November 16, 2018
How the Industry Decreases Defect Risk Using Technology
The title search, title insurance, and mortgage manufacturing and underwriting industries are, like every other aspect of American life, in a continual state of increase in the amount of mechanization and digitalization they bring to bear. While there’s truth to the assumption we occasionally encounter that these industries are of a sort that are inherently conservative in their processes—as indeed they must be, given their purpose of maintaining records and observing the passing of ownership interests over the course of what can be vast periods of time—the musty, dusty, shelves-and-paper view of the industry is changing, particularly with regard to current and recent transactions. Elements of human error are being culled by technology where they can be, and the risk of title defect is sloughing off right alongside.
In fact, the drop in error is happening at such a rapid rate that it can almost be observed in real time. According to the May Loan Application Defect Index released by First American back in June, the number of defects experienced in property purchase transactions had dropped by 3.6 percent since May 2017; and as compared to the highest point of risk in October 2013, the defect index was down 21.6 percent. In the later August version of the index, we find that, though the level of defect risk rose by 1.3 percent compared to the month prior, when compared with last August we find a decrease in risk of 8.3 percent; and further that the defect index is down 24.5 percent compared to that highest point in October 2013. The overall trend in purchase transactions is toward less defect risk, which is something we can all be glad about.
It seems clear that this is due to the recent years of push for enhancements in mortgage technology—automation, digitalization, and efficiency are the name of the game. Both mortgage creation and underwriting are seeing the benefit. Since the market trend, given rising mortgage rates, is moving away from refinancing in the direction of purchase transactions, this could hardly be happening at a better time.
Here at Topouzis & Associates, P.C., we provide title insurance to back our title services, and the advancement of technology in the industry is of great benefit in helping ensure that closing will go through with lower defect risk. Nonetheless, risk does remain—it’s tenacious—so the policies we connect you with provide peace of mind that a new home’s title will not be subject to any nasty surprises. Whether you’re looking to engage in the market in Providence, Rhode Island; Boca Raton, Florida; or Peabody, Massachusetts, feel free to contact us for more information.