Jobs Cut 6% as Volume Drops; Fidelity Jumps to No. 1
Fidelity National’s acquisition of Chicago Title Co. has vaulted it past perennial leader First American to No. 1 in the hard-hit OC title insurance industry.
Having taken advantage of historically low interest rates to expand their refinance practices and expand their operations, almost every one of the top OC title companies on this year’s Business Journal list now find themselves cutting back and changing their focus as increasing interest rates have dried up that sector of the market for the foreseeable future.
Indeed, so remarkable has the change been that every company on this year’s Business Journal list saw their business decline for the 12 months ending March 31, both in dollar volume and in number of transactions,except for Fidelity National Title Co., which grew only because it added Chicago Title’s business.
Fidelity’s pro forma numbers follow the industry. The combined company saw its OC volume drop 23% on 31% fewer transactions than Fidelity and Chicago did as separate companies the year before.
The total dollar value of the transactions insured by Orange County’s 20 largest title companies was $27.1 billion for the 12 months ending March 31, a 38% decline from the total posted by last year’s 20 largest, according to Acxiom/Dataquick, a La Jolla-based real estate tracking and information service. Business volume declined 36% among the local industry leaders, to 119,086 transactions.
Not surprisingly, employment rolls also took a hit. The 20 largest title companies employed a total of 2,679 in Orange County as of March 31, a 6% decline from the 2,863 employed by last year’s 20 largest.
The decline is cause for worry for some, but many of those interviewed simply accepted their fortunes, pointing to the cyclical nature of the title insurance business.
“That’s the nature of our business, we ebb and flow size-wise and employee-wise with the market,” said Ron Peterson, senior vice president and regional manager of No. 10 Old Republic Title Co., which reported $913.5 million in business for the 12 months ended March 31, a 55% decline from the prior 12 months.
“There have been those refi (boom) markets in the past when we expand our staff and so forth and grow with the market and (take advantage of the) available business, then we contract and that is pretty typical to the nature of our business,” Peterson said.
“When business is not there, you have got to adjust the staffing (levels),” said Al Nunnally, Southern California district manager for No. 18 Landsafe Title, which had $269.9 million in business, a 36% drop from the previous period.
More disheartening may be the fact that the latest numbers available point to continued erosion in the refinancing market. In the first five months of this year, there were 32,185 refinance loans in Orange County, down 44.5% from the 58,367 total during the same period last year, according to Acxiom/Dataquick.
Not surprisingly, everyone is scrambling to increase their share of the new home or resale mortgage business. But even during a hot market, there is too great a shortfall to be made up.
“There’s still a pretty hot resale market,” said Peterson of Old Republic Title. “We’re all trying to concentrate on that and things like that but there’s only so much of that. As hot as it is, it doesn’t equal the refi market.”
Which leaves folks such as Nunnally looking for a silver lining.
“If there’s anything encouraging it is that I don’t see a dramatic decline from where we’re at unless interest rates go completely crazy,” he said.
An unlikely prospect, given that the Federal Reserve Board last week decided to leave the federal funds rate at 6.5%. Of course, for title companies the damage is already done, given that the Fed has raised rates six times since June 1999, when the funds rate stood at 4.75%.
While the same two firms remain easily dominant on the list, they have changed places thanks to Fidelity National’s pickup of last year’s No. 3 firm, Chicago Title. No. 2 First American Title Insurance Co. registered $6.2 billion in local business, a 21% decline from last year’s level, when it was No. 1.
“Obviously interest rates are a fundamental factor,” said Jo Bandy, spokesperson for First American Title.
With the absorption of Chicago Title by Fidelity, Orange Coast Title Co. jumps up a notch to No. 3 on the list with $1.7 billion in business, a 16% decline from its 1999 level.
The overall decline has firms scrambling for market share, and some people believe consolidations and mergers are in order.
“The business is changing,” said Jeff Fox, senior vice president and county manager for No. 9 Southland Title Corp., which did $954.1 million in business, a 48% decline from the previous 12-month period. “I think we’re seeing the consolidation of the companies. I think you will see bigger companies get bigger.”
Fox sees the Fidelity National-Chicago Title as only the beginning. He added that Southland Title may very well be one of the companies that will be looking to acquire other firms. While no deal is imminent, he did indicate his company is looking and has the resources to acquire other firms.
In this vein, the latest word on the street has First American Title looking to acquire Old Republic Title. Peterson, the regional manager for Old Republic, scoffed at the notion, believing that executives at Old Republic Title and its parent firm will want to remain independent. Bandy said that First American is always looking for opportunities to grow its business, but declined to comment specifically on any potential deals. n
