Editor’s Note: This is part of our continuing monthly series on affiliated companies. Our goal is to feature companies which have had history and experience with affiliated businesses to learn about their success and share the RESPA compliance lessons they have gained in these affiliations over time.
TRI Pointe Group, through some of its homebuilding operations, has been around for 100 years. It now is one of the top 10 largest public homebuilding companies based on revenue in the United States.
As of March 30, the company had $3.172 billion last 12 months (LTM) home sales revenue, and 5,678 LTM new home deliveries, with a $626,000 average sales price of homes delivered.
TRI Pointe Group designs, constructs and sells premium single-family homes and townhomes in Washington, California, Colorado, the Carolinas, Nevada, Arizona, Texas, Maryland and Northern Virginia through six regional brands – Quadrant Homes, TRI Pointe Homes, Pardee Homes, Maracay, Trendmaker Homes and Winchester Homes.
The Orange County, California-based company went public in 2014 and expanded services into affiliated businesses in 2015 – mortgage company TRI Pointe Connect, TRI Pointe Assurance title and escrow services, and TRI Pointe Advantage Insurance Services.
“The goal is to provide a better customer experience with end-to-end support throughout the closing process,” TRI Pointe Connect President Ron Turner told RESPA News. “Our affiliates are focused on providing ancillary services to our homebuilders, but they also give us a better understanding overall about a buyer’s ability to purchase and close on the home.”
Turner said the affiliated business arrangements (AfBA) have proven successful.
“These are big decisions for homebuyers, but making the buying and closing process more seamless boosts their satisfaction and peace of mind, which adds up to a superior customer experience,” he said. “Most consumers choose to utilize our ancillary services – mortgage, title, homeowners’ insurance – primarily because of word of mouth from customers who have purchased in those same communities and know first-hand our commitment and quality.
“As affiliates, we’re in a special position to take that baton, so to speak, from the TRI Pointe Group homebuilders that have established the high-quality core customer experience. Then it’s up to us to build upon that experience with specialized and seamless service delivery. We’re there to un-complicate the closing process at every step.”
Turner estimated that 80 percent of customers of TRI Pointe Group’s homebuilders choose to obtain financing through the mortgage affiliate; 55 percent buy homeowners’ insurance through the property and casualty affiliate; and more than 95 percent of customers choose to utilize the title and escrow affiliate’s services.
For other businesses that might be thinking of entering into an AfBA, Turner shared tips on how to stay RESPA compliant. First, Turner recommended relying on systems to maintain processes by which you train your employees, as well as technology systems and procedures.
“We must be ultra-attentive in adhering to RESPA and any other compliance regulatory requirements, which means incorporating those standards and procedures into our processes and systems,” he said. “We maintain regular working relationships with RESPRO and third-party outside counsel. Any new processes and procedures that we put in place get viewed not only by internal sources, but also outside counsel to ensure we are interpreting and in putting the information correctly so as to eliminate mistakes.”
Turner said the company takes compliance so seriously that it retains more than one outside law firm for RESPA purposes, and uses in-house counsel for other business matters.
“There is probably a handful of trusted RESPA counsel across the country that manages the bulk of everything that we do,” he said. “We want to better understand our risk, and outside counsel provides us with that – better to be safe than sorry. Ultimately, if you have the right training, processes, procedures and technology in place, then we feel very comfortable with our practices.”
TRI Pointe always has given RESPA significant levels of attention, but steadily has increased its compliance focus over the years.
“Compliance in general, especially following the Dodd-Frank Act of 2010, has taken RESPA to a heightened level,” Turner said. “It’s RESPA Plus now. Without a doubt, over the last 10 years, you’ve seen most firms double the amount of inside counsel, and it’s not surprising now for them to have two or three firms on retainer just to ensure operational compliance. Where RESPA was perhaps 50 percent of someone’s job, now you may have someone who is 100 percent dedicated to RESPA compliance.”
To further compliance goals, Turner suggested that AfBAs join industry trade groups such as RESPRO and local chapters of the Mortgage Bankers Association to get access to information and recommendations to outside counsel.
“Reach out to all the affiliated organizations you can, get expert feedback on what counsels they’ve used, and don’t be afraid to overcompensate when it relates to compliance,” he said. “If you get things wrong, there are obviously fines and penalties, but also reputational costs. That’s not something you want to deal with.”
Turner said his biggest compliance challenge is navigating the nuances of the RESPA rules.
“Most of us working in the industry try to get a black-or-white answer, and sometimes there are certain areas that are just grey,” he said. “When you have huge industry changes such as the creation of the CFPB, that puts RESPA on the forefront. The bureau was initially enforcing by action. It was difficult for affiliates to navigate or make decisions to grow because we were scared, because you just didn’t know the rules. Now there is a little more clarity.
“By and large, most people in the industry want to do the right thing, but any time you get some ambiguity around enforcement and what the rules are, that makes it difficult and ultimately hurts the consumer because they won’t be offered as many opportunities as they otherwise would have.”
Oddly enough, Turner said the pandemic has proven to have a silver lining with compliance because it has forced customers to embrace electronic communications through DocuSign and other methods.
“It makes us more comfortable with RESPA compliance because we’ve been able to electronically document it,” he said. “My perception is the acceptance of electronic communication, and electronic signatures has only helped from a compliance perspective.”