05.03.08
As the Pendulum Swings
I sometimes feel that life in the title industry is like life in a soap opera! Times are always either TOO good or TOO bad. We are always looking to hire, or looking to fire. For those who follow the Title Industry as a whole, lots of news arrived May 1st as the status of the industry swung once again the 1st quarter. There were a few positives and certainly many signs of corrections made. Here are some updates:
TradingMarkets reported that Title insurers as a whole again saw significant job declines, down 12.1% from March 2007 to 87,100. Title insurance employees saw weekly earnings fall 5.4%
HousingWire said LandAmerica posted a net loss of $24.2 million in the 1st quarter. The company cut 300 employees during the quarter, and has cut staffing by 25.4 percent of staff since the start of 2007. The company’s lender services division, that houses default outsourcing businesses, posted pretax earnings of $10.1 million, with increased demand for its lien monitoring, appraisal, foreclosure and reconveyance services as a driving factor. No surprise here. Meanwhile, it reports Stewart Title revenues at fell 25.9 percent, driving a net loss of $22.3 million for the first quarter.
However, First American posted a small profit in spite of the fact that its revenue fell 22 percent. Factors contributing to the poor revenue stream were the obvious decline in the number of title orders closed, decreases in the average revenue per order (housing prices are dropping after all) and the reduction of certain agency relationships (certainly a good thing.) On the other hand, profitable results demonstrate that the company made deep cuts to its expenses in the 1st quarter including salary and other personnel costs, which, according to PRNewswire, were down 26 percent from the same quarter of 2007. Also, First American’s information services group, that supplies information on defaults also had significant increased volume.
Yet, Demotech, reports that the financial solvency of the industry as a whole has rarely been better saying
2007 results provided dramatic observations for the Title insurance industry, with premiums decreasing by 14 percent as losses increased 32 percent over 2006 results. While the recent financial challenges are not to be minimized and recent forecasts point to a long and slow recovery, from a historical perspective, the Title industry remains near its peak. Since 1995, the industry increased its Direct Written Premiums and Policyholders’ Surplus an unprecedented 228 percent and 129 percent, respectively. This broader perspective reveals a cyclical industry in a down cycle, but also reveals an industry that is maintaining exceptional financial stability and is still near record performance.
For those of us who have seen the pendulum swing over the last 35 years, this swing in the market is nothing new. However, we have never seen mortgage defaults at such extremes, or the immediate horizon so bleak. Many in the trade will move on to other occupations – by choice, or not. Much of this will actually improve the industry, by weeding out the week and inexperienced, and illuminating for Underwriters those title agents who were problem children because of their ethics, or rather lack of ethics. Have we hit bottom yet? Who knows, probably not. It still looks depressing out there. But, being an optimist, I look forward to a sunrise with better times. As the proverb says…and this too shall pass.