By Meghan Hall
Up until very recently—within the past couple of months—there was at least some aspect of the home buying process that required in person, face-to-face interaction. As COVID-19 has forced people to stay home, those who are eager to buy, sell or refinance their property have had to find a new way of transacting through the use of digital closings. As a result, platforms such as States Title are thriving. According to States Title’s Founder and CEO Max Simkoff, States Title has recently raised $123 million in Series C funding and has plans to expand in the future.
Digitization of the mortgage title insurance and settlement service industries has been in the works for nearly two decades. From your perspective, why do you think it has taken so much time for the industry to fully embrace digital closings?
I think there’s been a significant amount of inertia from processes that have been around for decades in an industry that is highly regulated. Because of a lack of transparency into the process, consumers have come to accept an antiquated process primarily because they don’t know what they don’t know – that there is a better way.
For those who are unfamiliar with the digital closing process, can you explain a little bit about how it works?
Digital closings can happen a number of ways and it depends on which state the property you are buying/selling/refinancing is in. Most states have passed legislation allowing homeowners to close using RON (Remote Online Notarization), which allows borrowers to sign documents electronically and where a notary verifies identity digitally, using audio-visual technology. In states that are not authorized to do RON closings, States Title is working to give lenders and their borrowers workarounds. For example, in California, which has not enacted a RON law or temporary RON authorization in response to the pandemic, borrowers can have their documents notarized remotely via a notary in another state that is authorized to perform RON transactions.
What criteria must be in place for a transaction to be deemed truly “digital”? Why?
I think for a transaction to be fully digital it needs to require no human to human contact. This means that all documents are sent and signed digitally, identity verification is done online and/or through video/audio technology with secure, multi-factor authentication, and all communication around closing dates and other important info can be handled electronically. Eventually the ability to digitally unlock doors will be mainstream so even the process of getting the keys will be digital!
What technological—and legal—gaps need to be closed before fully digital closings can become mainstream?
For most states in the US, there really are no remaining technological or legal gaps that need to be closed before fully digital closings can become mainstream. The technology has existed for close to a decade; it’s been mostly legal requirements around notarization (driving the need for an associated in-person signing) and recording of the mortgage, combined with overall industry inertia, that have held things up. With broader legislative acceptance of both Remote Online Notarization (RON) and e-closing and e-recording by many county recorders’ offices, it’s now possible to have a fully digital closing (and many of our customers are rolling this out) in most of the country.
Can you please tell The Registry a little bit about the technology behind States Title? How does machine intelligence lend itself to “instant” closings?
States Title’s patented technologies enable the use of data science to create predictive title insurance based on an assigned risk score to indicate how safe a property is from liens or liabilities, helping to achieve faster title processing and more efficient underwriting. Since this process is traditionally manual and involves searching through physical documents related to a property, our algorithm can reduce the title underwriting process from two to four days down to just seconds.
More recently, States Title has rolled out additional applications of machine intelligence around fee and document recognition. The algorithms “read” PDF documents in seconds and parse out/process key closing fee information. We will be doing the same for communication (instant email parsing and intent recognition) later this year. Both of these new features have/will further remove large chunks of time from the process and create an instant closing experience.
While COVID-19 has accelerated the use of digitized closing platforms thanks to temporary RON/RIN laws, what challenges remain, despite this wider implementation?
The main challenge is that even with the current situation where it is, it is a huge health concern to have human-to-human contact, not every state has passed legislation making a remote closing easy. In a best-case scenario, when this pandemic is no longer a concern, the hope is that we don’t go back to the status quo – that states and lenders will recognize the value of remote closing as something consumers have demanded, and the industry will be able to move forward, fully embracing digital technology.
In recent years, the number of new proptech platforms coming to market has increased significantly. Looking ahead, how does States Title intend to differentiate its product from the numerous others hitting the market?
We’ve loved seeing the emergence of technology across the end-to-end real estate process. The fact that, today, you can search for a property, make an offer, and get a loan digitally is great. States Title is completing that journey for homeowners, making the closing and refinancing process instant. Closing is the last frontier – largely untouched by technology – and that needs to change.
States Title recently raised $123 million in Series C financing. Can you provide some detail as to how States Title will use the funds in the future?
We plan to use this latest round to accelerate investment in our patented, industry-leading machine intelligence platform to enable lender, realtor, and buyer/seller/borrower end customers to be able to activate instant mortgage closings at the tap of a finger.
Is there anything else you would like to add that The Registry did not ask or mention?
The real estate industry can no longer afford to ignore technological changes taking place in the modern world – it’s time to adapt to the call of the times. Consumers want this and by enabling digital closings, we are giving homebuyers the experience they deserve for one of life’s most important moments.