Stacy Mestayer Featured on HousingWire’s ‘Ten Minute Talks’ To Discuss Alita’s Alternative To Traditional Title Insurance

Recently, Stacy Mestayer, President of the Alita Group, was invited to share her insights on HousingWire’s ‘Ten Minute Talks with Diego Sanchez’. In this discussion, Stacy delves into the innovative alternative Alita Group offers to traditional title insurance, detailing the development and potential of the insured attorney opinion letter product. Watch the video below or read on to explore her enlightening conversation with Diego.

Introduction of Stacy Mestayer and Alita Group

Stacy provides a brief introduction of herself and outlines the genesis and mission of the Alita Group.

Diego Sanchez:

I’m so glad to have you on, especially for this topic. But before we dive in, could you give a 60 second introduction of yourself and the Alita Group?

Stacy Mestayer:

Absolutely. So my name is Stacy Mestayer and I am the President of Alita Group. 

My background is in law. So I’m an attorney. I’ve been practicing law for more years than I’d like to admit, but I started in corporate law and then moved into being a general counsel for a law firm and we had an affiliated title company.

So that’s sort of where this attorney opinion letter opportunity came up. My law partner at the time basically said, what if we do this? 

I did not have a background in title. So I was literally the only person that thought, well, this seems like a reasonable idea. So let’s try it out. So I really just went and figured it out.

And I think kind of that naivete and lack of information about how title insurance really worked was what kind of drove me to do this. And so a few iterations later, here we are.

Alita Group is relatively new. We started the company as a technology company. We created the attorney opinion letter product and now Alita Group is setting out to create a market for it by enabling providers to provide it to their end user clients.

The Need for Alternatives to Traditional Title Insurance

Stacy discusses the limitations of current title insurance models and explains why there is a pressing need for alternatives.

Diego Sanchez:

So from your perspective, what’s wrong with the current version of title insurance? And why do you think that we need alternatives to that product? 

Stacy Mestayer:

A bit of a loaded question, but again my background is not in title. So, I feel like I come at it a bit objectively because I don’t have this long, long history.

I mean, I’ve been working on this for four years now, but prior to that, I didn’t really have a lot of background with title. 

Looking at it, title hasn’t changed a lot in the 150 years that it’s been around because it hasn’t had to, and I think that’s really the bottom line. 

Processes have gotten better, data has gotten better. title insurers are benefiting from those efficiencies. I think title agents are benefiting from those efficiencies when they want to. 

Consumers are not benefiting from those efficiencies. And I think that’s the problem, it’s that the business model is simply broken. 

I think there’s a disincentive to pay claims. Because of the way that the commission structure is set up and I think that there’s really just a general disincentive to become more efficient because there’s really not a reason to, again, it hasn’t changed and hasn’t gotten better because no one’s forced it to do that. 

Explaining the Attorney Opinion Letter Product

A deep dive into what makes the insured attorney opinion letter a unique and beneficial alternative to standard title insurance.

Diego Sanchez:

All right, so please walk me through this attorney opinion letter and how it compares and contrasts to the status quo title insurance product.

Stacy Mestayer:

Sure. So, I think the first and most important point is that not all attorney opinion letters are created equal. 

There’s lots and lots of information being circulated around, especially by ALTA. And a lot of that information is sort of based on a traditional attorney opinion letter and how it operated.

And when I say traditional, I mean the attorney opinion letters that existed prior to title insurance 150 years ago. So that’s first.

What we’ve created is an insured attorney opinion letter. So there’s an insurance wrapper around it that is a transactional liability policy, and it is intended to operate very similarly to title insurance.

So process wise, it’s very similar. Coverage wise, It’s very similar. 

There are a few minor differences as there have to be because we’re not selling insurance and we’re not providing insurance. 

We’re selling an insured product, which is a very important distinction. 

So, it is very similar in its coverage. It’s very similar in process, but at the end of the day, it’s a different product. So the output is going to be different. 

But the things that sort of come up again and again, are things that need to be clarified. 

So, one I think people like to talk about, “well, there’s no duty to defend here”. 

That’s not accurate. There is a duty to defend under the policy that we’ve created because the policy covers not only the lender, it covers the borrower, and it also covers any downline investors. So it moves to the secondary market. 

So that duty to defend applies to all of those insured under the policy, and it travels with the policy.

You know, people talk about, “well, with an attorney opinion letter, you have to prove negligence to get a claim paid”. 

That’s not true with our policy because it is transactional. 

If there is a loss and that loss is documented, that loss is paid. There’s no need to prove any negligence on the part of anyone involved in the process, including the attorney. That’s more of a traditional professional liability thing. 

You know, people talk about “what happens if the attorney goes out of business”? Or “what happens if the title company goes out of business”? 

That doesn’t impact the coverage. The coverage continues for the life of loan. So up to 30 years, regardless of whether those parties stay in business.

And kind of finally the most important one in my mind is this, this accusation or this, I shouldn’t say accusation, this commentary that these products aren’t regulated.

They’re not regulated by title insurance regulators because they’re not insurance. But they are regulated by State bar associations.

I’m an attorney and I have been for a long time and I’m very regulated. I can assure you. 

In addition to that, the insurers who are providing the insurance around the attorney opinion letters are huge multinational insurance companies that have been around for a very long time. They are all properly licensed and all regulated by state insurance regulators as well.

The Role of Insurance Companies in Supporting the Attorney Opinion Letter

Stacy elaborates on the relationship between Alita Group and insurance companies in providing the attorney opinion letter.

Diego Sanchez:

So you’re partnering with insurance companies to deliver this product. Can you talk a little bit more about that partnership with the insurance company? 

Stacy Mestayer:

Sure. So I wouldn’t say it’s necessarily a partnership so much as it’s just simply that they’ve worked with us to create this policy.

They provide the policy to us and you pay the premiums just like you would with any other insurance company. One time premium that’s paid at closing and, you know, they basically looked at title claims data for 60 years and said, this is what we think the premium should be because this is what we think the risk is worth and ultimately it’s much, much less than what title insurance premiums are.

The Path to Mainstream Adoption of Attorney Opinion Letters

Insights into the educational and regulatory challenges that need to be addressed to enhance the adoption of attorney opinion letters.

Diego Sanchez:

What changes need to happen? We’re going to talk a little bit more about ALTA, which is, uh, you brought them up. They’re the trade group that represents the title insurance industry. What changes need to happen before attorney opinion letters can scale as a title insurance alternative–in your opinion?

Stacy Mestayer:

Sure, I think it’s, I think it’s an education issue. I mean, obviously adoption is going to follow, but I think education is most important. 

People just don’t understand the insurance component and I think most of the information people get is what they see in the media that does come from ALTA or that they see come in their inboxes and newsletters from ALTA.

And understandably, that’s what they believe because that’s what they see. And, you know, ALTA is not wrong when they talk about traditional attorney opinion letters, but I think, you know, there’s a big gap in the information channel when it comes to an insured attorney opinion letter, because they’re not talking about the product that we’ve created and the insurance that we’ve put around it, which is obviously what kind of makes this a game changer.

So, I think that’s really it. It’s making people understand that this product is out there. It’s available. And making them realize and understand what it does and how effective it can be. 

Confronting Industry Incumbents and the Future of Title Insurance

Discussion on the challenges and excitement of introducing a disruptive product into the entrenched title insurance market.

Diego Sanchez:

So you’re, you’re going up against a number of entrenched interests in title insurance. There’s the big four title insurers. There’s also ALTA, which is a very powerful trade organization. What excites you about taking on these incumbents and these entrenched interests?

Stacy Mestayer:

I wouldn’t say that it excites me. I honestly, 100 percent honestly did not know what I was getting into when I started this. I just thought it seemed like a reasonable product and I quickly learned that there was a huge industry behind it that didn’t want anything to change.

It’s fun sometimes because it is a fight. That’s pretty clear. You know, and I know lots of people in title insurance, so I have lots of these conversations with people, you know, it ends up being fun and we joke around about it. 

Some people honestly won’t even look at me. They, believe so much that they don’t want this to happen.

So it’s been an interesting thing, but I will say, I don’t think the incumbents would be fighting it so hard if they didn’t think that it worked. If it was a useless product, everyone would ignore it. And that’s just not the case here. So I would say. It’s fun, but mostly I think it’s just the right thing to do.

I think it’s rare, kind of in your career, to come up with something that you feel meaningfully changes people’s lives or that impacts people. And I feel like that’s what this is. 

And so while the fight is there, it is what it is. I just think it’s the right thing to do. And so for that reason, I think that any fight that I have to get into is worth it.

The Rationale Behind Lower Title Costs for Home Refinancing

Stacy argues why title costs should be lower for home refinancing and discusses the broader implications of such changes.

Diego Sanchez:

Personally, I love competition as a way to bring down costs for the end consumer. That’s ultimately what I think we’re all trying to do here, is serve the home buyer. So, the Biden administration. You’re kind of on their radar, because they’re pretty focused on lowering closing costs, including title fees for refinancing transactions.

Why do you think title costs should be lower for home refinancings?

Stacy Mestayer:

I think this whole, everything about this has come like it’s been a bit of a perfect storm, right? Because there’s this whole idea of title waivers with FHFA and the administration, and then there’s the CFPB’s most recent RFI around title costs and, and what we’ve done.

And I think there’s, it’s important to distinguish them, right? 

Because title waivers. That’s something that I know is very contentious. It is a pilot program that may or may not get off the ground. 

What we’re doing is something that’s approved. It’s already in the guidelines. It’s already accepted by Fannie and Freddie, and it’s already accepted by other investors.

So I think that distinction is important. But to your point, refinances are a bit of a low hanging fruit for something like this, because I think people’s, you know, actually, the reason we started doing this is a story. It kind of came about from a story from a friend of ours or a colleague in the industry.

His mom is a widowed veteran or a veteran’s widow, I should say, and she went to refi. I think 3 different times in 2 years, and she had to pay for a full title insurance policy every time. And it was, it was a burden for her. And so that sort of made us look at it in a different light and think, why are these people paying over and over again for the same policy?

When they know that nothing’s happened to the property. I mean, if anything, a date down would tell you that. And that’s certainly not worth a full premium. So I think that that kind of context brings it to the forefront and you look and you say, I don’t think refinance necessarily warrants a full policy.

But it’s always been charged that way because it could be, but it doesn’t have to be. And it probably shouldn’t be. 

So I think that’s the answer is that everybody’s starting to look at it because, you know, it came to light. But, but we’re kind of in the background here trudging along doing what we started four years ago and have already gotten approved.

It’s just becoming much more public now because of the administration.

Diego Sanchez:

What an interesting conversation. Stacy thank you so much for joining me today.

Stacy Mestayer:

Thank you for having me. I really do appreciate it.