Title Insurance Business - U.S. - Market and Opportunities

2. INDUSTRY STATISTICS & MARKET SIZE

3. INDUSTRY STATISTICS & MARKET SIZE - REVENUE $15BN
INDUSTRY OVERVIEW
The title industry is highly dependent on real estate markets, which, in turn, are highly
sensitive to mortgage interest rates and the overall economic well-being.
During the housing bubble from 2000 through 2006, the industry's revenue more than
doubled. As the surge in real estate transactions drove up title insurance revenue—along with
a greater incidence of claims—the economic downturn that started in 2007 pared back
revenue significantly for several years.
To compare, the industry reported nearly $17 billion in title insurance premiums in
2005, but volume fell to $9.6 billion in 2009.
Companies in this industry offer insurance policies to protect homeowners and other owners
of real estate, as well as real estate creditors. Major companies include Fidelity National
Financial, First American Title Insurance, Old Republic National Title, and Stewart Title (all
based in the US).

4. INDUSTRY OVERVIEW
Many large US-based companies provide title insurance in Europe and in countries such
as Australia, Canada, China, Mexico, and South Korea, often for US buyers and lenders.
The reliability of government systems of land registration reduces the market for title
insurance in countries other than the US, however. The US has no single, comprehensive
system of land registration.
The US title insurance industry includes about 1,900 companies with combined annual
revenue of about $13 billion.
COMPETITIVE LANDSCAPE
Home sales and mortgage refinancing are the primary drivers of demand for the title
insurance industry. The profitability of individual companies depends on efficient
operations because of the large volume of transactions.
Large companies benefit from economies of scale in access to large accumulated databases
of property records. Small companies can mainly compete by specializing in nonstandard
titles or in geographical regions that the large companies don't cover. The US industry is
highly concentrated: the 50 largest companies account for about 95 percent of revenue.
More than 80 percent of industry revenue comes from title insurance products and premiums;
about 10 percent comes from title search, title reconveyance and other fees.

5. INDUSTRY OVERVIEW
BUSINESSES 1,547 (TITLE INSURANCE COMPANIES)
In the United States, the American Land Title Association (ALTA) is a national non-profit
trade association representing the interests of nearly 4,500 title insurance companies,
title agents, independent abstracters, title searchers and attorneys across the United
States.
ALTA members conduct title searches, examinations, closings, and issue title insurance that
protects real property owners and mortgage lenders against losses from defects in titles.
In addition to ALTA, the National Association of Independent Land Title Agents (NAILTA)
is a national non-profit trade association that represents the interests of independent
title insurance agents and independent real estate settlement professionals from across
the United States.
NAILTA represents the interests of those independent settlement service providers who serve
over 31 million real estate purchase consumers per year, who close an estimated $514.8
billion’ worth of refinance mortgages per year and who collectively insure approximately
$1.67 trillion in total national title insurance liability per year.
In 2012, according to ALTA, the industry paid out about $908 million in claims, about 8.1%
percent of the $11.2 billion taken in as premiums.

6. INDUSTRY OVERVIEW
EMPLOYMENT -46,076
The Title Insurance industry dealt with some shaky foundations during the recession as
potential homebuyers shied away from homeownership. However, this has since
reversed due to the housing market recovery. Positive growth will continue through 2018
as more homes are built and renters move to buy.

7. TITLE INSURANCE

8. TITLE INSURANCE
An abstract and title company does vital research to make sure a real estate transaction
is legal. The company provides the lender, insurance company and buyer with
information about any issue surrounding the property. These issues might include
unpaid taxes or liens against the property that will need to be paid before a new owner
can take possession.
WHO IS COVERED BY TITLE INSURANCE?
For most Americans, purchasing real estate represents the largest single investment
they will make. Given the cost of real estate, very few consumers can purchase home,
vacation or investment properties by paying cash. Instead, we borrow the funds from
banks, savings and loans, mortgage companies, or other lenders, granting them a
secured interest in the property.

9. TITLE INSURANCE
One of the conditions that lenders place on the buyer is that a lender’s title insurance
policy must be purchased in an amount equal to the mortgage loan.
However, a lender’s policy only protects the financial institution in the event that a valid title
claim arises. In a worst-case scenario, a buyer could make mortgage payments for 20 or 30
years when an unknown title defect comes to light, creating a valid claim that causes the
buyer to lose the title. The lender would be covered, to the extent of the outstanding
mortgage, and the owner could lose the property and all equity acquired over the 20 years
that he “owned” the property.
To avoid this scenario, an option available to the buyer is the purchase an owner’s title
insurance policy.
This would protect the buyer’s interest in the real property. If the decision is made to
purchase an owner’s policy and a lender’s policy at the same time, there may be considerable
premium savings. In the title insurance business, this is known as a “simultaneous issue,”
and the premium rates charged for the owner’s policy will be calculated on the difference
between the amount of coverage provided to the lender (amount borrowed) and the amount of
coverage provided to the owner (purchase price).

10. TITLE INSURANCE - STATE OF THE TITLE INSURANCE MARKET
The title insurance market is dominated by four major insurance groups: Fidelity
National, First American, Stewart Title and Old Republic. These four insurance groups
represent close to 90% of the available market (Figure 1); the remainder of the market
is made up of smaller companies with much smaller market shares.
Figure 1. Title Premium – Top Four Underwriters
Company
Name
2013 Direct
Premiums
2013
Market
Share
2012 Direct
Premiums
2013 Total
Revenue
Approximate
# Policies
2013
Fidelity National $4,185,546,021 32.72% $3,925,483,007 $4,434,278,786 8,868,558
First American $3,286,664,382 26.89% $2,880,670,965 $3,922,331,578 7,844,663
Stewart Title $1,518,509,089 14.92% $1,44,112,209 $1,603,698,271 3,207,397
Old Republic $
1,861,767,864
12.21% $1,518,725,094 $1,988,903,292 3,977,807

11. TITLE INSURANCE - STATE OF THE TITLE INSURANCE MARKET
Figure 2. Title Premium – Next Five Underwriters
Company
Name
2013 Direct
Premiums
2013
Market
Share
2013 Total
Premiums
2013 Total
Revenue
Approximat
e # Policies
2013
Westcor Land
Title
$326,046 2.42% $308,723,731 $315,197,510 630,395
Title
Resource
Guaranty
$2,065,821 2.10% $267,322,257 $269,975,087 539,950
National Title
Ins. Of NY
$3,996,363 1.84% $234,828,128 $244,853,960 489,708
WFG National
Title
$ 11,835,744 1.43% $182,754,270 $193,593,679 387,187
North
American Title
0.98% $125,131,294 $125,131,394 250,263

12. PROPERTY ABSTRACT

13. PROPERTY ABSTRACT
A property abstract is a collection of legal documents that chronicles activities
associated with a particular parcel of land.
Generally included are references to deeds, mortgages, wills, probate records, court
litigations and tax sales--basically, any essential legal documents that affect the property.
The abstract will also show the names of all property owners and how long a particular holder
owned it, as well as showing the price the land was exchanged for when it changed owners.
Rarely will an abstract mention capital improvements to the property. Property abstracts are
considered good starting places for research on historical buildings.
A property abstract catalogues, in chronological fashion, all legal documents pertaining
to a parcel of land. Included are references to deeds, mortgages, wills, probate records,
court litigation, and tax sales--the essential legal proceedings that affect property
ownership.
The abstract reveals the names of all people who have owned the property, how long each
owner had it, and how much it sold for when it changed hands. Only rarely, however, does it
mention buildings or capital improvements to the property. The abstract is a good starting
place for research of a historic building because it deals with real property and not
specifically the buildings and other improvements. The abstract also confirms that there are
no outstanding liens or back taxes.

14. ABSTRACT OF TITLE
An abstract of title is the condensed history of title to a particular parcel of real estate,
consisting of a summary of the original grant and all subsequent conveyances and
encumbrances affecting the property and a certification by the abstractor that the
history is complete and accurate.
In the United States, the abstract of title furnishes the raw data for the preparation of a
policy of title insurance for the parcel of land in question, except for in Iowa, where a Title
Guaranty policy is issued instead of title insurance.
An abstract of title should be distinguished from an opinion of title.
While an abstract states that all of the public record documents concerning the property in
question are contained therein, an opinion states the professional judgment of the person
giving the opinion as to the vesting of the title and other matters concerning the status of the
chain of title. Many jurisdictions define the giving of an opinion of title as the practice of law,
thus making it unlawful for a non-attorney to do so.

15. COMMENT AND SUMMARY
Each financial entry in an abstract can provide information. A substantial increase in
price in two consecutive sales, for example, from $500 in 1880 to $4,000 in 1885,
usually indicates capital improvement on the land sometime during that period.
Be cautious, however, when using financial transactions to date buildings. Many factors other
than construction can affect property value. Among them are general economic inflation or a
speculative market, caused, for example, by a railroad locating a depot in the vicinity. Thus, it
is important to be aware of the history of the area in question, and particularly its economic
fluctuations.
Some property abstract entries yield more historical information than others, and it is
often a good idea to make a trip to the courthouse to read the entire document.
Abstractors usually include the most important information, leaving out the legalistic
verbiage; but, after all, your concerns are different from those of the abstractors, and what
may have appeared trivial to them could be of importance to you. Unfortunately not all
properties in Wisconsin have abstracts. If you find that an abstract is not available for the
property you are researching, it is still possible to gather the information that would have
been included. In Wisconsin, virtually everything that might be entered into a property
abstract may be found in the Register of Deeds and Register of Probate offices at the
appropriate county courthouse.

16. TITLE ABSTRACT AND SETTLEMENT OFFICES
This U.S. industry comprises establishments (except offices of lawyers and attorneys)
primarily engaged in one or more of the following activities:
(1) researching public land records to gather information relating to real estate
titles.
(2) preparing documents necessary for the transfer of the title, financing, and
settlement.
(3) conducting final real estate settlements and closings.
(4) filing legal and other documents relating to the sale of real estate. Real estate
settlement offices, title abstract companies, and title search companies are
included in this industry.Housing units, 2012 132,452,405
Homeownership rate, 2008-2012 65.5%
Households, 2008-2012 115,226,802
Persons per household, 2008-2012 2.61

17. Subject
United States
Owner-occupied housing units with a
mortgage
Estimate Margin of Error
Owner-occupied housing units with a mortgage 50,671,257 +/-244,375
VALUE
Less than $50,000 4.5% +/-0.1
$50,000 to $99,999 13.3% +/-0.1
$100,000 to $149,999 16.4% +/-0.1
$150,000 to $199,999 16.0% +/-0.1
$200,000 to $299,999 20.2% +/-0.1
$300,000 to $499,999 17.9% +/-0.1
$500,000 or more 11.6% +/-0.1
Median (dollars) 199,100 +/-208
MORTGAGE STATUS
With either a second mortgage, or home equity loan,
but not both
22.0% +/-0.1
Second mortgage only 5.7% +/-0.1
Home equity loan only 16.3% +/-0.1
Both second mortgage and home equity loan 0.9% +/-0.1
No second mortgage and no home equity loan 77.1% +/-0.1

18. REAL ESTATE TRANSACTIONS AND TITLE SEARCHES

19. REAL ESTATE TRANSACTIONS AND TITLE SEARCHES
There are two basic types of title insurance: coverage for the homeowners and coverage for the
mortgage lenders. Title insurance for the owner is issued for the purchase price of the property and
lasts as long as the purchaser’s ownership interests in the property.
Title insurance for the lenders is similar to personal mortgage insurance in that the coverage
amount decreases with the principal loan amount over time and eventually disappears, along
with the lender’s interest. The lender’s policy is usually issued with the owner's policy for an
additional nominal fee.
Prior to 1987, there were no deductibles or coinsurance required in standard title insurance
policies. Typically, coinsurance and deductibles are used as risk sharing mechanisms to control
adverse behavior of the insureds (e.g., moral hazard).
Because title insurance is designed to insure against events that have occurred prior to the
insured’s involvement with the property, not against future events, these risk sharing
mechanisms are unnecessary.
Since 1987, however standard title insurance policies that are issued for less than 80
percent of the market value of the property contain coinsurance provisions. This feature is
used to prevent under-insuring the property, not moral hazard.

20. REAL ESTATE TRANSACTIONS AND TITLE SEARCHES
Since a majority of mortgage lenders require lenders title insurance as part of the mortgage
requirements, a background discussion of real estate transactions is in order. At the time of closing,
the purchaser and lender must be satisfied that: 1)
there are no title defects and
2) the seller actually owns the title to the property. In addition, it
should be noted that title insurance is the lingua franca of the secondary mortgage market
because of its uniform coverage of the title and the validity and priority of the mortgage.
To verify the condition of the title, a title insurance company must complete a title search. A title
search is an examination of all public records to determine whether any defects exist in the chain of
title. A defect is any hidden risk that may cause loss of title or create an encumbrance on the title.
The search begins with researching public records or re-indexed copies of the public records,
called title plants, that contain detailed information about each piece of property and its
owners in a given region (city or county). Written documents that affect the land (liens, loans,
and easements) are required to be recorded in the public record of the county where the real
estate is located.
The conclusion of the title search produces an abstract, or summary report, which is then
used by the title insurance company in issuing a commitment. This commitment, made prior
to the issuance of a title insurance policy, protects the policyholder from losses arisingf rom
defects in the title .

21. TITLE INSURANCE
Standard title insurance policy coverage includes defects in public records, forgeries, incompetent
grantors, incorrect marital statements, and improperly delivered deeds, that may lead to potential
liabilities.
Title insurance provides indemnification to the degree that the policy/report is incorrect and
lessor damage results. This policy also covers unrecorded liens not known by the policyholder.
Items not covered by the policy include: defects and liens listed in the policy, defects known
to the buyer, and changes brought about by zoning (although zoning coverage is available).
If any defects are found, the insurer may use its discretion to exclude them from coverage:
The title insurer searches and examines the public record to identify those matters of record that
affect real property and then determines whether any of these defects in title pose a threat of loss
This marks a major difference between a typical property-casualty (P & C) insurance policy
(occurrence policy) and a title insurance policy. A typical P & C insurer expects a higher frequency of
losses than a typical title insurer.
This difference is reflected in the degree of risk and level of risk avoidance services provided
by the insurer. Typical P & C premiums are charged annually and contain a large risk bearing
capacity (this capacity varies by line of insurance), while title insurance premiums are
charged once (premiums average about 1/2 of 1 percent of property value) and contain little
risk bearing capacity.

22. TITLE INSURANCE
Another difference between a normal P & C policy and a title insurance policy is the length of
coverage. A typical P & C contract is annual, while the title coverage is at least for the length of
ownership of the property.
Unfortunately for title insurers, there are no statutes that require notification of property sale to title
insurers from previous transactions. Thus, a title insurer has no way of knowing if its policy
coverage has ended unless it is also the title insurer for the new owner.

23. COSTS OF TITLE INSURANCE
Title insurance protection is significantly different from other lines of insurance. Typically, other
types of insurance assume a particular risk and provide financial indemnity in the event the risk
occurs. Title insurance, on the other hand, emphasizes loss prevention by eliminating risks caused
by title problems arising from past events.
Approximately 25 percent of all residential real estate transactions have issues with the title –
issues that are resolved by title professionals before closing. This emphasis on loss prevention
results in fewer claims paid by title insurers compared to other lines of insurance.
However, loss prevention and clearing title issues is a labor-intensive and costly component of a
title company’s operating budget. To compare, the expense ratio for title insurers averages 90
percent, while the expense ratio for property and casualty companies is less than 30 percent.

24. THE SEARCH PROCESS
Searching the public records provides a basis for title insurance and usually includes visits to the
offices of recorders or registers of deeds, clerks of courts and other officials. Title searchers look in
the records for mortgages, judgments, street and sewer system assessments, special taxes and
levies, and numerous other matters.
In many jurisdictions, information about a piece of property and any liens against it may be filed in
different ways. They can be filed under the seller’s name, the owner’s name, by lot number or by
street address. To make the search process less cumbersome, many title companies have created
title plants, which contain virtually the same information as the county records, but indexed in a
consistent matter (i.e. by name or lot number) so that title searches may be performed more quickly
and accurately. In major metropolitan areas, the title can be searched and title insurance issued
within 24-48 hours.
The following shows why it is a good idea to involve the title company in the early stages of a land
transfer. In one transaction, the title search revealed that two acres of land being purchased were
once part of a five-acre tract. A prior deed to the five acres restricted use of the property to “a single
family dwelling and the usual out-buildings.”

25. THE SEARCH PROCESS
The other three acres from the original tract already contained a single family dwelling, and there
was a serious question as to whether the purchaser could build a home on his two acres. With
assistance from the title company, releases were obtained from the appropriate parties to remove
the problem and allow the house to be built.
Occasionally, title problems may be so serious that the most prudent course is not to proceed with
a transaction. For example, a buyer was about to close his purchase when the title search revealed
pipeline, utility, flood and road easements across the property that would have severely limited his
use of the land. When these findings became known, the buyer declined to continue with the
transaction. Only a title search would have uncovered these problems.

26. BENEFITING PARTIES
Title insurance services offer a wide range of protection to the many different parties who have
various interests in real estate transactions. The benefits of title insurance protect:
• Real Estate purchasers
• Sellers
• Lenders
• Real Estate Brokers
• Attorneys
• Homebuilders

27. BENEFITING PARTIES
BUYERS
Whether the transaction involves a multi-million dollar office building or a single-family home, the
purchaser faces possible serious financial loss, or could lose the right to own the property
altogether, if a serious cloud on the title goes undetected. An expert title search before the
purchase will identify the nature of title and fix most problems that might be present.
An Owner’s Policy offers protection against various hazards, including those even the most thorough
search of the public records do not disclose, such as forgeries, missing heirs or recording errors.
And, the Owner’s Policy will pay valid claims as well as defense costs against attacks on the title.
For a one-time premium that is modest in relation to the value of property involved, the purchaser
receives the protection of a title policy backed by the reserves and solvency of an insurance
company. In the unlikely event the insurance company ceases to operate, reserves offer the
assurance that another insurer will accept risk for the existing policyholders.

28. BENEFITING PARTIES
SELLERS
Similarly, the seller wants to be sure his or her title is marketable in order to sell the property. A title
insurer facilitates the flow of mortgage money by identifying title problems so they can be resolved
whenever possible, and then by insuring against title risks. Title insurance encourages the
expeditious completion of a transaction, thus the seller receives his or her money in a timely
fashion.
LENDERS
Financial organizations are acutely concerned when it comes to the security of the funds they lend
for real estate investments. The Loan Policy provides the lender a high degree of safety against loss
of capital from title hazards. By identifying risks and eliminating them whenever possible, the title
industry is a major element in encouraging lenders to invest in mortgages – rather than in other
assets with lower risk.

29. BENEFITING PARTIES
LENDERS
The Loan Policy guarantees the lender a valid and enforceable lien, and assures that no claimant
other than those noted in the policy has a prior claim against the real estate. The policy assures
that the purchaser-borrower has title to the property being pledged as security for the loan. And, the
policy obligates the title insurer to pay for defending against any claim filed against the title that
might supersede the lender’s lien. If unsuccessful, it must also satisfy that claim should it be
upheld in court.
Another benefit is the in-depth expertise of title company experts, who facilitate the mortgage loan
process and help in resolving differences among the various parties in a transaction. This can
range from relatively routine assistance in a basic residential loan to helping with the multifaceted
legal and financial aspects of a complex, multi-million dollar commercial transaction. In the more
complicated examples, the title company’s efforts on behalf of the lender can extend even further.

30. BENEFITING PARTIES
BROKERS
There is much to be gained by the real estate broker who calls the title insurance company in the
early stages of a transaction. The security of title insurance greatly enhances the possibility for loan
approval. And, abstract or title insurance personnel – by fast accurate verification of title or by swift
resolution of a title problem – often make it possible to promptly complete a transaction that would
have been seriously delayed or lost altogether.
By calling the title company or its agent, the broker promptly becomes informed of the alternatives
for clearing up title problems found in a search of public records, and learns in a timely manner
what information the title company needs to issue the insurance. This close contact also enables
the broker to become better informed on available title coverage so the parties can be readily
assisted with their needs.
.

31. BENEFITING PARTIES
ATTORNEYS
In some states, it is a real estate attorney who handles the closing. The attorney will create an
attorney’s opinion to assess the condition of the real estate title. Title insurance enables the real
estate attorney to offer the client substantially greater protection than what is attainable with a
legal opinion alone. Title insurance resolves this dilemma by backing up the attorney’s title search
with guaranteed financial indemnity from a licensed, regulated corporate insurer, and providing
adequate capital and reserves to respond to claims.
The protection of title insurance extends far beyond the risk that may be incurred by the purchaser
as a result of an error or negligence by the person performing the search and examination. Among
the many risks covered by title insurance (that would not be covered by the attorney’s malpractice
insurance) are:
• Mistakes in the interpretation of wills or other legal documents
• Impersonation of the owner
• Forged deeds, mortgage releases, etc.

32. BENEFITING PARTIES
ATTORNEYS
• Instruments executed under fabricated or expired powers of attorney
• Deeds delivered after death of seller or buyer
• Undisclosed or missing heirs
• Wills not probated
• Deeds or mortgages by those mentally incompetent or of minor age (or
supposedly single but actually married)
• Birth or adoption of children after date of will
• Mistakes in the public records
• Falsified records
• Confusion from similarity of names
• Transfer of title through foreclosure sale where requirements of foreclosure
statue have not been strictly met
While ALTA recommends that all parties to real estate transactions be represented by their own
counsel, it is the view of the association that no real estate attorney adequately protects the
interest of a client without advising that client of the availability and protection of title insurance.

33. HOMEBUILDERS
Delays for the homebuilder can also be minimized by contacting the title company early in the
building process. Actions initiated by the title company that have a positive effect on the builder’s
project completion time can include the following:
• Calling a meeting of everyone involved to establish coordination and minimize
problems (builder, developer, attorney, engineer, architect, escrow holder, etc.)
• Expediting title search and examination so any difficulties can be dealt with more
quickly
• Advising on mechanic’s lien coverage and other title insurance needs of parties
to the transaction
• Setting up sale escrow accounts and handling disbursements upon closing
• Coordinating with subcontractors so their problems can be dealt with in the early
stages of the project
• Arranging for prompt handling of any title claims that arise
By assuring priority of the first lien mortgage for the lender, title insurance makes construction loan
financing considerably more attractive.

34. HOMEBUILDERS
Title company personnel help the builder or developer establish ownership rights to assure local
government that a project may proceed. This normally expedites plat approval. And, title companies
will insure titles to individual lots in a development on a mass production basis, often at a reduced
rate, so new owner’s policies can be promptly furnished to home buyers after updating of title work,
rather than extensive and time-consuming back searches upon the issuance of each policy.
Besides the basic owner and loan policies, title insurers offer various special coverages that are
important to different parties. Additional coverages relating to new construction are available in
some areas. These coverages could include mechanic’s lien protection, or special coverage
regarding surveys or zoning.

35. SECONDARY MORTGAGE MARKET
Beginning in the mid-1940s, the nationwide growth of a secondary mortgage market has proved to
be an especially dramatic benefit for millions of American home buyers.
The positive effects of this phenomenon have reached out to numerous other related sectors of the
economy. Essentially, the purpose of the secondary market is to broaden the base of investment for
mortgage financing and attract funds from areas of the country with abundant capital to areas
where mortgage money is needed.
Unlike the New York Stock Exchange and other organized trading markets where representatives of
buyers and sellers meet in a single location, the secondary market consists of a complex network of
organizations, intermediaries and various channels of communication. Through this facility, lenders
in one area of the country with funds to invest can readily make or purchase mortgage loans on real
property located elsewhere.
Secondary market operations may be as simple as a lender in California selling mortgage loans to
another lender in New York, or as complex as the development and sale of Government National
Mortgage Association pass-through securities, which are guaranteed by GNMA and are backed by a
pool of mortgages worth millions of dollars.

36. SECONDARY MORTGAGE MARKET
The need for protection from title problems is even more acute in dealing with mortgages in the
secondary market than what is normally encountered by a local lender. Knowing the local customer
and the attorney rendering an opinion may be sufficient for a local lender to lend and portfolio a
mortgage. However, a title opinion from a local attorney will not provide the assurance for a national
lender that is unfamiliar with local risks and/or unwilling to take a chance.
In view of these considerations, it is easy to see why virtually every mortgage traded in the
secondary market is covered by a Loan Policy. With financially sound corporate insurers standing
behind the validity and enforceability of mortgage liens, marketability of insured loans is greatly
improved.
National or out-of-town lenders know that, should a title problem develop on property located in a
distant part of the country, they can deal with title company experts whose capabilities are well
known who can quickly come to grips with the difficulty and initiate appropriate action.

37. SECONDARY MORTGAGE MARKET
Mortgage loans on all types of real property constitute the nation’s largest single category of
institutional investment. Loan policies have enhanced the remarkable growth in the availability of
mortgage funds, which has brought an impressive stimulus to real estate investment from coast to
coast.
This expansive viability has been characterized by two major developments -- both directly linked to
title insurance.
• Mortgage investment has become more secure.
• Mortgage money has become widely available throughout the country through the
post -World War II development of a nationwide secondary mortgage market.

38. SECONDARY MORTGAGE MARKET
Safety of investment ranks at least equally with return realized where institutional investors are
concerned. This fiduciary emphasis on security by the lending community means that the protection
brought to real estate transactions by title insurance is vital if mortgage money is to remain widely
available.
Without the title company’s assurance that the lender has a valid and enforceable lien, and that the
borrower has marketable title, real estate investment would be considered highly speculative and
would not enjoy its current high acceptance among lending institutions.
Most lenders also know that the familiar ALTA Loan Policy, developed based on their input and
voluntarily used by ALTA member title insurers, is a nationally prominent means of protection that
adds even greater facility to trading within the secondary market.

39. OFFSHORE OUTSOURCING: A CASE STUDY

40. OFFSHORE OUTSOURCING: A CASE STUDY
For years, title insurance companies have been using offshore data entry firms for back plant
automation and day forward posting. This article is a case study of how First Dakota Title of South
Dakota used offshore outsourcing to produce abstract and informational reports, saving the
company time and money.
ABSTRACT PROBLEM, CONCRETE SOLUTION
Dennis Anderson, founder and president of First Dakota Title, was with his vice president of
operations on a four hour drive from his headquarters in Sioux Falls, South Dakota, to Fargo, North
Dakota, when the idea came up: Why not use his offshore data entry firm not just to key in
information but to take the next step and actually produce complete reports?
North and South Dakota both require title insurance companies to establish and maintain their own
databases containing historical records of all real estate transactions in the counties where they do
business. (In the Dakotas, such records can date back to land patents established in the late 19th
century.)

41. OFFSHORE OUTSOURCING: A CASE STUDY
However, unlike South Dakota, North Dakota requires the creation of an abstract for almost all
transactions. This became a major consideration when Anderson decided to cross state lines and
acquire a title company in Fargo.
“We were wondering how we were going to do the abstracts,” says Anderson. “It
seemed to us that they were time intensive, labor intensive and redundant. We
considered what our offshore data entry firm was doing for us already: looking at
the documents, determining who the grantors and grantees were, locating legal
descriptions, and adding recording dates, filing dates, and document numbers.
Then we thought: An abstract is basically a recompilation of that information. In
addition to identifying bits and pieces, you’re retyping the document in the format
required for an abstract. So we said, ‘They should be able to do that.’ And that
started the wheels turning.”

42. OFFSHORE OUTSOURCING: A CASE STUDY
First Dakota Title’s experience with offshore data entry began in 1989, before the company opened
its doors. Anderson had averted a financially burdensome late start up by hiring a company called
HDEP International to help create his backplant. A Honolulu based firm with data entry facilities in
Manila, Philippines, HDEP took responsibility for the entry of 600,000 records—about half of First
Dakota Title’s entire two county project. Anderson was pleased with the speed, accuracy, and
motivation of the Manila operators.
Since then, the company has continued to rely on offshore outsourcing for an expanding array of
products and services. In the mid ‘90s HDEP helped modernize First Dakota’s database by
converting its microfilm records to digital images. By the time the company decided to expand to
North Dakota last year, HDEP was providing offshore day forward data entry services for the
company’s five South Dakota title plants—with the attendant advantages of reduced personnel
requirements, lower labor costs, improved work flow, and off site security backup.

43. OFFSHORE OUTSOURCING: A CASE STUDY
“Deciding to outsource reports wasn’t easy,” says Anderson, “but we had worked with
HDEP for over ten years and established a relationship of trust. We knew that their
people understood not just the basics of real estate but how the bits and pieces of
information fit together. That made the process much easier than bringing in
someone who didn’t have a clue what a deed or a mortgage is.
We also knew what HDEP was capable of doing and that they never promised what
they couldn’t deliver. This comfort level laid the foundation for having them
advance through the examination process.”

44. THE HISTORY OF OFFSHORE DATA ENTRY
American companies have sent large scale data entry work overseas since the early 1970s, taking
advantage of lower labor costs outside the U.S. The first offshore projects went to the Caribbean,
Ireland, the Philippines, Singapore, Taiwan and Korea.
As the world adjusted to new computer and telecommunications technologies, the early years were
filled with glitches. But the advent of fax services, inexpensive e mail, high speed Internet and T1
lines made communication between offshore data entry companies and their clients flow smoothly
and easily. Courier and next day mail services became faster and more reliable as well.
With the passage of time, countries developed their own specialty tasks—sometimes accidentally,
sometimes because a country is geographically, linguistically, or sociologically closer to a particular
type of customer. Economics also weighs in: Because of rising labor costs, Singapore, Taiwan, and
Korea have proved unable to compete with companies in India, China, Sri Lanka, and the
Philippines.

45. THE HISTORY OF OFFSHORE DATA ENTRY
Today, due to its proximity to large New York advertising agencies, the Caribbean is regarded as the
center for direct mail entry. Several Caribbean nations are also becoming centers for everything
from toll free and directory assistance to the processing of tickets for U.S. based airlines. Due to
English language limitations, the Chinese tend to concentrate on full text data entry from printed
materials.
Companies in the Philippines, thanks to the strong English fluency of a large percentage of the
populace, have gained expertise in difficult data entry tasks, including keying from public records,
library conversions, and litigation support work.
In the title insurance industry, as costs have lowered and speed and reliability have risen, offshore
outsourcing has become increasingly attractive. Title plant managers who face shortages of skilled
and committed data entry operators locally now turn with confidence to established offshore firms.

46. THE HISTORY OF OFFSHORE DATA ENTRY - THE QUANTUM LEAP
It’s one thing to key in information for a title plant. It’s another thing to search and examine
documents to create reports. The nature of basic data entry is “key what you see,” and although
real estate data entry requires some interpretation, the operators are still basically looking at
documents and filling in fields. Searching and examining the documents requires additional
training, as does assembling findings into a finished report.
That’s why, when Anderson first presented the idea to Virendra Nath, president of HDEP
International, and Doug Bello, president of D. Bello Associates, Inc., they weren’t certain whether
they wanted to take on the task.
Bello, a consultant who specializes in designing and developing title plants and works with Nath as
part of an industry alliance, the Title Team, whose services include consulting, data entry, digital
imaging, and Internet hosting, was initially more reluctant than Nath.

47. THE HISTORY OF OFFSHORE DATA ENTRY - THE QUANTUM LEAP
“When they asked us to consider doing the abstracts for them,” says Bello, “at first I
thought, that’s not what we do. We should focus on building title plants. But the
more I thought about it and the more I talked to Virendra, the better the idea
sounded. There’s no reason in this day and age that this type of a job can’t be
done anywhere in the world, as long as you have the necessary experience.”
Nath and Bello decided to accept the challenge and train a select group of their most experienced
and motivated data entry operators in Manila to prepare reports for First Dakota Title.
“It was more than a minor step up,” says Shirley Thoelke, First Dakota Title’s operations
officer, who in 1989 spent seven weeks in Manila training the HDEP staff in basic title insur ance
data entry for her company. “The training required was over and above the usual, so it
was a pretty big jump.”
“We had our work cut out for us,” says Bello. “It was an entirely different process, a
different set of skills we had to generate. I would call it a quantum leap.”

48. THE HISTORY OF OFFSHORE DATA ENTRY - THE QUANTUM LEAP
OUT BY 5 P.M., BACK BY 8 A.M.
Bello prepared himself by personally generating one hundred reports from his office in Burbank,
CA. In this way he could replicate what the staff in Manila would be doing. When he felt confident
that he had learned the procedure, he went to the Philippines to conduct the training.
“In Burbank,” he says, “I was excited to be operating in real time on First Dakota’s
system. Then I realized that at the end of the workday in Manila—literally on the
other side of the world—the staff would send the reports and go home; when they
came back in the morning, our customers’ feedback (from Sioux Falls) would
already be available. It was as if no time had passed.”
The time difference between Manila and Sioux Falls works in everyone’s favor, because 5 p.m. in
Sioux Falls is 6 or 7 a.m. in Manila, depending on daylight saving time.

49. THE HISTORY OF OFFSHORE DATA ENTRY - THE QUANTUM LEAP
OUT BY 5 P.M., BACK BY 8 A.M.
“We send Manila e mails with orders attached in two batches,” says Thoelke, “the
first at about four in the afternoon and the rest before we go home for the day.”
The company sends an average of 20 to 24 orders a day, some days topping 30.
“When we show up for work at eight in the morning,” says Thoelke, “they’re back. And
they’re done right.”
“It’s a 12 hour turnaround,” says Bello. “Like clockwork.”
Accessing the server over a T 1 line, the Manila staff accesses First Dakota Title’s title plant and
image data base, searches the property and the GI, enters reports directly onto First Dakota’s
computers, then sends an e mail to confirm the submission. After a senior examiner reviews the
reports on the computer, the process is complete.

50. THE HISTORY OF OFFSHORE DATA ENTRY - THE QUANTUM LEAP
HDEP provides its title company clients with more than data entry, producing detailed exception
reports that alert examiners to potential problem areas. It’s a relationship in which HDEP acts as a
partner to the title company, acknowledging that both are involved in a complex process with high
liabilities and experienced enough to intuitively recognize areas that require additional scrutiny.
“Another thing,” says Thoelke, “is that the typing is accurate. We’ve traditionally had
typists in the office produce these reports, and we were always sending files back
just for plain old, dumb clerical errors. That doesn’t happen anymore. They’re
doing a wonderful job. And they’ve taken a load of work away from our searchers
and examiners.”
“It’s worked out very well,” says Anderson. “We’re pleased with their quality and their
accuracy. And it has given us an opportunity to expand our services without
significantly having to expand our staff.”

51. THE HISTORY OF OFFSHORE DATA ENTRY - THE LEARNING CURVE
Is offshore outsourcing of finished reports appropriate for every title insurance
company?
“Back in 1989,” says Anderson, “when we were first considering doing offshore
keying, we were cautioned very strongly to be careful who we were working with.
But we decided to go ahead with it, and over the years our relationship with HDEP
grew stronger. If we hadn’t had this history with them, our likelihood of outsourcing
reports to an offshore company would have been very low.”
“People used to have reservations about outsourcing offshore,” says Thoelke.
“Frankly, back in ’89 I had them too. But now we’ve been working successfully with
HDEP for a long time. It’s the same as in any other industry, whether you’re
outsourcing offshore or within the states: Your success depends on the
relationship you have with your service bureau and your own willingness to provide
the feedback they need. That’s a huge part of it.”

52. THE HISTORY OF OFFSHORE DATA ENTRY - THE LEARNING CURVE
Is offshore outsourcing of finished reports appropriate for every title insurance
company?
“When people call and ask for references,” says Anderson, “I always tell them to be
very explicit in their instructions, so that everybody knows where they’re coming
from and going to. You can expect it to take some time for everybody to understand
the terminology and the ideas behind it. In this industry we’re all doing the same
thing, but we describe it in 20 different ways.”
BEYOND THE ABSTRACT
Abstracts aren’t the only reports HDEP creates for First Dakota. They also produce informational
reports— basic profiles of properties, rather than in depth interpretations, also known as tract
checks, letter reports or O&E searches.
“Banks want this information at a minimal cost,” says Anderson, “because they use it
primarily for home equity loans and other lines of credit.”
HDEP also prepares preliminary commitments for First Dakota—generally those involving properties
which the company has already insured in a previous transaction.

53. THE HISTORY OF OFFSHORE DATA ENTRY - THE LEARNING CURVE
Is offshore outsourcing of finished reports appropriate for every title insurance
company?
BEYOND THE ABSTRACT
“Next,” says Bello, “we’ll be doing commitments on properties they haven’t
previously insured. Who would have thought?”
“We haven’t gone completely down the road to having HDEP do every thing,” says
Anderson, “but you can see where it’s heading. As they become more skilled and
competent at what they’re doing, as they gain a greater understanding of the
process, we can definitely move ahead in that area.”
“Today,” says Nath, “an order comes directly in, we search the plant, identify
documents and review them, prepare a report, and submit it. The examiner reviews
it, presses a button and prints it out on company letterhead. At a time when the
title insurance industry is being compelled by customers to reduce costs and
improve the timeliness of their products, this is an excellent way to do it.”