February 24, 2014 Issue
The Most Powerful Name In Corporate News and Information
First Web-Based Release Tracking Service
reQuire's team of
legal, real estate closing, and technical professionals has developed the
first web-based release ordering, tracking, reporting and delivery service
aimed at quickly, simply and accurately verifying the proper release of the
security instrument securing fully paid institutional notes. This patented
approach bridges the information gap between the settlement agent, attorney
or escrow company, and payoff lender by creating a highly secure shared data
Virginia Beach, VA 23462
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – February 24, 2014
CEOCFO: Mr. Morris, would you give us a little background on reQuire?
Mr. Morris: The company is a hybrid of technology and service that was derived from a need that I recognized early in my career as an attorney within the closing of mortgage transactions on residential homes. There is this process of paying off existing loans or existing mortgages in order to give room for the new mortgage to come into place. There is a two step process to that. One is to pay off the actual account and to cancel the note associated with that account. Then the second process is to record an instrument in the land records that indicate that it is a release of the lien that was associated with that mortgage account. I recognized that there was a gap that existed between the process of closing out the accounts and the process of getting those lien releases recorded. In earlier years, a little over twelve years ago, I was representing title agencies and when I was recognizing that there was a problem that these lenders were failing to record releases for their liens, it became somewhat of a nuisance if not a problem for the landowner. As such, most people would say, “That is what title insurance is for.” Of course, that is one of the remedies that is available to you; to utilize a title insurance policy to make a claim if a mortgage claim is not released. However, I recognized that it is much easier for someone, at the time of transaction, to get the information and then follow through with making sure that the mortgage lien release was of record.
CEOCFO: What is the process that you have instituted to alleviate the problem?
Mr. Morris: The process is to capture the information related to the mortgage account payoff and the corresponding mortgage lien that is in the land records. Then, we take that information after a new transaction has closed on that property and then thereafter following up with that lender that was paid off to verify that they have either recorded the release or if they have not recorded the release to stimulate the process of getting that release into the land records.
CEOCFO: Who is your client?
Mr. Morris: Typically, our client is the landowner whose property is being encumbered with the new lien.
CEOCFO: Who would be introducing your services to them? How do you reach that landowner?
Mr. Morris: It is interesting that you say that. Currently, our model is that the settlement office or the lawyer is closing the loan recognizes this gap in the process and realized that our service was a good recommendation for their land owners who are utilizing them to close refinances or sales. Therefore, typically our referring partners, whom we call them, are the title insurance agencies and the law firms and escrow companies that close refinances and sales.
CEOCFO How do you reach your potential partners? It seems to me a no-brainer to offer a service to insure mortgage satisfaction, as I have personally had to go back and resolve one that was several years old?
Mr. Morris: Your experience puts you in a much better position of understanding what we do, in that you have personal experiences that you can reference when I talk about it. Most people who go through this really do not realize that the problem exists until such time as they are trying to sell their property or trying to refinance their property. Then, typically it is that phone call that comes to them that says, “You know that fund trust mortgage you had five years ago?” “Oh, yeah, that has been paid off.” “Well, the fund trust did not release the lien.” That is the pain point that occurs down the road. What we do is, we look at the different remedies that are available at that time. We also look at the experience of the landowner. If you look at the experience of the land owner, the land owner really was trusting in the good faith and ability of the lawyer or settlement company that closed their loan that paid off that fund trust mortgage. Therefore, immediately it is not uncommon for the landowner to believe that the lawyer or settlement company failed to do something that was required of them. Unfortunately, that is not the case. The duty of releasing this lien from the property land records lies solely with the lender that was paid off. The ability to force that lender to go forward with their duty to release that lien becomes much more difficult, the longer you stray from the time that you closed and paid off that old lien. In your experience, I think you said three or so years that went by; it becomes much more difficult to find that lender and to get them to act and to record a release. Therefore, we also recognize that that span of time that goes on; many times these lenders and servicers are bought or sold or merged and many times the records that are associated with that payoff becomes buried and very difficult to navigate in order to obtain a release. Getting back to your question about the referral process; that is that we recognized early on that we can fill this gap by capturing this information and following up and stimulating this release immediately after the closing. However, in order for us to do that, as I just mentioned a moment ago, it is necessary that we get that order in close proximity to the time that the new transaction goes on, so that we can then follow the money that went to the lender that was being paid off and verify that the account is closed. Then we, from that point, can act much more efficiently in getting these tracked and released.
CEOCFO: Do you find that most organizations you deal with in terms of the releases, whether it is a bank or a mortgage company are more amenable when they are speaking with you as opposed to the actual landowner?
Mr. Morris: Yes. In many ways, that is what is very difficult with the real estate transaction. You have a little over 3600 different land record locations throughout the country. You have many national lenders. You might go to Quicken Loans or you might go to Bank of America and so forth. They are transacting in all 50States. You have got 50 different laws that are variations of the lien release process and the duties that are imposed upon these lenders. Therefore, the complexity of just this lien release process is so cumbersome, that even those that are partners with us have very little knowledge about the real intricacies of that process. When it comes to the landowner; the landowner is coming into a situation where they are doing a refinance and they really are at the mercy, so to speak, of the lawyer or settlement company. They sit down at a closing and sign a stack of documents and although they may be adequately described to them, if you really sat them down an asked them about the import of the documents, many of them would have difficulty in really articulating that and understanding the importance of what they did. There is an ever increasing tendency for Federal regulators to come in and to address this disparity of knowledge and expertise, as well as the potential for a settlement company title agency or lawyer to have undue influence over the landowner. These regulations have now been consolidated within the umbrella of the Federal agency referred to as the “CFPB”, which is the Consumer Financial Protection Bureau. That is an amalgamation of many different regulators that have come together under this one umbrella. What is interesting enough about this is that the CFPB has significant subpoena power and significant power to impose conditions on lenders and ultimately find its way down to the settlement company and the lawyers as well.
CEOCFO: How do you reach your potential partners and have them really explain to their clients why it is needed; not just a good idea, but necessary?
Mr. Morris: Similar to what you just mentioned earlier, as to “why do they not get it”, is the reaction we get. When we finally sit down with them and have them take a look at it, they look at you and say, “Wow! This really is a great service!” We have had regulators say that. We have had our title underwriters be a big champion of ours as well. They recognize the services that we are providing actually support a role of risk reduction for them. Although it is not contemplated by the title insurance policy or the process of creating that policy; the services that we provide, in fact, result in a significant reduction in risk, as well as an identifiable instance of fraud. That is because we are a third party company not associated with the title insurance process, because we are following up, not only on the lien release finding its way to the record room, but we also are in touch with the lender at the accounts side, to verify that the underlying account has been closed. Therefore, in those circumstances where there may be fraud, we can readily identify that. They recognize a real great reduction in value or risk abatement feature. Therefore, they become a real champion of ours. Many times these title underwriters, when they are bringing on new agencies, will introduce us to them and say, “You need to use reQuire, because they can really save you a lot of money, save you a lot of headache, provide you with a great deal of satisfaction that these phone calls that you may get many times after your closings, from borrowers that are looking for lien releases. Since we recognize, as a title underwriter, that it is the lenders’ duty to do this and that ultimately you as our agent will be receiving these phone calls, by utilizing this service or recommending this service to your land owner customers, we recognize that that could significantly reduce your reputational risk that is associated with the failure of liens to show up in the court house.”
CEOCFO: Do you have much or any competition?
Mr. Morris: The competition that we have had really kind of pops up and then kind of dies away. As of right now, we have had a couple of companies really give us a run for our money, which is great. We are very excited about it, because it not only makes us stay on our toes, but it validates the value of what we provide. What is interesting is that the services that they are providing are a little different than the services that we provide. As I told you, we provide the two sided elements and that is the account closure and verification of that as well as the lien release in the courthouse. That really provides a great deal of comfort for the referring agency that is looking to us to follow up on these things for them. The competition has been sporadic. We have been very, very diligent about eliminating even any appearance of impropriety with regard to RESPA violations that may occur, by utilizing our services and then some other State level regulations. Interestingly enough, our business patents have been approved. Therefore, entities such as lenders, settlement companies, title companies and direct competitors coming in and utilizing our protected business process, would be in violation of the patents. Therefore, with those patents right now, we are filing the paperwork to issue the certificates. We will be making announcements for that presently.
CEOCFO: How is business these days?
Mr. Morris: Business is great, even with a decrease in transaction volume. We have established ourselves so well within the industry that despite a downturn in transaction volume, which was principally the result of increased mortgage rates, the value of what we provide for the land owner is still now, if not even more, recognized so that we have not lost any or our referring partners, with regard to their referring their transactions to us.
CEOCFO: Why pay attention to reQuire, LLC?
There are a
number of things that we are doing. The primary reason is that the company
is really focused on our core values and a very distinct mission that we
have laid out. I will pass this on to you with some paper if you would like.
However, those values really have been reemphasized late last year. It
became the foundation for the direction that we are taking the Company. Our
core business strategy has been to rely on these settlement partners to
refer us to their landowners. That is because we really provide a service
that is valuable, not only to the land owner and the settlement office and
the title insurance company issuing a policy on that transaction; but more
importantly we have recognized that because we follow up and make sure that
the prior liens are removed from the land records, we actually clear the
title. There is a distinction between clear title and insurable title. When
you are a lender putting a new loan in place and you are going to secure
that loan with someone’s home, one of the requirements that that lender
makes of the closing agent is that they put them in a first lien position.
Another condition that they ask is that they get a title insurance policy to
protect them, among other protections, to protect this first lien position.
What the lenders have recognized is that the settlement agent has little
power to actually cause them to be in a first lien position, other than to
record the new mortgage and to verify that the payoff was sent out. What
they are recognizing is that, although they have a title insurance policy
that might protect them in the event that there is a foreclosure or a
situation where a prior lien becomes a problem, the fact that we can
proactively follow up and verify that it has been removed from the land
record, gives them a clear title position. Therefore, the direction for the
company, parallel with our current business
model, is to work directly with originating mortgage companies to provide
them an assurance that they are in a first lien position by utilizing
reQuire as a requirement in their lender instructions. This is very exciting
for us, because then we are not relying on a settlement office to remember
to refer this over to us. They are actually in a situation where it is a
part of the requirement for closing the loan. I think that when you asked me
what was the real value and why they should be looking at reQuire; the core
reason that reQuire has the great reputation that it has and the
sustainability through various real estate market upturns and downturns is
that we have got people that are fully committed to this process and focus
solely on this process. We have sought many consultants and worked through
many programs. We have accumulated some very good policies, procedures, and
environments that are conclusive to growth for all the people that work
within our organization. Therefore, our goal is really to put the focus on
the people that are making reQuire work and grow and giving them opportunity
to grow and opportunity to expand their own personal and career lives as
well. I think that if you spoke to any of our employees you would see that
many of them have experienced a great change in how we have been able to
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