank attorney or an existing title The consumer disclosure and agencies, attorney or title company agency. Alternatively, smaller banks consumer choice provisions are joint ventures, and multi-bank have begun to form multibank title essentially operational issues. These agencies. Each are suited to agencies. These multi.bank agencies operational issues are easily different environments and have the advantage of spreading the addressed with appropriate particular circumstances. Most large cost of operations over a larger disclosures and loan processing banks, or multi-bank holding participant pool and increasing procedures. 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COR POR ATION issue focus any form of organization essential since RESPA does not let consumer education that has not (corporation, limited liability the LLC adjust distributions based previously been available in the company, partnership, or limited on actual volume. In addition, industry. Therefore, bank partnership) can be used, most RESPA would also prevent the affiliations will help resolve this lack ventures elect the LLC form. organization from restructuring its of understanding, but only with the Some type of entity is essential for ownership interest on any regular assistance and expertise of existing a bank since a limitation on liability basis if the purpose was simply to providers. is a required element of a business adjust distributions to referral Like bank entry into other activity. The LLC form then volume. insurance fields, banks are not in a allows for avoidance of a layer of Bank Regulatory Concerns. position to either reinvent the federal and state corporate taxation Bank regulatory issues impact the industry, nor to build organizations and allows the profits or losses to structuring of joint ventures, and from scratch. They must rely on the flow back to the venture several key factors must be met. expertise of professionals, either participants directly. The activities of the joint venture through joint ventures or through It should be noted that federal must: 1) be limited to those purchasing existing agencies in tax law allows limited liability activities in which banks are order to quickly enter the market. companies (like partnerships) to permitted to engage; 2) the bank Title companies and existing have great flexibility in valuing and must be able to prevent the joint agencies that are prepared to adjusting distributions, even at venture from engaging in activities develop business models and year-end. However, this adjustment that do not meet the foregoing marketing materials, and provide would likely violate the controlled standard; 3) the bank's loss exposure loan officer training will be essential business provisions of RESPA. must be limited as a legal and to any successful venture. Ownership Interest. Structuring accounting matter; 4) the bank In 1999, Congress recognized in the ownership interest of a joint must not have open-ended liability the Grarnm-Leach-Bliley Act that venture, particularly a multi.bank for the obligations of the enterprise the market for financial services venture, is particularly important. and 5) the investment must be banking, securities, and insurance- Because RESPRs Section 8 does convenient and useful to the banks had been changed by technology not allow distributions based upon in carrying out activities otherwise and market forces. GLB adopted a actual volume (the services permissible for the bank new regulatory structure to adjust rendered rule), the distribution can In addition, the bank may need to that change. Title insurance is a be based only upon the ownership to create and qualify a financial part of that overall financial system. interest. For most banks, subsidiary (meeting a well Bank entry into the title structuring its ownership interest in capitalized, well-managed, and insurance business will create new proportion to its expected satisfactory CRA requirement). opportunities and can be successful participation level is a major Regulatory requirements include for all participants-companies, consideration. The ownership notice to or prior approval from agents, lawyers, and financial interest can be based upon virtually banking regulators and compliance institutions-but only with the any criteria but is often tied to bank with state insurance licensing laws. involvement and support of those assets, historical loan volume, or already in the industry. some combination of the two Marketing Title Insurance factors. This permits the joint Bank entry into title insurance Timothy L. Amos is senior vice venture to be structured so that activities opens a new opportunity president and general counsel of the Tennessee Bankers Association in bank return should approximate to provide much greater marketing Nashville. This article is an excerpt bank participation. Otherwise, joint resources to the title insurance from his presentation at the 2000 venture partners will either have industry. Surveys show that ALTA Federal Conference, in more or less incentive to actually consumers simply do not Washington, DC. Tim can be use the joint venture agency. understand the title insurance reached at 615-244-4871 or Structuring the ownership product. Banks can provide [email protected] . interest correctly on the front end is marketing support and a level of 2 4 January/February 2002 www.alta.org inside the industry New Expanded Coverage Policies By Clifford L. Morgan Jbetitle mdustry's new there is no question about the true omeown 's and Expanded value we add to the real estate Coyerage Residential Loan Policies community. provide coverages that-for the first When I speak to groups I ask