I'd be willing to bet that they use third parties.  I was in TN a few years back researching the title to my grandparents' former home in Oak Ridge, and if memory serves, Tennessee is a title theory state.  They have what are known as Trust Deeds rather than mortgages.  For the uninitiated, that's a form of security instrument in which a borrower transfers title to a third party trustee, who holds the title in the form of a Deed of Trust until the obligation is satisfied.  I'm not sure whether Tennessee allows title companies to perform that function, but it seems logical that the Trustee would also be responsible for disbursements.  Any Tennessee title agents care to clarify?

Regards,
Scott Perry