Weekly mortgage Q&A: Virtual closings and the importance of title insurance

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The pandemic has accelerated a move to allow homebuyers to close the deal virtually, and the hot housing market has underscored the important role title insurance plays in protecting those buyers.

This week, Bankrate spoke to Diane Tomb, CEO of the American Land Title Association (ALTA), to hear about the shifting homebuying landscape and the post-pandemic outlook for these trends. The interview has been edited for length and clarity.

How significant is the move to more virtual processes when it comes to homebuying?

It is very significant. Prior to this time last year when we all shut down as a result of the pandemic, we at ALTA, working with some of our partners in the industry, have been educating our members about the access to digital and what some of the opportunities will be. Because there wasn’t a widespread network platform to be able to do virtual closings or other real estate transactions, it wasn’t as widely adopted. We partnered with Mortgage Bankers Association to put together a big camp in December 2019. People were thirsty for knowledge. At that time, people wanted to do this. We recognized how important it was and someone needed to take the leadership role.

During the pandemic, it accelerated significantly. It just became obvious that people were pivoting, how do they continue to do their jobs? People were doing drive-through closings, they were doing them through windows. We had a 547 percent increase in the use of online notarization compared to 2019. In many cases it would have taken us 5-10 years to get to where we are now.

Are these things going away? Do you think we’ll see more virtual closings even after the pandemic?

Our wish as an industry is that virtual closings expand, and we’ve been advocating for that since before the pandemic. In addition to that, we along with our folks at the Mortgage Bankers Association and the National Association of Realtors, are in the process of reintroducing some legislation called the Secure Act so that we have a national standard. Once that is in place, this will continue to be the way to go. Most states have temporary laws in place, but our goal is to make those permanent. It’s not the only way they can do business, it is just another option.

We all knew we could work from home in some capacity, but a virtual closing gives everyone time to be able to review the documents in a way that they may not have been able to when they were sitting at the table. It allows individuals to do things on their time and have access to the information in a way they can read it and understand it. It also allows our industry to close these deals and keep the economy going.

What is title insurance?

The pandemic has changed how we look at things. More people are investing more in their homes. For us, it’s really important that people understand why they need title insurance and why it’s essential. When property is transferred from one owner to another, there are many types of legal problems that can stay attached to a property itself. Many people are surprised to hear that 1 in 3 real estate transactions include costly legal problems.

Title insurance is a one-time fee. It’s not like car insurance, which helps you after the problem. It’s meant to catch these expenses and resolve them before you get to the table to close. I would say probably one of the biggest ones is a lien. If there was a divorce and a child support issue that wasn’t being paid, those are the types of things that would show up on the property record.

For most people, this is the largest purchase they will make in their lives. It’s really important from the title insurance standpoint that the title is clean and that all of this has been done before they sit down at the table.

How has the pandemic changed things?

Our membership comes from every county in the United States. Our members’ goal is to serve their customers. If they’re in a rural area and don’t have access to this, they can still do a drive-by, through a window, in a safe way that they can be sure the information is accurate and secure. We see ourselves as protecting the homebuyer’s property rights.

Many states have hybrids, and we really think this should be the ultimate goal, remote online notarization.

We have a chart of different types, some states require a wet signature, some states have different regulations. It allows individuals to do this process in a way that is more efficient for everybody. It’s not just the homeowner, it’s the Realtor, the buyer. Now everyone has the same information. It really streamlines the process in a way that’s never been done before.

Anything else people should know?

One area is the wire transfer fraud. It did exist pre-pandemic, and there’s always criminals, but with the pandemic, that has really increased significantly. It is something that the real estate professionals need to educate people with what happens in the closing. That’s how good the bad guys have become at watching people’s email and hijacking it. Sometimes the money is recovered, often it’s not. We are working with other industry folks, and with the federal government. CFPB has a big initiative working with them. We also launched stopwirefraud.org, the Coalition to Stop Real Estate Wire Fraud, in 2019.

There are some really simple things you can do: call, don’t email your wiring instructions. Always be suspicious at the last minute if you’re getting an email from someone to change your wiring instructions. These little things really mean a lot.

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Written by
Zach Wichter
Mortgage reporter
Zach Wichter is a mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy.
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