Despite the small uptick in mortgage rates recently, rates are still low compared to past years, and the momentum in home sales activity demonstrates that homebuyers are undeterred. For homeowners who have been in their homes for a few years, it’s still a good time to consider refinancing.
Does your title company have a marketing and sales strategy in place to capture refinancing business?
I sat down with PropLogix’s VP of Product, David Daley, to discuss how title agents can streamline their process and create conversations with consumers to add refinancing to their title business growth strategy.
Why aren’t more title companies and law firms doing refinance transactions now that the rates are so low?
Refinances are a great way for homeowners to save on their monthly expenses or cash out equity in their homes. Yet, this type of transaction makes up a small percentage of title orders for title companies and law firms.
In our State of the Title Industry report, 74% of settlement agents said they handle mostly resales.
“It’s difficult to build a business on just those [refinance] transactions. The rates are great. The challenge is when the rates go up, the first thing that happens is that the refi’s will dry up,” Dave says.
Refinances are unpredictable.
It’s hard to know how the forecast of refinances will change should the rate take a turn for the worse. Conversely, people will always be moving and buying new homes regardless of the rates. Those in any insurance industry are adverse to instability and unpredictability, so it makes sense most avoid these transactions in favor of the more predictable purchase business.
Why should title agents still consider refinances as part of their growth strategy?
Still, Dave recommends diversifying your business portfolio of services and products as a method of shoring up defenses against an economic downturn.
While refinances are unpredictable, they have the benefit of being less work overall, especially if it’s a home that you helped that current owner buy. Risks are always on the minds of business owners of all sizes, but right now, there’s a lot of potential growth for your business by targeting more refinances.
There is a boom right now in refinances, so while you may not have the ability to capitalize on the current rising tide, how can title companies capitalize on future waves of lower rates?
Take the manual work out of refinance transactions
The key to growing your business with refinances is to leverage technology and, especially, automation to make it more profitable.
If you’ve decided to make refinances a bigger part of your business, here are some of the steps to take to streamline your operations and increase profitability.
- The first step is to evaluate your internal process to see how you can make refinances more streamlined and profitable.
- Determine what parts of the title production could benefit from partnering with a due diligence service provider. Larger players in the title industry, like LandCastle Title, utilize a variable cost model in their title operations. As Jason Somers notes, this allows their company to keep their employee counts normal and manage their workflows better by only paying for services when they need them. Replicate the steps others are taking in the industry that have contributed to their success. How are they optimizing their internal processes with staffing, training, and tools?
- In addition to outsourcing, title agents should start applying automation to their workflows wherever they can. Project and task management tools, automated reconciliation, and automated email communications all are readily available to businesses in every industry. Closing software and most email platforms offer some tools to create templates for repetitive tasks and email communications.
- Next, investigate what lenders expect and how you can better accommodate their requirements. See if there is a way to build those standards into your automated process.
There are also some companies offering title production and commitment preparation automation through big data and machine learning. The application of Optical Character Recognition (OCR) allows scanned paper documents to be easily converted into PDFs, images, or other file formats that can then be processed by artificial intelligence for any errors or issues that require further investigation by a human. One study demonstrated that robots now score better than lawyers in reviewing and approving contracts. For title agents, deep machine learning could prove invaluable in the title search and examination period to reduce errors.
Create opportunities to educate consumers about refinances
Title agents play an integral role in the closing of any real estate transaction. But many consumers aren’t even aware of what a title agent is or what they do… or how important a homeowner’s title insurance policy is in protecting their property rights.
Once a purchase agreement is signed and you begin your work, it's a great opportunity to reach out to the buyer with important communications regarding the biggest purchase of their life. Setting up a simple email drip campaign with information regarding email spoofing and wire fraud, why a professional title search matters, what a title commitment is, and other homebuyer tips like saving on a mortgage is a great way to build trust with a future homeowner.
Once you’ve established that connection, continue to educate them. Even if the deal falls through, they are likely to buy a house at some point, and it's the perfect opportunity to explain how they can benefit from refinancing in the future.
There are lots of great free email marketing tools available like HubSpot and MailChimp. Here’s a guide on how to set up and schedule automated email campaigns in Outlook using a tool called SalesHandy.
Even if you aren’t writing this content yourself, there are great resources available like the American Land Title Association’s Homebuyer Education videos and our YouTube channel’s Tips for Homeowners and Homebuyers Playlist.
Wire fraud is still a concern in refinance transactions
The American Land Title Association recently released a warning about cybercriminals targeting cash-out mortgage refinances. While there are fewer parties involved in this type of transaction, there are still plenty of opportunities for fraudsters to interject themselves into the closing to divert those funds into their pockets. Tom Cronkright of CertifID explains in this video how it's being done.
CertifID makes the following suggestions for settlement agents to combat this growing trend:
- Educate the consumer and everyone involved in the transaction about the risks of wire fraud.
- Give explicit instructions on best practices for wiring funds and how you will share wiring instructions.
- Give examples of what is not a common practice, like changing banking relationships.
- Use encrypted email or other secure platforms when sharing wiring instructions. Do not share or rely on wiring instructions sent via standard email.
- Always confirm the identity of the party sending wiring instructions as well as the banking credentials being shared before initiating a wire transfer.
- Verify the funds were received into the proper account. Most wire transfers are completed within a few hours or one business day at most.
Purchase and refinance business is strong, and it’s a great time for title companies and law firms to implement strategies to gain a part of it.
Don’t be afraid to take action. With the right tools, process, and staff, your company can grow.