LIKE THE STARSHIP ENTERPRISE, STEWART Information International Inc., a subsidiary of Stewart Information Services Corporation, Houston, has been going where no modern title company has gone before. In markets as far away as the Czech Republic and Poland and as close to home as Michigan, Stewart has created new books of business for itself by examining local real estate markets to find and then fill gaps in the sales, title or mortgage process.
The key to these successful global initiatives has been Stewart's ability to read a local market, design a product to fit a gap in the market and then convince local players that the product will work in their market. It's a process that's worked for Stewart in many regions:
* In Poland, where it can take a year to register a title change, Stewart created a title product that protects the lender's mortgage registration priority during that gap time;
* In the country of Georgia, Stewart surveyed, mapped and recorded more than 2 million land parcels in only two years to create a system of private property;
* In Central America, Americans who wanted to finance the purchase of second homes were unable to find funding until Stewart created a mortgage product targeting this now growing market; and
* In the United States, Stewart helps Native American tribes navigate passage through a bureaucratic title system run by the federal government.
An ancient system
At the heart of every mortgage transaction is a title surety or guarantee system that can be trusted to deliver accurate information about the property securing the lien. Without that guarantee, a lender can't be sure its loan is secure.
In America, that information is typically stored in electronic format. In modern Poland, lenders must rely on land titles recorded in the Perpetual Books, a manual system established in the late 1800s that has changed little in the past 100 or so years. These handwritten ledgers reflect the country's history, and to track a change of title you'll often have to translate multiple languages--including Russian, German and Polish.
"To say the least, it's quite a challenge. The biggest challenge is the time delay in getting a new purchase, a mortgage or a lien registered in the Perpetual Book," explains Tomasz Klodowski, managing director of Stewart International Sp. z o.o., Warsaw, Poland. How long is the gap? One of the primary lenders in Poland recently told Klodowski that 10 percent of its mortgage portfolio is more than 12 months outstanding for registration. Despite those challenges, the mortgage market in Poland is booming. A half-dozen years ago, volume was nearly zero. This year, volume will likely hit $1 billion per annum.
Warsaw has more title challenges than just its pen-and-paper title recordation system. After World War 11, 85 percent of the city center was demolished. To accelerate rebuilding, the city fathers communized properties under the government. The former owners were given a window of approximately 12 months (called the Warsaw Decree) to make applications to reclaim their land in 1945.
"As a result of the number of families dislocated, killed or deported, especially Jewish families, there were a lot of families who were not aware of what was happening, "Klodowski says. "If you can imagine your family had a large plot of land in Warsaw in 1939 and the city took it over, it could be worth $5 million or $10 million today. Additionally, many people who complied with this Warsaw Decree and had their claims rejected are now trying to assert their rights of ownership. It's interesting, to say the least, and creates both challenges and opportunities for the title business," he adds.
While Stewart can't help the city leaders resolve their restitution issues, it has developed title products to assist in both ownership surety (title guarantee) and registration challenges (gap insurance). …