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 business to learn about their success and share the RESPA compliance lessons they have gained in these affiliations over time. 

Scottsdale, Ariz.-based Taylor Morrison Home Corp. is currently the fifth-largest homebuilder in the United States. Last year, its affiliated title business, Inspired Title Services, made more than $20 million in gross revenue, operating in Arizona, Colorado, Florida, Georgia, Nevada, North Carolina, South Carolina, Texas and Washington.

“Inspired Title was formed five years ago to serve the unique title and settlement needs of Taylor Morrison homebuyers and to provide true one-stop shopping and a great homebuying experience,” Bud Moscony, vice president of title services for Inspired Title, told RESPA News.

The homebuilder’s mortgage company, Taylor Morrison Home Funding (TMHF), began in 2009, when Taylor Morrison (TM) acquired Mortgage Funding Direct Ventures, a management company which had partnered with production home builders to create in-house mortgage subsidiaries. Since then, TMHF has expanded nationally and grown from a mortgage brokerage to an independent mortgage banker.

Taylor Morrison Insurance Services – the newest addition to the builder’s family of affiliates – was started in August, utilizing third-party carriers that specialize in new home construction to provide homeowner’s insurance for TM homebuyers in all markets.

Compliance is key

When it comes to RESPA compliance, Moscony said the Taylor Morrison family goes above and beyond.

“Being owned by a large publicly-traded parent affords you the benefits of a complete compliance department,” he said. “Our first task for title was to go through American Land Title Association’s best practices. We have internal auditors who partner with us to assure that we are doing what we need, to minimize risk. We also go through external audits by regulatory bodies as well our title insurance underwriters.

“We have a ‘clean desk policy’ to make sure there’s no non-public information sitting out – that it’s locked up and secured. We have random compliance checks by our compliance group to make sure the officers are being fully compliant. In addition, at the time of the referral, our homebuilder provides the RESPA affiliated business disclosure to homebuyers; we ask for a copy of it for our files. We will not issue a title commitment to anyone – to any of the parties – until we verify we have a signed AfbA disclosure in our file,” Moscony said.

Another key component of their compliance strategy consists of actively participating in key industry associations. For instance, the lender is an active member of the Mortgage Bankers Association and Inspired Title is an active member of the Real Estate Services Providers Council (RESPRO). Moscony chairs RESPRO’s Homebuilder Task Force. 

Staying compliant also extends to Inspired Title’s website.

“When folks call for our fees, we want to drive them to our website,” Moscony said. “There’s an affiliated business arrangement disclosure on that first page when you first arrive on our website. We have you click through that you acknowledge the affiliate business disclosure. As we grow our software systems into a more integrated and electronic platform for our homebuyers, we’re incorporating compliance controls as well.”

Perhaps the most important compliance component is providing the AfBA Disclosure at the time of the initial referral of the affiliate. Generally, homebuilding companies have an established process for giving it out either as part of the agreement of the sale or right before or after it.

The key, he said, is to have an established process in place, which you test regularly for efficacy. If so, an occasional slip shouldn’t get you into hot water.

“Historically, some regulators would lean towards giving you a pass if you missed a random disclosure saying, ‘OK if you’ve got a process in place, which you test regularly to make sure it is being followed, and you missed a random AfBA on Sally Jones for 123 Main St., we get it,’ ” Moscony said. “But we’re a bit more risk adverse. Tawn Kelley, president of Inspired Title and my boss, said to me, ‘No, please make sure that every one of our files has an affiliated business disclosure before you send out the title commitment.’ I said, ‘Absolutely.’ ”

More visibility, control

Moscony said affiliated businesses always have been a great way to align with the customer even during industry ups and downs, maybe even more so during the COVID-19 pandemic.

“I think that many of the affiliated companies today were started by companies that wanted a better experience for their customers than what they were getting,” Moscony said. “I hear from a lot of companies that the title companies they were dealing with weren’t doing a great service to their customers.

“How do we improve that experience? We take control, and we do it ourselves. Even today is a great time to start an affiliate. I think that having all the parties to the real estate transaction aligned, is a more efficient way to a more successful home purchase. Consumers today want to accomplish tasks quicker, faster, better, more conveniently. And affiliated businesses provide that one-stop shopping experience, true alignment, and peace of mind.”

With COVID-19, in some ways TMHF was insulated from the immediate business dropoff other real estate companies experienced due to the build cycle for a new home.

“Moreover, because Taylor Morrison Home Funding prequalifies each homebuyer before they sign an agreement with our builder, our lender affiliate provides our builder with a true line of sight into that potential homebuyer,” he added.

Typically, it takes the company about six to eight months to build a home.

“So once the pandemic hit, our lender affiliate proactively reviewed the loan backlog to provide as much  backlog visibility to our builder as we could,” Moscony said. “So we would review the backlog to see which buyers were required to sell an existing home as a condition of closing on their new home, who was furloughed, who may have just been laid off from a retail, hotel, travel or entertainment job.

“That allowed us to be proactive so we could reach out to our homebuyers and say, ‘How can we help you get ready to close on your new home?’ For some folks in this crisis, with the turmoil in the mortgage market, it was getting their loan interest rate locked. Or if someone’s been furloughed, we can reach out and say, ‘We know you’ve been furloughed, we know you’re going to get called back in July, let’s delay the closing until after you’re back at work and we’ll finish the closing then.”

Pandemic compliance issues

Inspired Title was well-prepared to adapt the way it conducts closings with the vast majority of its employees able to work from home within two weeks due to the pandemic, Moscony said. Safety and social distancing protocols include conducting closings by appointment only with those people who actually are needed. And since mid-March, the company has conducted curbside closings.

“Most of our curbside closings are what we call a hybrid closing, where we send the loan package electronically to the homebuyer in advance of closing so they can preview, and attach an electronic signature to a large portion of the closing documents. Only the note, mortgage/deed of trust, and documents to be notarized, are ink or wet signed,” he said. “Then we make an appointment with them to come to our office; they call us when they arrive, and our closer or mobile notary will go out – he or she will have a mask on and gloves – they’ll go out and verify the identity of the person(s) through their car window, then we’ll hand them the loan package, which is broken up into two parts.”

The first part consists of documents to be notarized. The second part is the few remaining documents that weren’t eSigned. The customer completes the top part first. Then the company notarizes those documents while they’re signing the second package.

“Then we collect the second package, return shortly thereafter with copies and keys and send them on their way,” Moscony said.

The company also is performing more mail-away closings, and some remote closings wherever the homebuyer wants to close, by appointment only.

But Moscony said going 100 percent electronic requires too many industry players upgrading their processes and/or systems to truly be on the immediate horizon.

“The title industry is regulated state by state through state insurance and/or financial services departments, plus you work with individual county clerks at courthouses around the country to record documents such as a deed and mortgages/deed of trust, to give public notice of a home transaction. Those, players, along with the lender industry, all have to be aligned to be able to electronically close a transaction,” he said.

Remote online notarization (RON) is a good step in that direction.

“Everyone’s talking about RON’s here, RON’s there. If you are capable of closing with RON, but you’ve got an investor who’s not accepting RON documents, you’re not going to use it,” he said. “It’s going to be very interesting to see where the industry progresses at the end of this crisis, because there’s been such a huge push towards electronic. That’s why we went with hybrid closings last year, because we could create a great homebuyer experience, with industry players’ current capabilities.

“There will be some limitations to an eClosing when we get there. With the current rush to do electronic closings, we need to remind ourselves that electronic closings are currently available only to those homebuyers who have an existing credit profile. To log into the eClosing portal, you must verify your identity and that typically occurs first through knowledge based questions. So, for example, if you’re a foreign national, you probably don’t have a credit profile, we don’t have ready access to questions that only you should know the answer to like,  ‘At which of the following addresses have you previously lived?’ to verify it’s you who’s on the other end.”

With electronic closings, disclosures and meet ups comes an increased responsibility to protect the homebuyer’s privacy and their nonpublic information.

“That’s where I think the real issue is for us,” Moscony said. “Some people are doing what’s called an ARON, an alternative RON, where you use a platform such as Zoom to do an audio-visual notarization with the homebuyer.                                                  

“We’re not sure that gives the proper authentication. So we’re very careful about that. Moreover, you’ve got to make sure that when you’re doing a closing that you are complying with your title underwriter’s guidelines. And so, it’s politically correct today to say you can do a RON, but we’ve got to make sure that at the end of the day that our underwriter First American or Stewart Title or Old Republic or Fidelity National is willing to stand by what you have insured. We’ll be ready when there’s a realistic move to a remote fully electronic experience, and we do it in compliance with our title underwriter and our stringent internal guidelines.”