Counsel’s Corner: Here is What Smaller Title Companies are Up Against

Lawrence P. Zielke

Lawrence Zielke is the managing partner of the Minnesota law firm of Shapiro & Zielke, LLP, and president of the First Financial Title Agency of Minnesota, Inc. Zielke has practiced law for 31 years, of which the last 25 have been spent in the default services industry. He has been a guest lecturer on Minnesota foreclosure law at various CLEs and industry events. Zielke recently discussed with DS News the challenges his title company is facing as well as the foreclosure laws in Minnesota.

What challenges are facing the title industry?

I spend a lot of time working with both companies, the law firm and the title company. The thing that keeps me up at night is wire fraud, because one huge wire could mean economic devastation for a title company. So we make sure that the controls are in place there. We work closely with our bank, too. But beyond that, for me in Minnesota, the challenge is competing against captive companies. We have some very large title companies in Minnesota that are captive companies to real estate brokerage houses, and so the rest of us who are not affiliated with a realty house are competing for a smaller piece of the pie. From a business standpoint, that's probably my biggest challenge—how do we increase market share? Because the REO inventory has diminished in numbers over time, we have begun to emphasize diversification. We are local-facing now—we are not just an REO title company now, but we are REO, traditional sales, purchases, and refinances. We've had some success in that, and we intend to keep growing locally so we'll be both a national title vendor and a local one. Trying to diversify our businesses is my biggest challenge right now. We’re going up against these captive companies that carve out such a large share of the market. But we're competing, and we compete on service and quality work.

The foreclosure laws in areas like Florida, New Jersey, Nevada, and New York have all been talked about quite a bit since the crisis, but we haven't heard much about Minnesota. What is happening with the foreclosure landscape there?

A couple of things. In terms of default rate, Minnesota has the lowest, which is good for the state but a little challenging for people who are in default servicing. The other thing is that we do have a state statute that deals with dual tracking, and it is similar to the CFPB rules but slightly different. So that creates a little bit of confusion and it does provide fodder for consumer lawyers as a litigation tool. We have to be very cognizant of dual tracking and to communicate well with our clients if we suspect that there may be some dual tracking issues.

We're a non-judicial state, so we'll probably never get the attention that a Florida, or a New York, or a New Jersey would get. Every file in judicial states is a potential litigation file or counterclaim, whereas our litigation a lot of times is coming in at the eviction stage once a foreclosure is done. Sometimes TROs will attempt to stop the sales, but we do see more litigation than we used to. We had one attorney in particular who was abusive of the system who has been suspended by the state board of professional responsibility and the Supreme Court in Minnesota. He filed a lot of abusive cases against both servicers and the foreclosure firms, and all the default firms were victimized by frivolous cases by this attorney. Despite numerous chances and warnings from both federal and state courts, he insisted on filing cases with frivolous facts and not using appropriate law as a basis for his cases, so we were relieved to see that he had been suspended from the practice of law.

Editor's note: Click here to read Zielke's feature, Tackling Title: Professionals are Well-Positioned to Face the Industry’s Challenges, which appeared in the February 2016 issue of DS News magazine.