FEATURE ARTICLE, JANUARY 2006

TITLE INSURANCE IN TEXAS
The title insurance industry in the Lone Star State is facing the challenges of change.
Bruce Liesman

For more than a century, the title insurance industry has played an important role in the efficient transfer of real estate between parties. Traditionally, the primary focus has been on the search and examination of the real estate records that specifically affect a piece of property and its owners and prior owners. This unique search and examination procedure sets title insurance apart from nearly all other lines of insurance in that risk of loss is not just evaluated but often eliminated by corrective documentation. This process of search and examination of the records results in the constant grooming and cleaning of public land records and is of tremendous benefit to the consumer and society.

Today, the settlement services side of the business is growing and drawing more attention from the business community than traditional title services. Such factors as ever-changing technology developments, dramatic consolidation in the industry and major shifting in the source(s) of title business continue to affect and reshape the title insurance industry.

The business world in which we work has changed radically and rapidly, and this is certainly true in the title industry. Word processing, online records, electronic transfer and storage of documents, email and other technological advances have impacted every facet of real estate settlement services. As these technologies evolve, they will continue to drive changes in every business that is part of the real estate transaction. On the title side, records used to be manually copied by hand at the county court house. Now, if the county records are already online, we can connect to the appropriate Web site to access the records that are needed. If they are not yet available online, we may be able to obtain access from a provider who then converts the data to an electronic format.

The next big step in terms of technology, which is anxiously awaited by the industry, is the electronic recording of documents with the county clerk. Several counties in Texas are testing programs and implementing procedures with broad application expected to immediately follow. The only other significant hurdle to make the entire settlement process paperless will be the secure capture of electronic signatures. This technology is already available, but unlike signing for a credit card purchase, applying a signature to legal documents and loan documents requires that there be more reliable “authentication” controls of the signature. It won't be long, though, before we will probably have people signing documents from their personal computers or at kiosks at the mall or airport.

During the past 10 years, along with most of the corporate world, the title industry has undergone tremendous consolidation. This has resulted in a few very large companies handling a very large percentage of the business, a few mid-sized companies operating mostly in metropolitan areas and many very small companies covering the large rural areas of Texas by individual county markets.

Today, more and more real estate business is driven by nationally based sources, including large banks and mortgage lenders instead of the traditional local sources. The reason for this shift stems mainly from the changes and consolidations that have taken place in the lending industry. Local control has been superseded by large national account units based on efficiencies of scale. And so it goes, change begets more change, as all of us continue the process of adapting and adjusting to new business models.

The title industry in the state of Texas is closely regulated by the Texas Department of Insurance to assure solvency and availability of quality service. Title companies are licensed by county and cannot issue title insurance policies in counties where they are not licensed. As a result, there are many challenges as we try to meld this regulatory structure with the movement toward nationally based business. Also, many lenders are more focused on the settlement services provided by the title industry than the title services. However, it is the title services side of the business that is traditionally tied to county licensing. In spite of the growth of the national market, there is a substantive need to have a title insurance company, both for title and settlement services, conveniently available to people in the most rural regions of the state.

The title industry continues to work through the changing business models affecting the industry while maintaining the availability of title insurance products and services throughout the state. As we adapt to the new processes and technologies that will drive real estate settlement services in the 21st century, we will all see an increase in the value of the title industry's products and services. Changes are a challenge, but the future requires the effort.

Bruce Liesman is president of Austin,Texas-based Texas Land Title Association.

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