Executives at Orange County’s largest title insurers hope an active commercial real estate market and revamped federal program for underwater homeowners can stem an expected drop in new residential mortgages this year.
The county’s 14 largest title companies—which write policies protecting buyers of homes and other real estate from claims contesting ownership—were involved in $30.7 billion worth of work here last year, according to this week’s Business Journal list.
That’s a decline of 6.6% from year-ago levels and halts two years of increases for the title companies on our list.
All but three companies on this year’s list reported year-to-year declines in the dollar value of the transactions they worked on last year in OC.
The top three companies on the list—who along with affiliated companies account for more than 70% of the business reported here last year—all reported annual declines in business for 2011.
The combined number of transactions worked on by companies on this year’s list also dropped in 2011, following two years of increases.
The roughly 88,000 transactions reported here last year were down about 8% from a year earlier.
Transaction volumes still remain nearly 40% above 2008 levels, when the housing and mortgage downturns took full effect and transaction volume plummeted to record lows.
The list of title insurers is ranked by the dollar value of OC transactions for 2011.
Information for the list was provided by Santa Ana-based CoreLogic Inc. and was supplemented with data from individual title companies on the list.
Commercial Strength
Interest rates remained near record lows for much of the year, but residential mortgage originations were off more than 15% from a year ago on a national basis, putting title companies behind the eight ball from the start in generating business.
Those companies were able to offset some of the residential mortgage-related declines partly by focusing more of their business on commercial real estate transactions over the past year.
Commercial transaction volume and revenues—which tend to be for much-higher-priced properties than homes and generate better returns from title companies—are up about 10% from year-ago levels, according to recent data.
“It’s been a strong segment for us over the last five quarters,” said Dennis Gilmore, chief executive of First American Title Insurance Co., a division of Santa Ana-based First American Financial Corp.
First American retained the No. 2 spot on this week’s list, reporting about $6.8 billion of OC transactions in 2011, a 4.4% decline from 2010 levels.
The company’s commercial division reported revenues of $107.3 million in the fourth quarter, up 10% compared to last year.
“We’re looking for a strong ’12 in commercial,” Gilmore said in a recent call with analysts.
Jacksonville, Fla.-based Fidelity National Financial Inc. kept hold of the No. 1 spot in this year’s list.
The company and its numerous affiliated businesses—five are represented in this year’s list—worked on $11.1 billion worth of transactions last year in the county, a 9% decrease over year-ago levels.
Commercial-related activity accounted for more than 27% of Fidelity’s total title premiums in the fourth quarter of 2011 and brought in about $104 million in revenue for the quarter.
The period marked “the strongest commercial revenue quarter in the history of our company,” said George Scanlon, Fidelity’s chief executive, speaking to analysts during his company’s most recent earnings call.
“We expect the commercial business to remain strong as we enter 2012,” Scanlon added.
HARP Help?
Early indicators aren’t too promising for an active 2012 in the title insurance industry, especially where residential mortgages are concerned.
Economists with the Washington, D.C.-based Mortgage Bankers Association are predicting “a relatively lackluster year for home sales and mortgage originations,” the association said in its late-February economic forecast.
The association is predicting “a very small increase” in existing home sales in 2012 followed by more significant growth in 2013.
Purchase originations will remain at a roughly $400 billion level in 2012, similar to 2011, before increasing to $675 billion in 2013, according to the MBA’s projections.
Refinance originations are projected to total $628 billion in 2012, down from $858 billion in 2011. The MBA expects 30-year mortgage rates, which are still in the 4% range now, to end 2012 around 4.5% and push toward the 5% mark in 2013.
The federal government’s reworked Home Affordable Refinance Program could provide a boost to this year’s projections, though its effects are still unclear, the MBA noted. The recently expanded program—dubbed HARP 2.0—is designed to help millions of underwater homeowners refinance their mortgage at lower interest rates.
The program, introduced late last year, has been contributing 10% to 20% of refinance application volume in recent weeks, according to market data.
Officials at First American and Fidelity are preparing for a bulk of the new re-fis from HARP 2.0 to begin showing up in the second quarter and run through the end of 2013.
