Ten years ago, Patrick Stone founded WFG National Title Insurance Company on the heels of the Great Recession when homeownership rates tumbled to 30-year lows, foreclosure rates rose to historic highs and the public opinion of the real estate and mortgage industries sunk to new depths.
Even in the midst of such turmoil, Stone still saw an opportunity to improve the transaction experience for real estate professionals and consumers marred by three years of financial and economic upheaval. Fast forward a decade later, Stone sees even more opportunities to create a more seamless, reliable, and speedy transaction for buyers and sellers navigating a world impacted by COVID-19.
Stone sat down with Inman to reflect on WFG’s first decade in business, the importance of putting clients first, why e-closings are the key to offering a quicker transaction, and what’s in store for 2021.
Inman: WFG recently celebrated its 10th anniversary, and I read your letter about the company’s backstory and mission. You started WFG in 2010, which was another difficult time for the United States as we were working through the Great Recession. What lessons did you learn in WFG’s early years that have helped you have a successful 2020, despite everything that’s going on?
Stone: I’m going to answer your question, but with a little bit longer timeline. Once you’ve gone through the early 80s, through the bulk of Volcker Recession, when we raised interest rates, and basically shut down the real estate business, and then we lost the S&Ls, as a financing vehicle for the real estate business. So that was, in a lot of ways, more challenging and traumatic than the Great Recession.
I was on the board of First American when in 2009, I got the idea for the company. The lessons [I learned] were that you can’t be a large indifferent institution that operates at arm’s length without interfacing with your clients. And everybody in the real estate business was going through a strong adjustment because we were being blamed for the Great Recession, and there was a tremendous amount of disruption and upheaval within the real estate industry. And it seemed to me that there was an opportunity for a company that would be a part of the clients’ process, as opposed to an indifferent third party institution.
Having lived through the early 80s as a manager, I decided to launch the company because I thought there was an opportunity to grow a company with a different philosophy and that the backdrop of the Great Recession provided an opportunity. I’m glad we did it; it worked. It was a lot of work. But it was fun. Over time, we’ve become a part of our clients’ process and to their benefit and ours.
That answer’s going to make me skip a couple of questions that I have written down. In your letter, you wrote about your company’s three C’s — communication, collaboration, and coexisting. So what have those three C’s meant to you this year, especially amid such turmoil?
You know, we have put a focus on that from day one. But what has happened this year is we’ve been able to focus a lot on using our status sharing software, MyHome. MyHome has enabled us to facilitate people’s understanding of what is going on, help our realtors and our lenders, and the buyers, sellers, and people refinancing homes stay abreast of what’s happening, so they’re not left out in a dark hole wondering what the status of an escrow is or how the process is going along.
The communicate, collaborate, and coexist [mission] is common sense, right? You have no purpose in business if you do not understand that you have to coexist with your clients. And if you don’t enable your clients to be successful, you won’t be successful. So communicating, collaborating, and coexisting is a mantra that is part of our culture. We are focused right now on maximizing interface with clients so they can stay current with what’s happening. Our MyHome product has been a home run for us. It’s created a lot of very happy buyers and sellers, which reflects well on the Realtor and lender. They get more business, we get more business and everybody’s happy.
That’s the next thing I wanted to touch on. WFG has had a record year in terms of sales volume and a handful of new product releases. Could you provide more insight into those product launches and how they fulfill WFG’s mission of enabling Realtors and lenders to provide excellent service to consumers?
The key thing to remember is that anything you try to promote to or initiate has to have a benefit to your customers and your clients, or it’s irrelevant, right? Beating the drum just to attract attention makes no difference. Bragging about where you are makes no difference. Telling everybody you have great service makes no difference. Enabling your clients to operate more successfully makes a huge difference.
Okay, well, one of the things that I’ve learned over 45 years is being self-centered, or talking about things that are irrelevant to your clients is a waste of time. You need to be 100 percent focused on your clients, and anything you do to promote your company, any investments you make in terms of technology, it has to be to the benefit of your clients, because if it’s not, it is a total waste of time. You see a lot of PR campaigns. You see a lot of people do things that they think are clever or catchy, but if it doesn’t benefit your clients, it has no long term benefit to you. You really learn that over time, even if you’re slow like me, that it’s about your clients’ success. If they’re successful, you’re successful.
Hearing you talk about that reminds me of Mr. Inman’s August Connect Now opening speech. He spoke about how important it is to focus on “what is certain” and master the basics of providing excellent and reliable service. What do you think ‘going back to the basics’ will look like for the industry and individually in the upcoming year?
I think what Brad was trying to communicate is we frequently get distracted looking for solutions that are innovative or disruptive, and the reality is that what fuels residential real estate are buyers and sellers. It’s about if you can make that process better, if you can make it more understandable, if you can make it more successful, if you can take time and cost out of it. As you benefit your clients, you get more business. That is just a basic rule of law in the business of real estate.
There’s been a tremendous amount of money, time and effort spent on innovative technologies, some of which have made a difference. But if it doesn’t increase the functionality of the process, or it doesn’t increase the positive experience to the buyer and seller, it is not as important as people think. So getting back to the basics is focusing on the client.
In your letter and in this conversation, you said you founded WFG because you saw an opportunity to improve the transaction process in the aftermath of the Great Recession. Ten years later, what new opportunities do you see on the horizon?
Well, that goes back to MyHome. We’ve just launched MyHome for lenders, which is more like a data vault with the idea being that you don’t have to rekey all the information around the transaction. We’re taking the time and cost out of the process, eliminating mistakes, [making sure] people can access all the relevant information so we can get to a close quicker and more effectively.
Forgive me for doing this, but I’m going to give you a little story that frames this properly. If you look at what it costs to buy the average home, how long it takes, what the commissions and extra dollars are that go around the conveying of a piece of property, it is a horribly inefficient process compared to buying other assets.
I mean, you can buy really fancy Ferrari, and you can do it in an hour and a half and for a very low add-on cost. Real estate is more complex because the underlying data, information, regulation, and laws vary tremendously among the players and state-by-state and market-by-market. So it’s a little bit more difficult.
But if you focus on making a process efficient, if you focus on making sure people don’t have to repeat the same data, if you focus on taking the errors out because everybody can access the same data, like we’re doing with our MyHome lender product, then you reduce time and costs make the process more efficient. If I’m a buyer or seller, and my Realtor facilitates a closing that is quicker and less painful, and I’m kept in the loop, I’m happier, right? I mean, it’s really about time, cost and making sure that people are informed.
I’ve been writing for Inman for a few years, and a common theme is making the transaction process more seamless, streamlined and quicker, similar to the experience of buying a car or another high-cost item. Do you think it’s possible to provide that kind of experience? Would it even be helpful or beneficial to create a homebuying experience like that?
No, we’re never going to be that quick. We can be aspirational, and we should be. But, keep in mind that every participant is accountable to a different regulator; every state is different; most markets are different, business practices are different, and underlying data accessibility is different.
What we should try to aspire to, in my opinion, is what was sort of evidenced back in 2015 by both Fannie Mae and by the [Consumer Financial Protection Bureau, when they did their e-closing studies. And we participated in that, by the way. What the bottom line was, is that if you use e-closing, if you have a common data vault, if you quit rekeying all the data, you can get a transaction down into the low 20-day range.
I think that’s what our goal should be right now. The pandemic has opened a lot of people’s minds and their willingness to try to use technology more progressively. So again, what we should aspire to is embracing more of the tenants of e-closing and doing more interface like that, and it can reduce the time significantly. An average time of over 40 days to close the real estate transaction is not necessary; we can get it down to 20 if we work together.
I read a 2019 interview you did with one of my brilliant colleagues, Andrea Brambila. She asked you about your most significant concerns for the upcoming year, which centered on the trade war with China and other countries. Are you still concerned about that? What are some new concerns you have about 2021?
Let me be real careful here. I think we all, no matter what our political ideology is, we all are on all sides of a little concerned over the election, making sure that it goes down effectively. That the results are honored, and that we move on.
Now, having said that, we have had very easy money for quite a while. The Fed has been very aggressive about keeping rates down [and] about buying assets. There is a lot of money in the market. Now, typically, when you have such easy money, you create asset bubbles, and the Great Recession basically was caused by real estate becoming an asset bubble. We were making loans to people with FICO scores in the 500s. We were packaging those loans to collateralize debt obligations, and they failed on Wall Street. Real estate got blamed for the Great Recession, although I think Wall Street should have been blamed.
I worry a little bit about having an asset bubble or two. I don’t think it’s going to occur in real estate; I think it’s going to occur in other industries. One thing that concerns me right now is collateralized loan obligations (CLO). These are very similar to what you saw with [collateralized debt obligations] that caused the Great Recession problem. Collateralized loan obligations are corporate loans that are packaged into a security and sold, and people have gotten more and more aggressive about these loans. We don’t necessarily have to have a problem [with CLOs], but if we create an asset bubble, and that’s always a risk when you have free money, we will have a problem.
The other thing that concerns me a little bit, one of the reasons inflation has been so low in this country is we’ve had service inflation and we’ve had progressive increases in wages and salaries up to the pandemic. But basically, we had no goods inflation because we had globalization keeping the price of goods down. And actually, goods inflation was deflationary from about 2013 to 2019. Globalization really benefited us in keeping inflation down, but I worry a little bit about a continuation or an escalation of the trade war. So those are the two things that have me concerned.
So, what’s your vision for WFG in the upcoming year? If 2020 has taught us anything, it’s to expect the unexpected. How do you want to help your clients and their consumers better deal with the topsy-turvy time we’re in right now?
I’ll answer that in two parts. The first part in terms of WFG, in 2021, we’re cautiously optimistic that it will be a good year because we do think interest rates will stay low through next year. We also think because of the pandemic, there’s been a real emphasis on the desirability of a home. So I think 2021 will be a good year. What we’re trying to do as a company is make investments in technology that makes the process more efficient, that take time and cost out, make people more aware, so they know what’s going on.
Another emphasis on our technology is our decision point product, where we try to run everything through an AI process so we can determine how much time and effort has to be spent on the title report. Some results are automatic, especially a certain percentage of re-fi [loans]. But the rest of it, we need to shorten the process by determining what needs to be done and what needs to be researched.
If I may, I think the industry has been focused on, and I don’t mean this as a criticism; this is an observation; I think the real estate industry has been focused on access and control of the client as opposed to the process. Most of the noise is around access and control of the client, not making the process more efficient.
Consequently, you see a lot of money being spent, and then you see it being effective in a very small percentage of the whole process. So our company is going to be focused on taking time and cost out of the process, making the process more efficient for the consumer and benefiting our clients and our consumers in that way.