First American Gains on Home Loan Surge
By MATHEW PADILLA
Santa Ana-based title insurer First American Corp. is one of those companies in the background benefiting from the boom in home lending and mortgage refinancing.
Quietly but dramatically, First American’s 12-month revenue has increased to $5.4 billion as of June 30, an 86.9% jump from $2.9 billion for the 1-year period through June 30, 2000.
First American’s rapid gain puts it at No. 24 on this year’s Business Journal list of fastest-growing companies.
But with mortgage rates rising again, it’s uncertain if the company can continue its heady growth. After rates began rising in mid-June, demand to refinance home loans plummeted 70%. Homeowners have to buy new title insurance each time they refinance.
Rates began falling again in September but lately have started to rise. And last week, First American said it was cutting 2,000 workers, or 7% of its staff, as the market cools.
The company does more than title insurance. It bills itself as a purveyor of business information and related products and services.
The title insurer recently wrapped up its buy of Transamerica Finance Corp., an insurance company, for $375 million. Transamerica earned $65.7 million before taxes last year on revenue of $245 million.
First American, which also provides flood zone certification, expects to combine Transamerica’s flood data with its own to create a mega database. First American officials also expect Transamerica’s tax service operations to be an important asset.
Last year First American pumped more than $50 million into a Web-based software system dubbed FAST Transaction System. The system automates title searches, policy production and escrow closings.
Company President Parker Kennedy last year described it as “the most strategic initiative we have taken since we started expansion out of Orange County back in the 1950s.”
FAST, short for First American Software Technology, sits on company servers across the country. The software centralizes title processing and escrow closings.
The system allows for title searches and paperwork processing through a Web browser,instead of 50-some different applications used previously.
