Orange County’s largest title insurance providers are looking at acquisitions both inside and outside their core business lines to help them grow operations and improve efficiencies in a climate of interest rate hikes likely to cut into their refinancing work.
The 18 largest title companies handled $45.5 billion worth of work last year, based on this week’s Business Journal list. That’s up a little more than 18% over 2015, when the area’s 17 largest title companies and affiliates reported working on $38.5 billion in transactions.
It’s the second year running with year-over-year growth in the industry, whose companies write policies protecting real estate buyers from claims contesting ownership.
Ranked companies’ transaction volume was up about 11.6% year-over-year. Only two companies reported a decline in dollar value of OC transactions.
• Last year’s performance was “strong,” with revenues up about 8%, said Chief Executive Dennis Gilmore at Santa Ana-based First American Financial Corp., No. 2 on the list.
First American’s property purchase-related revenue was up 6%, thanks to an improving housing market, and its refinance business was up about 21% due to declining mortgage rates over the course of the year, Gilmore said last month following the company’s latest earnings report.
Commercial business declined by 5%, though it was the company’s second-best year on record in terms of transactions related to commercial properties, Gilmore said. The firm’s market value is about $4.2 billion.
It reported a 20% increase in local business to $11.3 billion.
• Jacksonville, Fla.-based Fidelity National Financial Inc.’s affiliated businesses, meanwhile, had a 10.4% work increase and retained the list’s top rank with $16.1 billion in reported work.
The combined work of Fidelity National and First American represents about 60% of the list’s transaction volume.
List data was provided by Irvine-based CoreLogic Inc., which was spun off from First American in 2010.
The two giants in the industry said they anticipate another strong year of purchase and commercial business but are planning for a decline in refinance work.
Last month, “The recent increase in interest rates has significantly reduced our refinance volumes,” Gilmore told analysts.
Mortgage buyer Freddie Mac reported this month that 30-year, fixed-rate loans were about 4.1%. The benchmark rate stood at 3.6% a year ago and averaged 3.7% last year, the lowest level on record in over 40 years.
Signs are pointing to more interest rate hikes in the near-term. Federal Reserve Chair Janet Yellen has signaled in recent weeks that the Fed could resume raising interest rates after meeting this week as a result of recent steady economic growth.
Acquisition Push
The biggest title insurers, to protect themselves from interest rate-related hits to business, plan to expand business lines.
Fidelity National has new interest in residential brokerage operations, especially in California.
“We are actively looking at various real estate brokerage companies (to acquire),” said Chief Executive Bill Foley at last month’s company earnings call.
“We’ve focused on the West Coast because we have a pretty good operation in the Bay Area, and we’ve recently expanded that into Southern California.”
The company’s reported deals in the region have thus far taken place in Los Angeles, led by the buy of luxury real estate brokerage John Aaroe Group in Los Angeles.
“It is an area that we want to focus on as we supplement our title insurance or title agency operations, direct operations in various states,” Foley said. “We’re looking at a lot of different opportunities.”
First American acquisitions reported over the past year include RedVision Systems Inc., a Parsippany, N.J.-based provider of a variety of title insurance-related data, technology and managed services, as well as Orange-based TD Service Financial Corp., which provides technology and other services to the mortgage banking industry.
TD Service had been headed by Dale Dykema, a prominent fixture in local Republican political circles.
First American, in addition to buying smaller title companies in select markets, is “going to continue to look to buy data companies where they allow us to build our public corporate databases,” Gilmore said.
“Our whole theme is to drive efficiencies with title companies and then also add or sell additional products and services for our mortgage customers.”
