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Should We Start A National TItle Company Or Not?

Should We Start A National TItle Company Or Not?

Dear Stakeholders:

Please find enclosed the requested Cohiba Consulting Group report detailing the demands and considerations to be factored in when determining whether to move forward with the proposed creation of a Vendor Management Company (herein referred to as “VMC.”)

After carefully reviewing the proposal, market conditions and industry climate, it is believed that the creation of a Vendor Management Company would be a prudent and strategic move, capitalizing on the increasingly complex and competitive real estate services market.

As the father of modern quality process, W. Edwards Deming, once said, “It’s not necessary to change. Survival is not mandatory.”

Please find contained the results of our consultants’ industry experience, as well as extensive research into the financial, technological and regulatory climate of the real estate industry. We hope you will not hesitate to contact us with further questions or concerns, and look forward to advising you further.


CEO & Managing Director
Cohiba Consulting Group

Table of Contents

I. Market Overview
A. Refinance Transaction Market
B. Purchase Transaction Market
C. REO Transaction Market
D. Commercial Transaction Market
E. Appraisal Management Company
II. VMC Set-Up Strategy
A. Time-Frame and Logistics
Q: Refi mini-boom?
Q: Which comes first, customers or VMC?
Q: If we build it, will they come?
Q: Separate AMC from title?
Q: Is work-sharing (of title) a good idea?
B. Marketing Strategy
III. VMC Offerings and Capabilities
(Customer and Market Demand)
IV. Human Resources Strategy
A. VMC Operations Manager: Experience, salary, other staff considerations
B. Critical Characteristics
C. Dallas Market
V. Software Considerations
A. Reware
B. Reamquest
VI. Conclusions

I. Market Overview

A. Refinance Transaction Market

The residential refinance market is, in large part, controlled by interest rate fluctuation and pricing. In October of 2008, the interest rate on a 30-year fixed mortgage (hereinafter referred to as “rate”) peaked at 6.33%. As that rate has descended, the volume of transactions has swelled. Consumers, particularly in a price-conscious economy, are highly sensitive to rate fluctuations, and this has led to the current refinance boom. In May 2009, the rate reached an intermediate term bottom at 5%, but bounced rapidly back up to 5.51% in June 2009. During that one month period, the market was “shocked” by this sudden increase in rate, and refinance volume temporarily “dried up.” This sudden decrease in volume illustrates a market that is highly responsive to changes in rate. Rate then consolidated at the 5% price point for nine months.

However, as demonstrated in the price point chart below, in March 2010, the rate commenced a rapid descent. This once again led to high transactional volume until the rate started to bottom out once more in or about October of 2010. The rate then began consolidating between 4.35% and 4.19% in mid-October, 2010. After that, the rate dropped further due to artificial pressures exerted by the
Federal Reserve through its plan to invest additional funds in the real estate market to spur economic growth. Freddie Mac issued a statement that the rate had dropped to a new low of 4.17%, which broke the previous record low of 4.19% that was reached in mid-October of 2010. The chart below illustrates this volatile decline in rates.

Since then, the Fed has repeatedly pledged to keep interest rates low for “an extended period” of time as the economy continues to mend. On Nov. 3, 2010, the Fed outlined plans to invest $600 billion in Treasury bonds to keep rates low, add liquidity to the market and incent investors into riskier assets. The move has indeed helped to keep rates low, but it is still unclear whether economic activity will rise as intended, Some speculate that the Fed has simply run out of tools for boosting the economy.
Moreover, despite historically low mortgage rates, the housing market’s recovery continues to be slow, owing largely to household job uncertainty and tight credit conditions. The unemployment rate has remained at 9.5% or higher for the past 15 months, and commercial banks have tightened lending standards in 16 of the last 17 quarters, according to the Fed’s Senior Loan Officer Opinion Survey.
In conclusion, high volume in the refinance market will continue as long as interest rates remain at historic lows. Based upon historically similar events, rates should increase when the Fed ceases its investment in Treasury bonds.
B. Purchase Transaction Market

According to the National Association of Realtors, “existing-home sales rose again in September, affirming that a sales recovery has begun.” Existing-home sales include completed transactions pertaining to single-family houses, townhomes, condominiums and co-ops. The sales figures for these transactions jumped 10% to a seasonally adjusted annual rate of 4.53 million in September 2010 from a downwardly revised 4.12 million in August of the same year, but remain 19.1% below the 5.6 million-unit pace in September 2009, when first-time buyers were scrambling to purchase before the initial deadline for the tax credit last November. These figures are illustrated below.

Many experts are now speculating that the housing market is in the early stages of recovery, though it will most likely experience some high volatility on its way there. This of course depends on the potential duration and impact of a foreclosure moratorium. The mainstream belief is that the overall trajectory will see a gradual rising trend in home sales with buyers responding to historically low mortgage interest rates and very favorable affordability conditions.
As NAR President Vicki Cox Golder pointed out, “A decade ago, mortgage rates were almost double what they are today, and they’re about one-and-a-half percentage points lower than the peak of the housing boom in 2005… In addition, home prices are running about 22 percent less than five years ago when they were bid up by the biggest housing rush on record.”
In conclusion, there has been a marked increase in existing home sales for the last three months. This bodes well for a housing market recovery if that trend continues. The purchase market will eventually return and those title agencies with a solid national footprint and effective purchase process will capitalize.

C. REO Transaction Market
Class-action lawsuits against large banks active in REO have, predictably, been filed in conjunction with the recent foreclosure controversies. Suits have been filed against J.P. Morgan, Bank of America, Citigroup, Wells Fargo and Ally Financial. More suits should certainly be expected as delinquent homeowners fight foreclosures and investors fight to recoup money from problematic securitized mortgages.
These lawsuits are the inevitable result of a foreclosure compliance failure that became public knowledge after an employee of Ally Financial admitted that he signed thousands of foreclosure documents without reading them. Since then, several “robo-signing” issues have come to light, including the revelation that some affidavits filed in courts have been faulty.
At least 19 states, including Iowa and Texas, are conducting separate investigations to determine whether state laws were broken. In addition, all 50 attorneys general are investigating robo-signing issues in a matter being led by Tom Miller, Iowa’s Attorney General. Ohio’s AG Richard Cordray, the first AG to pursue Ally Financial in the courts, also filed a lawsuit in early October.
The newly appointed Federal Reserve Governor Sarah Bloom Raskin has stated that with no immediate solution for the crisis in U.S. mortgage servicing, the outlook for foreclosures remains “grim” for the next couple of years. Estimates of U.S. mortgage foreclosures are predicted to reach 2.25 million in 2010. Experts believe they will remain at 2.25 million in 2011, before dropping to about 2 million in 2012.
In the recent past, servicers have relied upon lean systems which are adequate for handling routine aspects of the business but which cannot cope with a “serious down-cycle,” according to Raskin. However, she claims that deferred maintenance and investment by the industry on a significant scale are both on the horizon.
The Federal Reserve and other agencies are now examining foreclosures procedures at several banks other than those already mentioned. When those reviews are completed, there will be more information about the extent and significance of these faulty business practices.
The REO/foreclosure market has slowed down tremendously in recent months due to robo-signing issues. Anecdotal evidence suggests that REO orders have been put “on hold” in title companies across the country. Once these investigations and resulting actions are complete, the REO/foreclosure market is expected to gain strength rapidly. The market should gain stability for title agencies through 2012.
D. Commercial Transaction Market
At a macro level, the latest industry report for the third quarter of 2010 reveals an increase in closed transactions – up 35% as compared to the second quarter of this year. Total transaction volume in 2010 is well on track to double last year’s $54.4 billion. These numbers are nowhere near the volume of transactions in 2007, but the trend is positive, with commercial transaction activity increasing steadily.
At the micro level, there is a definite building of momentum, but this is a different kind of market than most experts expected. There is no feeding frenzy of discounted opportunities, and no easy or fast deals. With a small number of transactions taking place, every investment has to be carefully designed and structured to balance against the uncertainty of a slowly recovering market. Without a large volume of transactions to establish a widely agreed-upon value for a given asset, it is nearly impossible to proceed on any broad-based auction. Without deep discounting, there is insufficient investor compensation for uncertainty. For now, every deal must be negotiated and structured with caution.
In conclusion, the commercial real estate market is commencing a slow recovery. Positioning oneself as a national commercial RE title agency is a prudent tactic at this point in time. The market is evidently cycling back and the margins are extraordinary. Cohiba represents an REIT which has verified these assessments.
E. Appraisal Management Company Market

Historical Overview By Russell Solomon

Appraisal management companies have arisen due to increasing demand for a bundling of closing requirements such as title insurance, credit reporting and appraisals. Originally designed for efficiency and operational economy, these companies have historically aided national lenders that struggle to manage volume services on a national scale.

The landscape changed in 2009 with the institution of the Home Valuation Code of Conduct (HVCC). This private settlement agreement between the New York Attorney General’s Office and the two largest government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, has significantly altered the way these businesses are structured. Basically, the agreement required the GSEs to institute new policies regarding appraisal independence, such that any parties whose compensation was dependent upon the closing of the loan are not permitted to be involved in the selection of an appraiser. Many lenders that had originally managed appraisers in-house then chose to outsource the process. Many national lenders were already doing this, but regional and local lenders, burdened with the new requirements, determined that utilizing AMCs was the best practice. This decision created great demand for outsourcing the appraisal management process.

In response to this demand, many companies entered the AMC space that had never been involved with this scale of management. Regional appraisal firms, reacting to the sudden migration of business, formed their own appraisal management companies. Others that had no history in valuation at all created management companies to fill the growing demand for this outsourcing service.

As a result, numerous new AMCs arose, most without the necessary capitalization, knowledge and resources to execute the process efficiently. Some of the startup organizations provided poor and unprofessional service. The rapid proliferation of AMCs thus created real problems, and real estate agents, appraisers, mortgage brokers and local lenders all began to complain about the appraisal management process.

These complaints still abound, and new ones are constantly being voiced as well. From the lending and real estate community, they chief complaint is a lack of competency. Anecdotally, AMCs seem to be hiring appraisers who are willing to work for low rates. Many in the business complain that this leads to incompetence. This incompetence often results in low appraisals, which ultimately means missed opportunities for home-buying transactions. In response, many states have now passed statutes to supervise appraisal management companies. The requirements of these legislative acts vary widely, with some reflecting a more punitive than regulatory tone. Compliance with these dissimilar regulations is a burden to all but the largest AMCs. Smaller organizations are often unable to address the complexities of multi-state legislation.

For example, Arizona is one of many states that has begun to implement procedural changes with regards to appraisal management companies. Arizona’s reform bill (titled Senate Bill 1351) passed in mid-April of this year, and it is now on its way to the House, where it is expected to pass. The new bill requires appraisal management company owners to submit to background checks. It also requires AMCs to reveal any hidden fees to consumers and comply with the same rules applied to lenders and appraisers.

Competitive issues By Russell Solomon

There are now hundreds of AMCs crowding the market, many of which claim to have proprietary vendor management software that makes them uniquely capable. Without having seen a demonstration from every one of these companies, it would be difficult to say which are the best. However, most major AMCs provide the same basic services. These include nationwide appraisal coverage (or other forms of valuation), online ordering and integration (some including Calyx and other platforms), streamlined communications and 24/7 access to status reports on every outstanding appraisal. Many of these AMCs have been around for 10-30 years, and they tend to market their services specifically to other title companies and AMCs. The below are some of the larger AMCs, along with brief comparative notes.

• Exact Bid
o http://www.exactbid.com
o Online portal that connects lenders with appraisers and other real estate vendors. Used by over 12,000 vendors in 2008.
• Mercury Network
o http://www.mercuryvmp.com
o Online vendor management platform. Used by over 200,000 mortgage professionals since 2002. Targeted towards lenders and other VMC’s. 100% nationwide coverage.
• VTAM Software- ValuTrac
o http://vtamsoftware.com/
o Appraisal management software. Not an AMC.
• Elite Appraisal Management Inc
o http://www.eliteappraise.com/
o National coverage. Online ordering and tracking, however website is much less professional.
• KStreet Appraisal
o http://www.kstreet-appraisal.com
o National coverage.
• First American
o http://www.eappraiseit.com/index.aspx?id=23
o Traditional and automated products
o Over 50 products.
• PCV Murcor
o http://www.pcvmurcor.com
o Appraisals, BPO’s, Value Reconciliations, disaster inspections, due diligence
o In business since 1981
• Street Links
o http://www.streetlinks.com
• 48 Hour
o http://www.48hn.com
o 48 hour appraisals
o http://www.nationsls.com
o Established in 1990 as a division of Nations Holding
o Title and appraisal services
• Epic Real Estate Solutions
o Appraisals, BPO, Title settlement services
o http://www.nascopgh.com/
• Imortgage Services
o http://www.imortgageservices.com
o Appraisal, Title settlement services
• Advantage Equity
o http://www.advantage-equity.com
• Hubpages
o http://hubpages.com/hub/Top-10-Appraisal-Management-Companies
o Lists the 10 best AMC’s

In conclusion, federal and state legislation effecting AMCs is still evolving. The competition and barriers to entry are significant. The learning curve is steep. VMC would do well to outsource its appraisals through an agreement with a major AMC, and then integrate. White labeling it as a VMC would provide one-stop shopping to VMC lenders. This would constitute a significant competitive advantage for TA’s existing clients and new prospects.

II. VMC Set-Up Strategy

A. Time Frame and Logistics By Russell Solomon

A realistic time-frame estimate is highly dependent on what products will be offered by the VMC . Assuming that the VMC will initially offer abstract, title, closing, appraisal management, and credit with a Phase II product offering, the “go live” date should be no more than four months from the date of incorporation of VMC.

The following is a brief checklist of the most pressing action items and estimated time frames:

1. National title licensing and national agency appointment in 40 states: 6-8 weeks, depending on acquisition of bonds and availability of licensees to attend testing required in various states.
2. Title software selection and rollout: 10-16 weeks depending on numerous factors including but not limited to 1) ability to move rapidly on choice of software; 2) intellectual capital available for software rollout and 3) choice of software.
3. Creation of public relations, sales and marketing plan, including optimized website: 6-8 weeks.
4. Recruiting of key employees (National Operations Manager, National Sales and Marketing Manager, Webmaster, Chief Network Administrator): 8-12 weeks.

(Note: Below you will find answers and further material for consideration regarding many of the questions that have been posed directly via email.)

Question: Will we miss the current refinance “mini-boom”?
It is difficult to answer this question for the reasons discussed above in Section II (A) and in the Market Overview in Section I. Picking the bottom of a market can be a risky strategy. On the other hand, if rates do continue to drop, as some experts suggest they will (especially after the Federal Reserve’s recent statement that it was prepared for more extraordinary measures to pump up the economy), mortgage rates could inch in the direction of 0%. Continued concerns of deflation may also put pressure on mortgage rates.
Moreover, home builders have been known to pay down mortgage rates for their buyers, so these days it wouldn’t be unheard of for them to entice people with a 2% or 3% mortgage rate, at least for a period of time. Mortgage rates could certainly drop lower than they are now. Two years ago, few people would have thought a 4% mortgage was possible.
Another logical question to pose would be, “If we do miss the “refi mini-boom,” is there a chance that another “mini boom” will occur on which we might capitalize? It is abundantly clear that the market for foreclosure transactions, which is now stalled due to robo signing issues, represents a “mini-boom” in and of itself. When the foreclosure process issues are worked out, there will be an inventory of millions of foreclosed homes.
In conclusion, notwithstanding the possibility of “missing” the refinance mini-boom, a well-diversified portfolio of product offerings is the key to future profitability within the title and vendor management sectors.

Question: Which comes first, customers (and orders) or the set-up of the VMC?
This is an important question that any new enterprise must pose to itself before developing a strategy. However, your company is uniquely positioned to overcome this challenge in many respects.
It is clear that “tip-toeing” into a new enterprise poses many challenges, especially the risk of poor service if the company is not properly set up from an operational perspective. If one were to seek out clients for a VMC without having the proper technology and operational infrastructure in place, this could doom the initiative from the start. However, because TA has a long-standing national reputation, industry-wide contacts, and an operational processing center, staging into the VMC with exemplary strategic planning would seem the most logical course.
Moreover, any technology and intellectual capital acquired as part of the new venture can eventually be leveraged by TA within its existing operation. This, in effect, hedges against potential difficulties in acquiring clients for the VMC. In other words, if the clients didn’t come (which is highly improbable, in our opinion, with proper planning and marketing), TA could still capitalize on the technology, human capital and other acquisitions resulting from the creation of the VMC.

Question: If we build it, will they come?
The short answer to this question is “yes,” subject to the following considerations. If the market is analyzed carefully to determine current and future demands, and if the product and service offerings are strategically designed to meet those demands, the venture will be in an excellent position to succeed. Beyond those concerns, it is imperative that a strong branding and marketing campaign be developed to present these offerings to the proper audiences. If all of these criteria are met, the venture will in all probability be successful.

Question: Should we separate title and AMC services?

Because federal and state laws surrounding AMC are continually evolving, the risks associated with the AMC are unclear. Therefore, any appraisal management orders, whether or not they have been referred out and white labeled, should be kept legally separate from TA and VMC.

Question: Is Work Sharing (of Title) a Good Strategy for National Coverage?

Workshare can often be the path of least resistance, but based on extensive experience employing this strategy, Cohiba’s consultants have found that it is often quite costly and produces sub-par service for clients. Even the most competent workshare processing centers do not perform very well in our experience, and should only be used in states with significant barriers to entry. It would be Cohiba’s recommendation to execute on a national licensing strategy that includes at least 40 states and to use workshare only in the states with very expensive or complex licensing requirements.

B. Marketing Strategy By Russell Solomon
The following recommendations would necessitate the hire of a content writer and a webmaster. This is critical to execution pursuant to current marketing and public relations best practices.
The main goals in marketing and publicizing the venture should be to showcase your expertise, educate clients, earn trust and build lines of communication. This will position your company as a resource within the field and thus nurture positive client relations and drive sales.

The first important step is to build a pristine and content-rich website. This should include a blog page within the website, where a content writer will post relevant, engaging and thoughtful material designed specifically with the ideal audience in mind. The next step is to expand the venture’s presence via social media channels. LinkedIN is an excellent professional social network where the venture can educate its potential clients and demonstrate knowledge through a specialized group page. The blog and LinkedIN group are invaluable tools for earning trust and developing conversation with your target audience that will result in warm leads and eventually new clients.

Beyond a website, blog and LinkedIN group, the content writer should develop white papers and articles which can be used to drive traffic to your site, capture contact information and further the venture’s positioning as a thought leader. The white papers and articles should be optimized for search engines, available in exchange for valuable contact information (name, email address and company) and accompanied by news releases distributed across the web using free or paid PR tools. These efforts can be supplemented by speaking opportunities where relevant, as well as face-to-face interacting at industry conferences, meetings and other appropriate settings. Taken as a whole, these marketing and PR efforts will help to rapidly develop your online and real-world presence while engaging potential customers of the new venture as well as re-engaging current and former customers of TA. An email newsletter and periodic updates can serve as a valuable contact point for pushing out the content that is housed on your website, blog and social media homes.

1. The initial steps for this marketing plan should include:

a. Notify all current clients of the creation of VMC
b. Identify potential customers
c. Identify the major players in the industry (allies, competition, target audience, etc.)
d. Maintain customer and potential customer databases (using Salesforce or other CRM software)
e. Audit current TA marketing to determine which efforts will work well in conjunction with those of VMC
f. Assess of the website visitor data, Search Engine Optimization (SEO) and social media presence, and determine strategy for ongoing assessment
g. Research and identify associations, conferences, trade journals, industry networking opportunities (social media and otherwise), and sponsorships to get involved with
h. Determine marketing strategy and set goals

The next steps, depending on your final strategy, might include:

a. Update all collateral reflecting the VMC launch
b. Continually write press releases, case studies, and white papers to engage target audience
d. Review editorial calendars for publications where relevant, create distribution lists, make introduction to editorial staffs, submit releases using blanket distribution and based on editorial opportunities
e. Create tradeshow calendar, identify speaking opportunities, submit abstracts accordingly, plan exhibits
f. Create social media presence and entice followers, fans, current and potential clients, etc. (a weekly update at a minimum)
g. Perform biweekly analytics reporting for website, SEO and social media
h. Look into creating a free download or useful and valuable tool to place on website
i. Conduct free educational webinars (we suggest using Go To Meeting or WebEx)

In conclusion, the most important steps in developing a marketing strategy are identifying the target audience, determining the best outlets for communicating with them and crafting the brand and messaging around positioning the company as an invaluable resource populated with knowledgeable experts.

III. VMC Offerings and Capabilities BY Russell Solomon
Customer and Market Demand Considerations

It is very important to recognize customers’ expectations and pain points up front, and to be sure to address their needs and desires with targeted offerings. As previously discussed, the most important customer-requested offerings might include speed of delivery, connectivity, or frequent status reports.
Voice of the Customer (VOC) is a term used in Six Sigma and other quality initiatives to describe the in-depth process of capturing a customer’s expectations, preferences and aversions. Specifically, Voice of the Customer is a market research technique that produces a detailed set of customer wants and needs, organized into a hierarchical structure and then prioritized in terms of relative importance and satisfaction with current alternatives. Voice of the Customer studies typically consist of both qualitative and quantitative research. They are generally conducted at the start of any new product, process or service design initiative in order to better understand the customer’s wants and needs and often serve as the key input for new product definition.
Much has been written about this process, and there are many possible ways to gather the information, including focus groups, individual interviews, contextual inquiry or simply taking note of complaints. All of these strategies involve a series of structured in-depth interviews, which focus on the customers’ experiences with current products or alternatives within the category under consideration. Needs statements are then extracted, organized into a usable hierarchy and prioritized by the customers.
Understanding the customer’s desires is often a complex, iterative discovery process. Moreover, it must be done on an individual client basis if the venture’s goal is complete customer satisfaction. When commencing a new client relationship, it is highly advisable to undertake an “on-board” call. This call may be posed as a “welcome call,” but it is actually designed to inquire as to a particular customer’s needs and expectations.
Essentially, the question of what the client wants can be difficult to answer. However, after years of conducting on-board calls and VOC exercises, Cohiba’s consultants have established the following with certainty:
Speed of delivery has and always will be a crucial concern for clients. Title turn time, lien clearance, HUD turn time, and post-closing review are a few of the processes that must be expedited to meet client expectations. Additionally, the ability to deliver information of any type, when needed, is paramount. Through technology, outsourcing and automation, the delivery speed of all types of information along the value stream can be enhanced exponentially. An in-house call center can also speed up information delivery both to and from the client.
Connectivity through a web portal has become the industry norm. Most end-to-end platforms already contain this crucial component because of its necessity in the increasingly high-tech real estate services environment. The web portal can now be used for order entry as well as communication and delivery of documents. Connectivity through integration has also become the norm between tile vendors and lenders.
A web service portal is defined as a software system designed to support machine-to-machine interaction over a network. In lay terms, a web service portal enables lenders and other clients to create and exchange of information readily.
From the technical perspective, a web service portal has an interface described in a machine-processable format (specifically Web Services Description Language, or WSDL.) The lender’s systems interact with the web service in a manner prescribed by its description using SOAP messages, typically conveyed using HTTP with an XML serialization in conjunction with other Web-related standards. The web service portals allows lenders or other clients to create and exchange of information through xml. Extensible Markup Language (XML) is a set of rules for encoding documents in machine-readable form. XML’s design goals emphasize simplicity, generality and usability over the Internet.
This “push-pull” xml integration technology can be used to receive title orders, push back title data including settlement fees, title premiums, recording data, mortgage taxes, deed taxes and other information needed up front pursuant to the new RESPA rules and MDIA. Communication is streamlined by pushing and pulling (as opposed to emailing) notes and documents. All important communications and documents created by the title company are pushed and attached directly into the lender’s operating system as they are created. Most importantly, when there is a change in loan amount or any other substantive amendment to a loan which might impact the transaction, the xml integration seamlessly communicates the change and updates all documentation, thereby avoiding the necessity for emails, phone calls and other forms of potentially inefficient communication.
There are significant benefits and competitive advantages associated with this type of integration and delivery of documents, notes and data in real time. Title companies can now integrate several points of process with large lenders and servicing companies, exchanging documents rapidly through what is sometimes referred to as “push-pull” technology. In all cases, integration will lead to increased efficiencies, thereby solidifying client relationships and increasing profit margins.

Finally, reporting is now commonplace in the lender-title relationship. Early reporting systems simply provided visualization of certain items on the web portal. The lender might log in to the title agency website to view the status of his order, for example. Now, with the advent of more sophisticated software, the title agency can send a wide variety of customized reports to lenders. Examples of lender-requested reports would be title turn times, outstanding titles, a list of files where borrower authorization has not been forwarded and title policies owed to a lender. The capability to customize reports on demand is essential for any company to remain competitive in the current environment.

In conclusion, it is of utmost importance that the venture carefully analyze its customers’ needs and desires before developing its suite of produce and service offerings. Speed of delivery must be cutting-edge in order to be competitive. Connectivity is likewise a must. Finally, a software system that supports customizable on-demand reports will make the venture an attractive lender partner and ensure competitive advantage. There may be other offerings that are also crucial to the customer base; in-depth interviews (including on-board calls) will provide a clearer picture of their specific needs and desires.

IV. Human Resources Strategy By Russell Solomon

A. VMC Operations manager: Experience, salary, other staff considerations

A qualified national operations manager should have at least 5 years of well-rounded title experience in high-tech operations. The expected salary range could be in excess of $100,000 per year with benefits and incentives.

The following would be an appropriate job advertisement for an Operations Manager, and should provide an overview of the critical characteristics that will be required of this person.

Reporting to President & Chief Executive Officer of VMC, the Operations Manager is responsible for partnering with middle management of the VMC to shape and deliver operational strategies that support our management objectives.

Responsibilities include:
• Continuously define and improve a high-quality, cost-effective and compliant service model
• Oversee operations and in-house service call center
• Champion continuous process improvement (knowledge of Six Sigma attractive)
• Provide leadership to the operations group and to organization as a whole
• Ensure rigorous oversight and adherence to compliance procedures.
The Operations Manager will lead and manage a staff. He or she will also manage an operating budget and have business ownership for said budget, and will deliver the following:
• Maintain a service strategy for the operations function to support the vision, mission, and objectives of VMC
• Define and communicate a vision for the departments
• Working with senior management, gain buy-in to strategic initiatives initially and on an on-going basis and leverage these resources to help shape the service offering in the future
• Be responsible for all communication (internally and externally) of the service model and impacts to the customer
• Network with industry resources to understand and develop best practices
• Oversee the activities of the operations function of VMC
• Ensure that all activities are performed in compliant fashion.
• Oversee and set direction for:
§ The execution of all transactions including but not limited to abstracting, title, closing, appraisal management and credit
§ Maintenance of procedures to support associated operational processes
§ Continuous training of staff on operational procedures
§ Defining and maintaining service levels, developing metrics and associated reporting to measure performance of service levels
§ Developing control mechanisms to proactively identify potential service issues and execute accordingly, reporting on service levels internally and externally
• Champion continuous process improvement for operational processes and procedures, including quality assurance and training. Align business processes with overall technology strategy.
§ Work in partnership with technology teams to sponsor automation opportunities that address process efficiencies.
§ Identify, champion and execute on the elements of the technology strategy that address business processes within operations
§ Implement and manage controls to measure effectiveness
§ Establish reporting mechanisms that identify trends; leverage to make adjustments to staffing and procedures to ensure an optimal service model
§ Develop and maintain unit-cost models
§ Continually review and update unit-cost models and determine initiatives ongoing to support the overall reduction of unit costs
§ Define and sponsor the implementation of process improvement opportunities that positively impact customers
§ Act as business owner for back-office system enhancements and associated process improvements, including driving change management to achieve documented benefits
§ Be accountable for the development and ongoing maintenance of quality control and quality assurance programs for department functions
§ Develop training and development programs to improve quality within the department
• Provide overall leadership and support to the operations management team (direct reports)
§ Talent acquisition strategy: recruiting, selecting, on boarding, forward staffing
§ Coaching and mentoring of direct and indirect staff
§ Developing leaders, ensuring effective bench strength to handle day to day operations, succession planning
§ Setting objectives and supporting alignment of staff to these objectives.
§ Create synergy between department objectives and overall goals of VMC
• Ensure rigorous oversight to regulation adherence. Ensure ongoing regulatory compliance.
§ Work in partnership with Compliance on the development and priority of new/changed procedures relating to changes in the regulatory environment
§ Influence the design, through careful balancing of regulatory requirements with service offerings
§ Proactively scan the regulatory environment to determine and implement changes to processes and procedures impacted by such regulations
B. Critical Characteristics (Qualifications)
• Bachelor’s degree required; MBA or advanced degree attractive
• Lean Six Sigma Black Belt attractive
• At least 5 years title operations experience
• At least 5 years operations management experience including exceptional service/call center process management/improvement leadership experience
• Good knowledge and experience partnering with business process outsourcing firms
• Proven track record as a results-oriented leader that collaborates well with business leaders
• Strong people management and leadership capabilities including the ability to take control and create a high performance and field relationship focused culture
• Ability to successfully work across all levels of the organization, including interacting with senior management, compliance and risk management.
• Drive to deliver results and strive for continuous improvement
• Strong analytical, critical thinking and problem solving skills, with thorough attention to detail
• Excellent organizational, planning and documentation ability
• Open and honest communication skills
C. Dallas Market

Question: Does Talent Still Exist in the Dallas Market By Russell Solomon

Cohiba is not in a position to evaluate the Dallas market. However, it is worthy to note that this author’s prior title agency initially faced labor pool challenges because it was located in Middletown, Rhode Island, which has a population of less than 20,000 people. It is moreover on an island in the smallest state in the country and is positioned 70 miles from the nearest major city (Boston, Massachusetts.) Notwithstanding this immense challenge, an eager human resources department discovered plenty of capable people who were willing to work, learn and grow when presented with strong opportunities and excellent leadership.

Dallas has a population well over 2,000,000 people, and is located in a metropolitan area whose workforce specializes in technology and financial services, among other talents. Moreover, the current high unemployment rates make for a strong hiring market, giving HR managers the opportunity to pick and choose from many talented and eager candidates. Accordingly, it is assumed that this human resources challenge will be overcome without great difficulty by TA/VMC management.


Utilizing cutting edge end-to-end software applications is essential to growing your business and improving profit margins. Early models of processing software were largely capable of creating most important title-related documents, but used an antiquated user interface. This became worse as providers added features to compete in the market.

However, there are two relatively new software products that are market leaders, Reamquest and Reware. Both of these feature-rich software platforms offer everything a VMC requires to efficiently operate and scale a world-class, high-volume vendor management company. However, they function somewhat differently and require a certain amount of intellectual capital and IT staff in order to be used effectively.

A. Reware

1. Paperless Processing

Most software platforms are able to achieve some level of paperless processing today. Reware offers a very integrated solution where documents are stored centrally within the software and can be posted to their web portal, sent to a client via integration or emailed via its built-in email tool. There are also tools in place to scan a document directly into the file in Reware, bypassing the need to first search your scan folder and manually upload the document into the file.
2. Email

Reware can send and receive email from within the platform. This is an important tool for many reasons. Many software platforms have the ability to send an email from a file through an integrated or third-party email client (like Outlook.) The email is then either saved as a note within the software, or as an attachment for easy viewing.

Reware has taken this a step further by adding the capability to receive emails as well. This gives you the ability to create an email address for specified departments, and have that email map directly into the file. For instance, Jane Smith at XYZ Lending sends an email to postclosing@abctitle.com with the file number in the subject line. That email is fed directly into the post closing queue, or to-do list, within the software and attached to the proper file.

Any employee in that department can now open the email within the file, take care of the request, and reply back to Jane Smith without leaving the software platform. Both the incoming and outgoing emails are logged in the notes section of the file. The requirement of shifting back and forth to Outlook has been cut out of the equation. This has obvious positive impacts on efficiency.

3. Call Centers By Russell Solomon

Taking it a step further, you can create a specialized and highly trained department within your company called a call center. This department would be responsible for all incoming phone calls and email/fax communications. This can be set up “behind the scenes,” so that no abrupt changes to your normal process are noticed by your client.

To efficiently process emails and faxes, everything would be routed to the Call Center queue, or to-do list, within the software. Then highly trained staff members, who are essentially customer service agents, take care of any routine requests as well as many more complex items, without disrupting the main operations center. Basically, the call center acts as a filter, taking care of and responding to as many emails as possible, and only forwarding the most difficult emails to the appropriate department within the operations center. Electronic faxes would work the same way. The call center employees would also handle all incoming phone calls and only forward those callers whose issues could not be handled within the call center. This process works very well for larger lenders that close hundreds or thousands of loans a month, but it can be tailored to smaller companies who require a bit more “personal touch” as well.

4. Web Portal

The web portal is set up as a secure website where any party to whom you have given credentials can log in and review vital information. Specific access and privileges can be changed depending on who is logging in. For instance, the lender could be given access to all posted documents, notes, online order entries and file locations. However, an outsourcing company providing title-typing services might only be given access to the file’s search package. Most data entry can be completed on the web portal, without the need to purchase additional licenses. One of the most useful features of the web portal that it allows vendors to upload documents to a file. An abstractor, rather then emailing or faxing their completed work to the Abstract department, can simply upload the document directly into the file. Through automation, which I will explain further below, the file can be moved to the next department simply with the upload of specific types of files.

5. Push/Pull Integration

Reware has the ability to integrate with other Reware clients, along with many other software platforms. Often this capability has already been set up, however it may require custom work for an additional fee. It is an invaluable tool for streamlining communications between your company and its lenders and vendors. Order entry is a perfect example of where most people enjoy the benefits of integration. Rather then performing some form of double entry, whether by the lender or title company, integration allows the lender to “push” their order request directly from their software to Reware. Pertinent information about the borrower is automatically entered into Reware, with no need to type it all in. This is in stark contrast to the normal practices for email and fax orders, or even online orders, which still require the lender to type information into your online portal.

6. Automation

I mentioned earlier the ability for the file to move automatically to the next department after the upload of certain types of documents. This is an incredibly useful feature.

The way it works is that each document within a file is labeled with a certain document type, be it “search package,” “title commitment,” “tax certification,” or anything else. Actions drive the process within a file. An action is simply a to-do item on a list, and these actions can be set up to complete automatically upon the upload of certain document types. Therefore, when the abstractor uploads a document with the “search package” type attached to it, “receive search package” is automatically completed and “type title” begins.

Once again, this eliminates the need to receive an email, upload the search package into the file, and email the title department alerting them that they have a new file. This can be used for the receipt of many routine documents from various vendors.

Routine email communications can also be automated. When you are preparing to send the title commitment, tax certification, HUD, title policy or any other routine document, a standard email drafted by your company can automatically go out to the client. This is similar to automated emails you receive from Amazon.com and other high-tech retailers. If their order confirmation email needed to be typed manually, they would need a department of 20,000 to do nothing but type emails all day long. Reware gives you the ability to template emails that go out for certain routine communication, eliminating the need to manually type repetitive communications. Furthermore, it can pull in information from the software and place it within the outgoing email. An example of this would be an email requesting the lender to verify that the current vesting is correct. A template email would go out and pull the actual vesting for that particular file into the email.

7. Summary

These are some of the main features of Reware. It is important to note that implementing all of these features can take up to a year. Out of the box, Reware is fully functional, but to train your staff on each feature, build custom integrations with your biggest clients and generally ramp up to using the software at its utmost potential, time is required. Reware also necessitates the need for at least one full-time Reware-specific administrator. Many companies utilizing Reware have an IT director, an assistant IT administrator, and a network administrator. They may also have a third-party IT consultant or tech support employee to assist with major upgrades or any network issues.

In summary, Reware is the most featur-rich platform available today. With the proper culture and staffing, it has limitless potential. Major drawbacks include the need for full-time IT support, as well as long training and implementation periods.

B. Reamquest By Russell Solomon

Reamquest is the most popular end-to-end operating system in the title industry. There are many reasons for this, including its user-friendly interface, highly customizable platform, scalability and quality customer support. They also offer a workflow dashboard and action automation which were created in response to the automation features of Reware. The following are some of the relevant and unique features of Reamquest:

1. Castigation Market – Reamquest “web services”

Closing Market is a digital platform that consists of a Web Services-based architecture.
It is written with Microsoft’s .net language, and it enables point-and-click service fulfillment to eliminate time-consuming phone calls and faxes. This feature is web-based and pre-configured, with many vendors who are already members. Some of these integrated members include: Federal Express, Realty Data, Simplifile, Calyx, Encompass and Real EC. If your venture desires integration with Closing Market, Reamquest can perform this upon request.

2. Complete Closing Enterprise

Complete Closing Enterprise is Reamquest’s end-to-end solution, and it offers many useful features. 2010 HUD-1 Production allows Reamquest users to easily and intuitively generate a 2010 HUD-1. It also offers users the flexibility to select the pre-2010 or the 2010 version of the HUD when opening any file. Reamquest’s role in defining the title industry’s position on RESPA reform are apparent in the user-friendly and intuitive 2010 HUD production feature. Additionally, it has the added bonus of enabling users to better understand the RESPA Reform regulation.

Another useful new feature is the Enhanced Workflow Automation. This provides additional functionality throughout the platform, including task lists within Reamquest’s predefined and customizable workflows, streamlined email capabilities, additional search options and a number of new communication tools. These features further enhance any title company’s operational efficiency and effectiveness. They are also recent additions in response to Reware’s action-driven capabilities.

Other great new features inclue the ability to add notes when moving paper and paperless files between departments. Multiple department alarms constitute a feature that gives more oversight to the enterprise and enhances file tracking within an organization.

3. Positive Pay

The Positive Pay Module is now available for Complete Closing Enterprise to help significantly reduce and deter check fraud. Through a simple interface, you can create a Positive Pay file that can be sent to your bank. This enables you to identify items presented for payment that you did not issue and provides an effective communication tool between you and your bank to “compare notes.” The feature also contains functionality to process files for different banks or multiple accounts within a single bank.
4. Custom Reports

Reamquest’s SQL Server Database allows a variety of methods for developing customized reporting to resolve unique needs. They have developed reports using the following tools:
Crystal Reports
Microsoft Access
Microsoft Excel
Custom Delphi Programs

5. Custom Development

Reamquest has a team of professionals from the real estate industry, and others from software development backgrounds who can employ a rapid methodology to create custom technology for title companies and lender clients.
Reamquest utilizes a “streamlined” development methodology that promotes good communications and rapid development. The basic phases of the methodology are:

Business Requirements Definition
Functional/Technical Design
Testing, Training, and Documentation
Post Production Support

In conclusion, Reware is clearly the more sophisticated and advanced technology with respect to end-to-end scalable software systems for the title industry. However, Reamquest is a close second, as it offers 85% of Reware’s features. The major advantage that Reamquest has over Reware is its user-friendly interface and lower learning curve.

The “roll out” period on Reware is, as noted, considerable. It often takes a full year to implement completely. Reamquest on the other hand can be fully implemented in three months because it is easier to use, train on and administer.

Moreover, Reamquest’s Closing Market offers superior ease of integration with other vendors and lenders who are already using it, while integration with Reware must be custom-designed (again, requiring a significant amount of time.)

Essentially, Reamquest lacks the capability to receive incoming mapped emails and many of the automation features that Reware possesses. Reware these features, but in a less user-friendly environment that requires more IT support. Reamquest capitalizes on its superior user interface.

The decision of which software is right for your company lies in answering the question of how much time, intellectual capital, and training you are willing to expend. They are both excellent systems designed for different audiences.

VI. Conclusions

In summary, there are a number of important factors to consider when determining whether to move forward with the VMC venture. These include a review of the current market climate. Although the real estate market is complex right now, a review of the refinance, purchase, REO and commercial transaction markets reveal that now is an excellent time to be developing a VMC. The next important consideration is the time frame of development. The VMC could most likely be developed in about three months. Though you would miss out on the current refi “mini-boom,” many experts believe that a few more are coming before the market improves and rates go up again. The marketing strategy section above details the important considerations for building a marketing and PR presence to promote the new VMC. Our human resources report details the necessary skills of a VMC Operations Manager, as well as salary expectations and a an opinion on the state of the Dallas talent pool. Finally, the above contains a run-down of the two major software programs available for the real estate services industry, carefully detailing the pros and cons of each. We believe that the above document, as well as the attached Addendum and ongoing consultation with Rusty Solomon, CEO of Cohiba Consulting Group, will provide invaluable information as your company proceeds with its final decision regarding this venture.

Thank you for providing Cohiba with the opportunity to consult with you on this matter, and we look forward to working with you in the future.



1. National Settlement & Document Tracking
2. Title Insurance
3. Appraisals
4. Credit
5. Abstracting / Title
6. Customized Closing / Signing Services
7. Escrow Services
8. Signing Services
9. Default / REO
10. Cell Tower/Windmill Title Services
11. Commercial Title Services
12. Full Service Title Clearance
13. eRecording
14. Property Report Document Preparation
15. Reverse Mortgages
16. Bulk Loan Sales & Acquisition Services
17. Disaster Recovery & Lien Release Overflow
18. Document Imaging & Delivery
19. Final Document Services
20. Loan Review Services
21. Investor/Hedge Fund/Capital Markets Bundled Services
22. MERS & Assignment Services
23. Research, Release & Assignment Services
24. Document Recording
25. Document Retrieval
26. Final Document Services
27. Lien Release Processing
28. Title Policy Replacement
29. Title Policy Retrieval

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