– Alright, looks like it’s slowing down so we’ll go ahead and get started. Thank you all for joining today. For those of you who have joined our webinar series previously, we’re gonna do things a little bit differently here today. I’ll be acting more as a moderator and will be hosting a discussion with Tom Cronkright and his business partner, Lawrence Duthler. Now for those of you that don’t know, Tom is the founder of CertifID but he’s also the co-founder of Sun Title, where he works with his smarter better half, Lawrence. So thanks, guys, for joining. Nice, yeah.
– Good morning, Tyler.
– [Tyler] So what are we gonna be talking about today? Today’s topic is “How To Lead Your Title Company “Through the COVID-19 Crisis.” And specifically, we’re gonna be talking about the Paycheck Protection Program, RON E-Closings and hybrid closing options, and technology to support new processes during this time of social distancing. So just to sort of set the stage here, Lawrence is really gonna be helping us understand everything he is doing from an agency owner perspective at Sun Title. And Tom is gonna be providing us with insight based on his communication and connection with well over 100 agents, large agents, from across the country, really, and his role at CertifID. So we want this to be really engaging. We’ve already seen a lot of people ask questions to our posts in LinkedIn and replied to some of the emails that we sent out. There is a Q and A panel. You are more than welcome to ask questions throughout the session and we will try to address as many of them as we can. Now, before we get started, we just want to do a quick poll. So I’m gonna launch a poll here and for those of you attending, if you could answer, that would help us get started. So the question is, which of these do you most relate to regarding the Paycheck Protection Program? One, I have applied for the PPP loan. Two, I’m in the process of applying. Three, I’m still unclear about the loan and have questions before filing. And four, I don’t think I’m going to file for a loan. So I’ll give you all just another couple of seconds to vote here. All right, great. Go ahead and end the poll so we can get started. So, Tom and Lawrence, it looks like about 33 percent of our audience have already applied for the PPP loan while 31 percent don’t think they’re gonna apply. 20 percent are in the process of applying, and 16 are still kinda unclear about it. So, that is a great segue into our first question. Lawrence, I understand you have already submitted, been approved and funded your PPP loan. Can you help the audience understand what this process was like for you and sort of how you went through it for Sun Title?
– Yeah, it was, it was a constantly moving target, and frankly, still is a moving target. We’ve got some pretty good relationships with some of the larger lenders here in west Michigan and we gotta call from one of them and they asked if we could almost be a, kinda their first guinea pig on this whole thing, so by the time the law was passed, that shifted everything over to the SBA. The SBA has to, is going through their rule-making process so it was probably Thursday or so where we got the first set of documents, the application form; we filled it out, submitted it. The next day, the form changed, so we had to fill it out and submit it again. Then over the weekend, there was another form. So we had to fill it out . So it’s just this constantly moving target because the SBA, in fact the “Wall Street Journal” had an article again that they’re just still, they’re still trying to figure out all the forms and responsibilities of the lender, so we got our application in and submitted through the SBA over the weekend, and got approval for funding on Monday. And then our funds actually hit the account late Monday afternoon. So, over the span of a very short period of time, we were able to apply, revise the forms, and get the funding. What’s interesting is there’s a lot of lenders, what we’re hearing is that the, they’ve got applications into the SBA, but they’re, and may even have approvals back, but as the lender who is responsible for administering the program and following up on the due diligence that they have to go through through the SBA, they’re nervous about funding the loan. So they may an SBA approval, but they’re still nervous about their documentation, so in fact, we got a call from our lender who already funded the loan and basically said, “Hey, there’s more documents coming, “even though you’re fully closed, “and you have the funds in your account, “we’re still gonna send some more forms over.” And we’ve got a good relationship with ’em so they’re not concerned, but it’s a constantly moving target. Even on the forgiveness sides, the statute goes through, once you get the loan, what’s gonna be forgiven and the like, but there’s a lotta regulations and rules that the SBA still has to come up with and I suspect that they’re gonna take the next eight weeks at least, which is the period of time that there’s the look back for the forgiveness, to determine what’s the documentation and everything else that you need for these loans? So, the calculating of the loan amount, if you pull up the actual bill, it’s got the the two-and-a-half times payroll costs, that’s how it’s defined in the act and it goes through a number of things and really there’s three sets of calculations you have to do. There’s the how much is my loan gonna be? That’s based on the payroll cost, two-and-a-half times payroll cost. Then after you get the loan, there is–
– Let me stop you there. Payroll includes how much. So Lawrence is being modest. He read the entire CARES Act, the 800 pages, so,
– I slept very well afterward.
– And developed a whole spreadsheet around this, so let’s be a little more, a little more truthful in the sense that you dug deep into this, because the lenders just, it was moving so quickly, and frankly, unlike any other SBA-backed program, because remember, the SBA is just a guarantee no different than an FHA loan. And what it says is, “Hey, lender, if you loan money “to this business and they default, “the SBA will back that “guarantee,” right?
– Right, yeah.
– And that’s why this has been just such a hard, but walk through, just dissect real quickly, how we came up with the calculation.
– Yeah, so, the payroll cost, there’s the gross compensation. So that’s your W two wages, commissions, bonuses, anything that’s deemed as a compensation to employees is kind of the first starting point. Then you go into what you’re allowed to add, what you pay for state unemployment taxes. So that’s in addition to the gross payroll amount. Interestingly, you’re not allowed to include the employer’s share of FICA and Medicare. So it’s those kinds of nuances that you’re walking through so it’s the gross payroll, it’s the state unemployment, it’s any health insurance premiums that the company’s paying in addition. It includes 401K matches, things like that. So all of those things get added up, then you, of course, gotta come down to the monthly average, and multiply it by two-and-a-half. The bill itself says it’s a 12-month look back. Some lenders are interpreting that for the last full year, so they want you to go January through December. For us, it was more advantageous to do April one through March 31, and it’s an example of how the SBA hasn’t said one way or the other. So I think, I think that’s when we started talking about why lenders are nervous. They see the 12-month look back. Do they mean 2019 full 12 months? Do they mean the, end it, for us it was the end of March 31. And then you’ve got the timing of the documents necessary to prove it. So I, for example, all our payroll runs through ADPs, so I submitted all our ADP reports and I can demonstrate through our bank account that the money came out, things like that. The other thing they’re looking for, though, are your payroll tax returns. Well, we brought our payroll, our 12-month look back, I went through March 31st. Well, the quarterly taxes returns aren’t due until April 15th. But we got our funds Monday. So, when the lender starts looking at “Okay, do I have everything I need in my file?” Which, by the way, the SBA hasn’t told me what I need yet, I’ve already put the money in Sun Title’s account. How am I gonna get this documentation and what does it mean and that kinda, so, so that, that’s just the start with the loan proceeds. Two-and-a-half times payroll cost. Once you get the proceeds, over the next eight weeks, you’re allowed to use those proceeds for very particular things. What you would expect: payroll costs, there’s interest on debt, which is pretty broadly defined. There’s rent costs, utility costs, a number of different things that you can use the funds for, but then the third calculation is what’s, what could be forgiven? So to give you that a nuance, you’re allowed to use the funds for interest on pre-existing obligations, but the forgiveness is only on interest on mortgages. So, on one hand, you can use the money for interest but only the interest on mortgages is allowed to be forgiven. And that kinda goes hand-in-hand with the fact that you can use, lease costs are another forgivable permitted use, so they’re trying to match up folks that lease property, folks that own property and that kind of thing. So, it’s kind of those three applications, or those three calculations. The documentation, so far, for the program has been shockingly limited, I mean, shockingly limited.
– It’s scary.
– The application has, it’s two pages, at least the last one we filled out. It’s basically how much is the payroll that you’re getting? You’re not a convicted criminal. And then a bunch of attestations that we calculated correctly. We understand that fraud’s bad, all the kinda things like that, then you signed it at the bottom. And that’s about it. And then, when the documentation came back over from the lender to actually document the loan, there was a Paycheck Protection Program promissory note, two pages, that was , so there’s almost nothing to that. And then some standard, I would call, loan docs, that kinda thing that the bank kinda threw in for good measure. So the documentation in terms of the loan documentation is pretty limited. I think where the lenders, again, are getting nervous is the documentation that they are requesting back from the company to demonstrate, number one, was the loan amount correct? Are you inflating that? And then of course, later, with the forgiveness. But, you can already start to imagine creative fraudsters out there and how that money could be diverted by if you’ve got a laser printer and Google, I’m sure you could create some ADP reports and payroll tax reports. So I think, a lot of the lenders are focused on customers that they’ve got good relationships with already. So that there’s already a level of trust. I think if you were to go to a lender cold, it might be challenging.
– [Tyler] Lawrence, what would you say were the biggest aha moments or if there was a takeaway that you could share with others in this process to kinda, to kinda then help them through, what would that be?
– I would say just the uncertainty to the lenders. We’ve got a great relationship with the loan officer that we were working with. And he would sheepishly come back to us and say, “Hey, yeah, another document change. “I’m so sorry,” that kinda thing, so so really, what I guess one of the aha moments I had was just the amount of leading you have to do with a lender to kinda work them through the process and, frankly, a fair amount of grace to give them on the process that they’re flying pretty blind, as well. So when they come back for more documents or they come back with more questions, and things like that is to kinda keep the, keep your own frustration level low. Initially, we were, one of the reasons we wanted to do it immediately, and really try to get out in front of it was there is, there’s such a high demand for it that you worry about the funds running out. And what we’re seeing is that there’s a tremendous amount of applications but not a lot of approvals yet, so if there’s folks out there that think it’s too late, it’s not; it’s not too late. I would say if you have an opportunity to apply for this, you should absolutely take advantage of it. The loan itself it has six months, no interest, no payments, nothing. There’s no personal guarantees. There’s no collateral. It’s incredible, so worst case scenario, if you’re able to get the loan, even if you completely foul up the forgiveness side of it, our loan priced at one percent.
– One percent for a two year note.
– One percent for two years and then you could amortize that, I think ultimately over 20 years if it’s not paid? So worst case scenario, you’ll have a note at one percent for 20 years, so it’s pretty cheap.
– That’s unsecured.
– That’s unsecured, by the way.
– Now, we’re probably thinking a lot like many of you on the call is that we’re not looking for a loan, right? We weren’t looking to go into the debt market to put working capital into the coffer, right? We were planning on having our reserves and our own liquidity, weather this portion, but once we dug further into it, the question here that was posed, and it’s a good one is what’s forgiven? And I think at 40,000 feet, what we understood, if you take all the media noise away from it, and you read the statute, what they’re trying to do is to say, “Okay, we’re gonna go through a rough eight week period “as a country,” right? That typically started the beginning or middle of March is when it really started to hit east coast west coast. “And we’re gonna pretend “this eight weeks didn’t really happen. “So what we’re gonna do “is we’re gonna make sure you’re able to pay “your people, keep current on your rent and mortgages, “keep the lights on, so that when you re-enter “after this eight weeks and hopefully “all the shelter in places have been lifted, “everyone’s still there. “The lights are on and the furnaces are working. “You’re not being defaulted on any rent “or other obligation and you continue operations.” That’s a 40,000 foot kind of view of this and–
– The four elements that are forgiven are payroll costs, so there’s a definition of payroll costs and it’s what we talked about already. It’s interest on mortgages. It’s lease payments and utilities. Those are the four components that can be forgiven, and again, in eight weeks, we’ll see what the what the due diligence is to prove that that’s what you paid. But that’s the amount that’s forgiven.
– Yeah, we have a really good question. What if I’m a sole proprietor? I think they actually contemplated that in the statute.
– Yeah, so right now, my understanding is the SBA is taking applications right now for employers that have W two wages. If you’re a sole proprietor or an independent contractor, it will be a little bit later that you’re able to apply, so I, absolutely talk to your lender as to the two stage application process, but the statute specifically contemplates independent contractors and sole proprietors in that same group; there was just an article that one of the senators just put in a bill or a proposal to take the funding from 350 billion, which was all, 349 billion, already approved for another 250 billion. What’s interesting if you do the math on it, the GNP of the United States is about 22 trillion dollars a year, and the stimulus package is at two point some trillion. If they put more money, it could be two-and-a-half trillion. So, they’re hedging that even if the economy went down 30 percent or so over the next two months, that the two point whatever it is 2.3 trillion up to 2.5 trillion, well it should make up for a lotta that. That’s where you get into some of the unemployment numbers and things like that, where folks on unemployment get an additional $600, kind of a flat, from what I can tell from the statute, it’s a $600 on top of your state unemployment. So however your state calculates unemployment, they just flat out add $600 to that paycheck, which, if, I think a lot of employers are concerned. I know I’ve got friends in the restaurant business, where you’ve got folks that are going on unemployment and they will make twice as much money on unemployment than they would coming back to work. And right now, there doesn’t seem to be a lot in the statute that would suggest that there’ll be a pull back from that, so when this thing does recover, and people are looking to get those employees back, it’s gonna be interesting to see who’s, well who’s taking care of, taking advantage of the new marijuana laws in Michigan and the like, right?
– [Tyler] Lawrence, incredibly insightful. That is great stuff. We still have a couple of questions, but we’re gonna segue into our next segment. And then we’ll hopefully answer any other questions that remain regarding the Paycheck Protection at the end. So, our next segment of today’s webinar is all about RON. So, we’re gonna take a quick minute for one more poll question of the audience. And here we go. Which of these statements do you relate to most regarding RON? I am already up and running with a RON solution. I am in the process of vetting RON software. I am still trying to learn about how this works. I am trying to avoid RON at all costs. All right. Great.
– I love that one.
– Yeah, that’s a good one.
– [Tyler] I’m sure if people could select two, they would also like that one.
– People would probably wanna select a couple of boxes, right? Yeah, I’ve already applied, and I’m also trying to avoid it at all costs.
– [Tyler] All right, we’ll just give it a couple more seconds here. All right, let me go ahead and close up the poll. And I will share the results. It looks like the biggest portion, 40 percent, in the process of vetting RON’s software. We got another 20 percent, or sorry, 33 percent that are still trying to learn about how it works. 20 who are up and running a solution. And eight percent that are trying to avoid it all costs, so with that, Tom, I know we’ve had a lotta customers of ours at CertifID and you’ve been, your email blowing up from underwriters reaching out to us to try to talk about sort of RON and hybrid closings. It seems like there’s different requirements in every state, and now these executive orders are coming in to sort of fast track RON. Can you help the audience just help make sense of what is going on?
– Yeah, so as Lawrence was trying to figure out the CARES Act, I was spending weekends reading all of the executive orders around the country to get a sense of what, what really is going on.
– I got a better, I got a better side of that deal.
– Yeah, I think you may have. Mind-numbing. So there has never been, I think, a topic hit the market or this industry so quickly as what RON did; and RON just kinda snapped into full view about two, two-and-a-half weeks ago. Essentially, there’s three things that you have to really get your head around to figure out what your next series of moves are. And I’m gonna use series, ’cause I don’t think it’s just one right now. Most states, if they have some type of a remote online notarization statute in place, they have adopted what’s called the MBA Alta Model Act. Some will refer to it as the NEIC Model Act. But essentially, everyone got together and said, “Okay, if, title companies, if you wanna close these “and we need to be able to sell and service these “on the secondary market from a mortgage lending standpoint, “we have to have a voice in this.” And most states, I forget the exact number, have either fully passed or passed but yet not yet made effective their version of the RON legislation, okay. Most of them, just know, require the use of a platform that’s pre-approved by the state. And what we found is that platform doesn’t separate the functionality or the activity of a remote online notarization from an E-Closing, fair?
– That’s one of the ahas that we had. So the challenge there just can, so let me go through that first. That’s the RON Model Act. Secondly, there was a kind of a makeshift federal legislative bill that has been proposed that would make lawful across the country RON closings, okay? That is, within the spirit of the Model Act but a little less restrictive from that standpoint. And then the curve ball that continues to come in is state-by-state, you’ve had the Bar Associations, you’ve had the Land Title Associations, and you have had the Mortgage Banking Associations approach the governors and say, “Look, we still have to have “the notorial duties and acts activated “but how do we do that in light of shelter in place “and social distancing requirements,” that in some cases like Michigan, is a misdemeanor crime if you violate them.
– So now, you’re taking the notary out of the face-to-face by law and saying, “Look, if you’re non-essential, “then you have to figure out another way.” And the governors, and I’ll be very candid, they just basically said, for the most part, “Whatever you’re doing in the closing room, “you can go ahead and do over a recorded online session.” But what quickly developed in that was the underwriters and the Mortgage Banking Association saying, “Look, that’s not good enough “for “us to be able to ensure “from a closing perspective of the underwriter “and to be able to sell and service on a secondary market “once the loan is closed through this type “of remote online notarization signing.” So, I at best right now, it’s a box of chocolates. I think what you really have to do is look at one, has your state adopted the Model Act? And then quickly pivot to whether or not there’s a proclamation, there’s an order, there’s some type of gubernatorial message or a lot of them are doing it under the disaster or the crisis response to COVID that they’re loosening up the, they’re loosening up the reins there. But this is the, this is a significantly important moving target right now. ‘Cause we have to get the loans closed. We have to get these deals done.
– [Tyler] So Tom, what do you think are, what do you think the underwriters are most worried about or how should title companies be thinking in order to make sure their policies will get underwritten?
– Yeah, so, so here’s some things that and some questions that you need to ask or some takeaways where you need to, you need to really focus on. One, the underwriters first and foremost identify verification and security. So now, I don’t have the luxury of even five minutes face-to-face with somebody. I have to rely on this distancing socially through technology and we’re relying on a driver’s license that’s held up to a camera and documents that may be shown after they were signed. How do we know they weren’t altered or doctored up or something like that? So I think identity verification and security. The other is legal compliance. Will the Register of Deeds, this is a very important one, guys.
– Big disconnect, big disconnect.
– Big disconnect in the Register of Deeds; you have to understand county by county, will they accept a digitally signed document? And if not, you’re back to papering out the whole thing, getting wet signatures, and probably back to your notary statutes for compliance, wouldn’t you agree?
– Yeah, this, I mean it’s, Michigan’s a good example. So we’ve got the RON Model Act passed. But within the act, there were basically two major statements. One was the fact that the Secretary of State, who oversees the notaries, had to come out with regulations and rules and things like that on, for the Registers of Deeds on how to evaluate them. But, at the same time, the statute said, “Regardless of that, “Registers of Deeds, you have to accept this “if you e-record.” So what you have is you get into these Registers of Deeds, where someone’s worked there for 30 years, they don’t understand the statute, they’re waiting for regulations from the State and they’ll refuse to record the document even though the statute says you have to record the document. So, you can only do these in counties where they e-record; you gotta make sure that the staff at the Register of Deeds will accept it. So there’s a big disconnect there and the other side of it is just state law on the promissory notes.
– Yeah, the promissory notes. The other legal compliance, some states even under the executive orders require you to provide notice to the State that you are going to be performing notorial acts through a digital or distance remote platform. So that’s another one when you talk about legal compliance; you gotta get into the weeds a little bit to make sure that you’re checking all the boxes, that it can’t be challenged later. Underwriter approval, so we’ve seen a lot of underwriter bulletins over the last seven to 10 days. They’ve been somewhat inconsistent. I think they’re doing their best because each state has a little bit of a different framework on how they’re approaching this but making sure your underwriter approves. The one that isn’t being talked about that we really need to think about is our insurance company and our E and O. So, we have very specific requirements in the triggering of coverage in those covenants on how are our notorial and our witnessing duties are performed, and if we go outside of that, I would simply be letting our insurance carrier know this is what we’re doing and have them write back to us that, “Yep, we know we’re approving this format “right now for the time being while we’re in “shelter in place,” give yourself some cover on that. And then the other big one is the mortgage banking industry. So, the governor can say whatever they want. I think everyone would agree on the call that up until now, RON was much more of a lender driven issue than it was the title industry really trying to grab hold of this and distance everyone. But the mortgage banking industry if anything, we’re seeing a little bit of a hesitation to fully lean into this. Because I think of the, the ricochet of 2008 through ’10 where we had all of the mirrors and the mortgage mods that had to take place, so, again there’s a multi party constituency that has to line up before you just start firing up a Skype and having somebody sign documents remotely.
– [Tyler] Lawrence, you spoke a little bit about what’s goin’ on in Grand Rapids and Michigan specifically. How have you, at Sun Title, decided to approach this RON issue?
– Well, I think the RON issue, we felt like we had to get set up on a platform to do the RON. If for nothing else, it’s accelerating that opportunity. The challenge that we’re having with RON, though, is they’re, again, getting back to these disconnects, the RON only works if you’ve got state law and the likes lined up for the promissory note. In order to do a fully RON closing, you have to make sure that the lender is participating in some type of a what they call an e-note program. It kind of reminds you a little bit of MERS going back to the 2008. Remember MERS was the Mortgage Electronic Recording System. That idea was about assignments of mortgage. So rather than recording mortgages over and over and over in the Register of Deeds, you would use MERS to kind of do it behind the scenes. The RON issue with promissory notes is very different. A promissory note, just really quick, goes back to English law, way back where you have an original promissory note. So, whenever you sign a mortgage, do a transaction, and you sign one of the key documents as a promissory note, it’s not notarized or anything like that; it’s just signed by the borrowers. But it’s called a negotiable instrument. And it’s treated like that under what’s called the Uniform Commercial Code, which is pretty much across the country, state driven, but it’s the Uniform Commercial Code that everybody follows. And so, this promissory note, being a negotiable instrument, is looking for that wet signature on the ink, ’cause there can only be one original. I was thinking back, if you even seen the Scrooge movies, right? He was walkin’ around with his little book. And he would put peoples’ debts down, and they’d have to sign it, right? Well, that’s what we’re hearkening back to. It’s like the 1800’s, well you don’t have a book anymore but you got this original promissory note. So the question is this, what do you do with this supposedly original, original note? So, there’s this thing called EVault that some of the lenders use, where you electronically sign the note and it goes into what they call this EVault. It’s a complicated system, but the idea is it goes into there and it’s it’s considered an original. But most lenders are not signed up for E-note, so what does that mean? That means all of these RON closings with the benefit of being completely distanced with no interaction, doesn’t work because at the end of the day, I’ve gotta send the note to the borrower, have them sign it, and send it back. So there’s still despite all of this talk of a remote online notarization, you still end up with a document that needs to be signed with a wet signature and sent back. So that got to be challenging, so when we were looking at that, we’re going down the road with RON and we’re hooked up with a a software vendor that does it. If any of you have already signed up for it, you can see just how challenging some of these systems are. I’m not sure the folks that created the systems were title people, and understood how this all works, but it’s, it’s a, they’re challenging systems to say the least. What we ended up doing, though, is looking back at our current state statute for public notary acts. And it was actually a little bit surprising that we can do things that we generally think about before that really weren’t asked for under the current act; so I’ll give you an example. Under Michigan law, there are two types of notaries that you have to, that you do. When you’re a notary and you’re signing someone’s signature, you’re doing one of two things. One is called, and again, this is under Michigan’s act, but many other states have the same act. You should look at yours. But under acknowledgments, I am simply acknowledging the signature. So that means that someone can sign the document outside the physical presence of the notary. Ultimately, when the notary goes to get the document, they can say, “Look, I’ve signed that. “That’s my signature.” So that’s called an acknowledgment. So it doesn’t have to be signed in the physical presence of the notary. The other type of notary is what’s called an attestation, more of an oath. So if you look back into a loan package, one of them might be the name affidavit. So, you’ve got your name at the top and all the different names that you went by, all your aliases or whatever you happen to be, right? And the idea is now I’m attesting, I’m taking an oath that everything in this document is correct. So that has to be signed in the physical presence of the notary; that pen has to go to paper while the notary is watching. Well, if you look at a standard loan documentation or any standard document set in a transaction, there’s only a couple of documents that require that higher level of in-person signature. It’ll be of surprise to some people, most deeds, mortgages, those are acknowledgments, not attestations. So we came up with what we’re calling remote mobile notarization. So the idea is, it’s still a completely physical package that gets sent to the person signing, so you overnight the package to them. You create a GoToMeeting, something like that, and you walk through the package with them, and they sign virtually every document in the package. ‘Cause some signatures don’t require any notarization. If you look at the promissory note we talked about, you look at the government forms, things like that, they don’t require any notarization. So they just sign all those as you’re walking through it in the video. The next thing is the acknowledgments. They can sign those while you’re having the video chat, and then you just simply highlight the two documents or so that require the attestation. And then, you have notaries roaming around. They go to the person’s house. You set a time to pick up the package. And then, whether it’s through the door, through the window, through social distancing, you watch them put those last two signatures on the documents. And then they say to the notary, “All these signatures “are mine,” that covers the acknowledgments, and you’re off to the races. So you’re not passing the documents back and forth. There’s one to transmission the documents back. So why is that important? One of the challenges that we’re having is the lenders are not able to change their process and procedures as fast as what we need to in this eight week period of this lock down. So, they’re trying to catch up, so the question is, “Well what can we do “to still maintain social distancing “but yet allow for the physical package?” Because from the lender’s perspective, the way I just described it where I send the package, we sign everything up, we notarize, it’s fully compliant with the, call it the old notary act before it was amended to account for RON. So from their perspective, they’re getting a fully wet signed package back, fully and compliantly notarized, and it comes back to our office. So it’s a, it was a way that we developed that we could still sign all the documents. Some of our clients really like it because take for, in Michigan, I think most of the states, the real estate community was deemed non-essential so they can’t even go out. So the question becomes, “Well, how do, if I’m a realtor, “how do I participate in the transaction?” Under most of the RON platforms, it’s only the notary and the signer. There’s no opportunity for anybody else. Well, with the remote mobile notarization, we call it RMN, with an RMN, it’s a GoToMeeting. You can invite the lender, you can invite the realtor, you can invite anybody you want. Now everybody gets to participate. They can answer questions, they can talk to each other, they can do all these different things. It feels a little bit more like a regular closing. And our clients love the relationship aspect of it. So, under the RMN program, you kind of get the best of both worlds. And because it’s fully compliant, the lenders don’t have to change anything. When they get the package back, it looks just like a regular package.
– Yeah, and we’re not under an executive order in Michigan so it’s really important to note this, that if your state does have an executive order, you may have the ability to even avoid the need to pick the package up.
– You’re talkin’ about a notary executive order.
– I’m talkin’ a notary executive order, where now the governors are saying, “Look, you witnessed their signature, “and you have that recorded. “They can send that document back to you.” Most of them require it to be sent back the same day or next day, and then you’re able to basically ascribe the notary, you’re able to finish the attestation as if you were present, and then the executive order says, they basically say, “This is in replacement of in-person “contact or communication.”
– And that brings up the challenge, right, is that the governors don’t know how the title, shockingly, right, they don’t understand title, they don’t know what we do, right? So they’re passing these orders and they don’t understand that at the end of the day, the underwriter’s gotta agree to it, so the underwriters might see this executive order and say, “Look, I don’t care “what the governor says. “You’ve gotta have some in-person contact.” And I think it’s important as much as I’d like to believe that we’re the most important industry out there, even with these notarization statutes, it’s designed for all notarizations, right? It’s designed for notarizations for attorneys and estate planners and banks and all these different things. Title is just a blip on there, and they don’t understand how our industry works.
– [Tyler] Nah, I love it. Apologies to those of you still on. We are running a little wait, but we figured that today was really important so we’re gonna continue to roll on through. Lawrence–
– Yeah, I wanna answer two questions that, two questions that came in, Tyler. One was in Georgia. Again, the hybrid is you witnessing, again, if you’re able to do this under the executive order, witnessing the signature remotely and then having the ability to ascribe the, to complete the jurat with the notary signature and seal as if you were present. That’s the hybrid right now.
– That’s the nuance, yep.
– That’s the nuance. Somebody’s mentioned is the iVault technology similar to block chain so that it’s tamper proof. We can’t speak to that. The nice thing about this, guys, if you really wanna go full RON, you have to get with your key lender customers. They have to set up their own iVault. They have to digitize the documents that they have and, essentially, they would, in most cases, we learned, set the order up, and then pass it over to you as title and settlement to then affix your documentation, your closing agreement, the final closing statement, whatever it is, and then that ends up being the full doc-pack, so–
– I think it’s important that we remember, RON, one of the biggest purposes of RON had nothing to do with social distancing. It had nothing to do with, as much as they might talk about the fact that, millennials are really into this idea of remote closing, that’s not what’s driving RON. What’s driving RON is, if you do a fully RON closing that has the promissory EVault, so that you’re recording the documents within 24 or 48 hours, all of these different things, that allows a lender who’s selling that loan as part of a portfolio, it advances the sale of that portfolio by two to three weeks, right? So, that’s what’s driving RON. By doing a fully compliant RON electronic closing, a lender is able to sell that loan two to three weeks earlier. Why does it matter? It’s the cost of money; it’s the time value of money. They avoid paying the interest and the cost of reserving that capital for two to three weeks. They can redeploy that capital much quicker, and they’re getting a much quicker return on it. So that’s what was driving RON. And that’s why the lenders were a little bit hesitant because title companies really weren’t asking for it, borrowers really weren’t asking for it. It was kind of a, I don’t wanna call it a money grab, but it was kind of a money grab, right? The idea is, if we get this right, we can sell ’em two or three. Well now, we’re trying to jam this social distancing into the RON program, and it’s just, it’s way more involved than what you can do typically in two to three weeks.
– Well, and particularly if you do commercial, if you do construction, they are at split closings. There are edge cases that we found ’cause we have been at the deep end of the pool on this the last two weeks as we went into shelter in place. Just make sure you’re really thinking about your work flow and the full transaction profile that you have across all deals because we didn’t see it as a one size fits all, at least to start. We’re goin’ down the path.
– Yeah, and that’s what I loved about what you guys really came up with was this what you called the remote mobile notary solution. So I mean, we even, Tom, you and I have been noodling at this about CertifID of could we actually create a product to help facilitate sort of a hybrid closing, if you will, where it would take the benefits of CertifID and the full identity verification to ensure you’re actually following necessary measures to protect the transaction and meet the requirements but then just start a video chat that would enable you to watch the wet signing of the document.
– [Tom] Yeah, our question was simply this. Lawrence and I, we had our whole team. We worked around the clock the weekend before shelter went in place, we kinda had a tip that it was taking, that it was gonna go down, and we said, “Well, what if,” right? “What if we could develop a platform,” and we’ll talk about how CertifID interacts with this, but “What if we could develop a platform “where we had all the security, and we had all the trust “but we took the closing experience in person and we just simply moved it into a digital landscape where everyone could, everyone could benefit?” Maybe you can speak to what the customer and our referral partner response has been.
– Yeah, it’s been, it’s been shocking how quickly it’s been accepted. I think, if we had tried to roll out an RMN solution six months ago, I think there would have been more resistance and a little less interest because, yeah I wanna see my client, I wanna show up with my client, and that kinda thing. But now that we’ve got this requirement in place, all of a sudden, this technology of being able to do this closing still with a physical package, but the beauty is if you use the right platform, not just the notary and the borrowers show up, but all the parties to the transaction can show up. And so, that, as you know, if your client base is anything like ours, our realtor clients, they live and die by referrals, and that closing experience is a big part of it; same thing with lenders. So we’re seeing this as an opportunity, not just while this shelter in place is going on, but we’re seeing this when everything turns back to this new normal. We’re gonna continue to use this, because it’s a time saver. It kind of, it scratches the itch of if it’s truly the millennials and others that are tech savvy that wanna do that, it’s an opportunity to still do that. Again, lenders don’t have to change any of their programs. I don’t have to do anything different with the Register of Deeds because it’s all wet signed signatures; I don’t need a special executive order from the governor. In all likelihood, your notary statute in your state follows this exact structure. So you can do all of it at the same time. The only caveat we’ve had as we go through this is any concern about the identity side. So how do we, how do we incorporate some type of identity verification into our system so that when they get the video link, they’re able to confirm their ID. ‘Cause you can hold your driver’s license up and that’s certainly part of it, but we’ve all see the frauds out there with fake IDs and all this kind of stuff and it gives all of us anxiety as we’re paying off these large mortgages and the like. So how do we take this idea of using our ancient notary statute, our ancient Register of Deeds, wet signed signatures, but then adding this technology component to it, and that’s where I think we came up with what we were moving.
– Yeah, exactly, we’re enabling–
– [Tyler] That’s a great segue. We’re actually gonna launch a little poll because we’ve been noodling this at certifID exactly what Lawrence just mentioned. We’d love to know what you all on the line think about a solution like that. So, if a hybrid closing solution were available, essentially a wet signature over secure video chat, that you could have full identity verification, is this a solution that you’ve already implemented, a solution you might be interested in using, a solution I would use right away if it were available, a solution that does not feel like it would meet your needs or I still don’t understand how this would work? And, we’ll just give a couple more moments here. And great questions comin’ through. Really appreciate all of the interaction from the audience; it’s been fantastic. All right, so we’ll go ahead and end the poll right there. And I will share the results. So it looks like we have about 37 percent that said a solution I might be interested in using. 34 percent said a solution I would use right away if it were available. And then about 18 percent that have already implemented a solution like that, so that’s great. Looks like you guys are on to something there, Lawrence and Tom.
– Necessity is the mother.
– Great, nothing like a good old fashioned pandemic to get you to innovate.
– To get the wheels rollin’.
– And it’s crazy.
– All right, we’re gonna do a little bit of a lightning round here to try to close this out. We’ll try to fire through some questions that we had gotten previously and then continue to answer any more questions that come in, so we’ve obviously covered PPP. We’ve covered RON, two of the hottest topics in the industry but I want to ask you a couple more. So Lawrence, Michigan was one of the first states to go under shelter in place requirements. How has that affected the business at Sun Title?
– I would say for deals that are, were already in the pipeline, those continue to close. They’re using our RMN solution, so they love it. The feedback we’re getting from customers and clients has been really, really positive, so easy to use, they understand the why, they love the ability to space, so the ones that were already in process are closing, purchase transactions, refinance transactions, that kind of thing. With the lowering of the interest rates, we had already seen a huge influx in refinance transactions and frankly we were about to go into this April, April market, with all the purchase transactions coming online with all these refinance transactions, so it was, it was a bit overwhelming. The shelter in place went in, and we have seen a, as you can imagine, a significant drop on the purchase side. So, in our state, and I think many states are the same, the realtors are, because they’re deemed non-essential, they can do video showings and things like that but if anybody’s bought a house, you wanna walk-through, you wanna touch the countertops, you wanna see the house, right? So the number of purchase orders that we’ve seen has come done dramatically. They’re still trickling in. I think if anybody goes down the expressway of a state that has a shelter in place order you’re wondering how all these people are essential services. I got passed by a Molebusters car the other day, so apparently that guy is an essential service right now. So I think we’ve got a lot of clients that are looking at it saying, “Look, I know I’m not essential, I’m not supposed to go out, “but I’ve got a buyer that wants to see this property. “I’m gonna show it.” So there’s a little bit of that going on, I think. So we’re still seeing some listings come through the multiple listings service. We’re getting some of those orders but largely, it’s been a tremendous shift into the re-fi side, which in itself has its own challenges, whether they were in process or new, we’re seeing more documentation coming through in the closing package where the borrowers have to sign an affidavit that their employment hasn’t changed, that they’re still receiving the same income, that kinda thing. But for the most part, the refinance business has continued to be strong. Again, it’s the, the hard part, I think, is trying to move people to more of a digital platform. We still have closings in the office, so we’ve got a lot of protocols in place in terms of how visitors are welcomed into the office and everything’s cleaned down when they’re done and the questions you ask when they walk in, and it’s a bad, you don’t wanna walk into the office and cough, right? And of course, it’s allergy season in Michigan and everything else so everybody’s pretty hypersensitive to it, but that’s probably been the biggest impact, I would think.
– Well, I would say the–
– Tom, what about you in terms of what you’ve seen via CertifID. So as far as people’s willingness to adopt new technology during this time of social distancing and sorta how they’re thinking about security. What is your sorta insight from that role?
– Yeah, I think it was an immediate wake-up call as we had to move our teams, as companies move teams into the home. I mean, once schools shut down, it was an immediate need there. And then the shelter in place rolled in, so I think there was a much more kind of acute lens that was focused in on the security of the infrastructure of the company, how they’re connecting, what devices, updates, things like that. But then, if you looked at recently the Better Business Bureau, the FBI, the FTC, Secret Service, everyone’s put out bulletins around social engineering, business email compromise. One of the biggest trends that we’re seeing develop, unfortunately, is cash-out refinance wires that are being diverted, so as we have one of the biggest refinance cycles since the early 2000s and then again between ’08 and nine, we’ve got called into to help in several where you think you’re paying off after the rescission, the however much they’re taking out in equity from a cash-out and it’s actually a fraudster that somehow infiltrated the communication and is redirecting the wire, so be very careful about that. In our business, just to speak to CertifID, and I think with anybody in information security right now, we had just a flood of people looking at it saying, “Okay, the last thing we need “right now is a wire fraud in amongst “all the other stressors that we’re trying to develop,” so we’ve been, we’ve been having a really good influx from a customer standpoint.
– Lawrence, what about you? You mentioned the the use of technology to help you with these remote mobile closings, but has there been any other sort of technology that has helped you kind of cope with social distancing within your own business?
– I think it’s been a combination of things. So one of the challenges that we’re always concerned about is this email compromise and the like, so we’ve been using GoToMeetings and things like that in order to transmit that, but that’s one of the things where we’ve been working closely on this CertifID solution, where we can, we can start embedding those links and such behind a system that verifies the identity and everything before we even get started. So that from a technology standpoint, it’s a, we’ve been fortunate. Title is not exactly one of the fastest technology adopters that you’ve ever seen out there. But my staff, as they’re looking at this whole thing, it’s been amazing how quickly they’ve adapted to these digital video closings, looking at more opportunities to verify identity, things like that, so I think it’s been kind of a light speed jump into more technology acceptance just out of necessity.
– Got it. We just had a question come in around–
– There was a question on the Paycheck Protection Program that if you have multiple entities, do you apply for one or each separate entity? As we understood it going through it, it’s strictly payroll record driven, right? So it depends on where, if you’re leasing, you maybe can take this one.
– Yeah, there’s some exceptions, so the general rule on the program is you have to have less than 500 employees. And they really don’t get into where those employees are located or anything. It’s a very broad test for payroll cost but you gotta have less than 500 employees. Where you start getting into location and branch questions is if you have over 500 employees but they’re at different locations, different areas. Then there’s a whole ‘nother analysis that you can do to demonstrate that even though I’ve got more than 500 employees collectively, I have less than 500 employees at these various locations and then there’s ways to apply for it there. So that’s where you get into the branch area office locations, but that’s another example of the challenges that the bankers are trying to figure out is how, okay, how do I do that? I know I’ve got someone applying for a loan. They’ve got 1500 employees. They’re giving me evidence as to where they’re located and the SBA is just like, “Ah, we’re not sure yet.” We just had another one come in; it says, “My worry with RMN “is that if you are getting random mobile notaries, “they may not be comfortable notarizing documents “they actually,” or “they didn’t actually see “the signatures; have you ran into that?”
– We haven’t. I think if, I think most of us, and depends on your geographic area, right? So, we’re in west Michigan here so we do most of our closings on the west side of the state; we’ve got good relationships with mobile notary companies that have multiple notaries within them. So we made sure to communicate to them how this works and why it works and that kinda thing. So there can be a little bit of education in advance that you can do. I think if you get a random notary that is not told how this is gonna work I think that’s challenging, but I think you’d have to communicate to them anyway, if for no other reason when we contacted the notary companies that we work with, we explained to them that, “Hey, this isn’t, this isn’t gonna be a full sit down notarization “of a closing package.” So it’s not gonna take you an hour-and-a-half. It’s five minutes in the driveway. So if you were charging me 100 bucks before, it’s 50 bucks now. And they’re welcome for the business ’cause their business is slowed down, so I think there’s a kind of a, there’s a two-fold conversation that you’re having is one, let’s negotiate these prices a little bit ’cause you’re not doin’ the full, the full package, but also, “Hey, this is how it works. “This is why it works,” and so forth.
– But I think for us, we were way ahead of the communication so bringing the lender, bringing the real estate broker and agent, bringing if we have the third party out and use a resource like that, as long as you kinda dissect why this is compliant in the way that this works, we haven’t had any pushback. There was a question on the PPP, is it forgivable or is it, if the debt is forgiven, is it taxable, and I think you found specifically in the statute they waive–
– Not, the forgiveness of the loan is not taxable. So it’s a, I’m a recovering lawyer and former CPA, so I was walking through my mind with my controller on how we were gonna book this thing, right? And it’s a book to cash and a book to loan, but when they forgive the loan, it’s gonna be weird, right? We’re gonna reduce the loan amount and it’s gonna go into equity. It doesn’t hit the income statement at all. It’s just, it’s bizarre.
– [Tyler] Hey guys, well this has been absolutely fantastic. We’re about to hit the top of the hour. For those of you who joined, we really appreciate it. Hopefully, we were able to answer all of your questions. We did see quite a few come in around our hybrid closing solution and how we’re sort of thinking about that. Feel free to reach out to us if you’re interested in that or if you’re just interested in finding out how CertifID can help protect you from wire fraud, especially during these times of social distancing. You can reach out to myself or Tom or directly to our channel at email@example.com. We really hope you enjoyed the the conversation and Lawrence, thank you, really. We really appreciate your time and insight. It was awesome to have you on today.
– Had fun, yeah.
– I wanna underscore one thing, Tyler, before we wrap. I think if anything that we’ve learned, and look, guys, we’re human like everyone else. We have employees that have good days and bad days. There’s so much change that took place in such a compressed amount of time. This was nothing like ’08. I mean, we were able to grow the business through ’08, but this has a whole different framework. One of the things that we did find is that our team, our referral partners, even people that maybe weren’t doing business with us, that maybe now, they were just really, they’re wanting honest communication about what’s going on and how we’re reacting to it. And I think, don’t underestimate your impact or your voice within your marketplace of how you’re thinking about things and what you’re doing in response and be humble enough to get feedback. When we were approaching RMN, we asked the underwriters first, “Hey, confidentially, “we need to show you something that we’re “about ready to launch in a few hours. “And we need your blessing “on it,” and the same thing for customers. ‘Cause I think the companies with the grit, the companies that pivot to solution, the companies that are really clear-headed, and are looking to execute in ways that make sense not only for now, but some of the things that we’ve developed
– Yep, that’s exciting.
– going forward, both in CertifID and the Sun Title operation. I mean, I’m not saying that whatever, this is a horrible tragedy globally, but I can tell you from the seat that we’re in right now, we’ve had a lot of learnings in a short amount of time, and I do think the way business is done going forward is on a different path. And it’s on a path to more efficiency and more tech adoption. We’re proving that we can all, we don’t have to be in an office right now. And the work’s still getting done and the orders are coming in. So, I just wanted to underscore that. That’s what, and I don’t know if you wanna add anything to that.
– Yeah, I was joking with my family; I was just excited that we were identified as an essential service. Nobody knows what we do or how we do it or what role we play. But we’re essential; at least, we’re essential. We’ve known it for years. But it’s nice to get the U.S. Treasurer, or U.S. Treasury Secretary to say you’re essential. Thanks, now just tell ’em what we do.
– [Tyler] I love it; well, thanks again, guys. Really appreciate it, and thank you all that joined. We’ll be hosting the recording on our site if you need it, and have a great day.
– Thanks, guys,
– Take care; be safe.