Title company earnings down across the board in 3Q

Lower margins at the nation’s publicly traded title insurers took a bite out of third quarter profitability.

The combination of less business — due to far fewer mortgage originations — and investment losses for some companies had an impact on the bottom line.

Still, of the six title underwriters that reported results, four were profitable; Old Republic’s title line also made money, although the parent company — which has a general insurance subsidiary and a mortgage insurance business in run-off — reported a net loss. Only Doma, which already retrenched on some of its plans, took a loss, although management says it’s accelerating the timeline on its goal to become profitable.

Here is how the title insurance underwriters performed in the third quarter:

Fidelity readies distribution of 15% of life insurer

Fidelity National Financial reported net earnings of $289 million for the third quarter, compared with $382 million in the second quarter and $732 million for thethird quarter of 2021.

Pretax earnings for the title segment totaled $289 million for the period with revenue of $2.3 billion. In the second quarter, title revenue was $2.6 billion, while in the third quarter of 2021, it was $486 million and $2.9 billion.

FNF’s pretax title margin was 14.6%, down from 16.6% one year ago.

Open orders ended the quarter at 363,000 from 443,000 three months earlier and 688,000 a year prior. Closed orders over the same period fell to 278,000 from 348,000 and 527,000.

“During challenging environments such as these, I have always stressed the importance of maintaining a fortress-like balance sheet with ample liquidity to take advantage of market dislocations,” William Foley, FNF’s chairman, said in a press release. “To that end, we paid off all of our $400 million Senior Notes which matured on Sept. 1, leaving FNF with a debt to capitalization ratio, excluding accumulated other comprehensive income, of 23%.”

Another balance sheet move FNF is undertaking following the quarter’s end is the distribution of 15% of its stake in F&G Annuities & Life on Nov. 22.

“While rising rates are pressuring the housing sector, they are proving to be a tailwind to F&G’s results as assets under management grew to $42 billion at Sept. 30,” Foley said. The holding company in June 2020 acquired the shares it didn’t already own in the life insurer.

Also subsequent to the end of the quarter, FNF purchased four connected St. Louis-based title and settlement agencies: St. Louis Title, Security Title Insurance Agency and Accurate Disbursing of St. Louis, Missouri, and Benchmark Title of Southern Illinois. Terms of the deal was not disclosed.

First American barely makes a profit

Net investment losses of $226 million during the third quarter contributed to net income of $2 million at First American Financial.

In the second quarter, the company earned $109 million, while in the third quarter of 2021, it had $445 million of profit.

The pretax title margin ended the period at 9.9%, down from 16.4% one year prior.

Total orders opened during the quarter fell to 206,200 from 257,200 in the second quarter and 318,800 one year ago. Over the same time frame, orders closed dropped to 160,500 from 205,000 and 252,700.

“While we expect the challenging market environment to continue into 2023, we believe the company is well positioned to emerge from this cycle even stronger,” said CEO Ken DeGiorgio, in a press release. “The market has shifted away from refinance toward purchase and commercial transactions where we are stronger and, consequently, we are growing our market share.”

DeGiorgio referenced the depository the company owns, First American Trust, which enables it to better capitalize on rising interest rates.

Investment losses hurt Old Republic’s bottom line

Old Republic’s title insurance business had pretax earnings of $73.3 million in the third quarter, down from $109.5 million in the second quarter and $135.7 million in the third quarter of 2021.

“Title insurance net premiums and fees earned declined by 15.2% and 6.9% for the third quarter and first nine months, respectively,” the Old Republic earnings release said. “Both directly produced and agency produced revenues declined during the quarter, and it is expected that such revenues will continue to be lower in the fourth quarter of this year when compared to the same period last year.”

The title business had open orders of 91,903 and closed orders of 80,498 in the third quarter, compared with 117,243 and 102,585 for the second quarter and 141,250 and 123,124 for the third quarter of 2021.

In October, Old Republic acquired Veritas Title Partners, a title agency that operates in the Houston market.

Meanwhile, the run-off mortgage insurance business reported a pretax operating profit of $9.2 million, compared with $12.2 million in the second quarter and $8.4 million in the third quarter of 2021.

The parent company lost $91.7 million in the quarter, due to investment losses of $297.9 million. In the second quarter, it reported a loss of $40.1 million, with investment losses of $317.4 million. While one year ago, it earned $88.7 million.

Stewart’s title margin down nearly 50% year-over-year

Stewart Information Services reported third quarter net income of $29.4 million, compared with $61.7 million for the prior quarter and $88.7 million in the third quarter of 2021.

Its title insurance business brought in $51.9 million of pretax income versus $119.1 million one year prior. Pretax margin over the same time frame fell to 8% from 15.4%.

Open order counts fell to 86,974 from 103,646 in the second quarter and 144,155 a year ago. Closed orders fell to 66,798 from 88,842 and 109,462, respectively.

Real estate solutions had a year-over-year increase in pretax income to $3.4 million from $2.8 million.

Meanwhile, after the quarter ended, Stewart closed on the purchase of reverse mortgage specialist FNC Title Services, which could add $10 million in pretax income, management said.

Doma cuts timeframe to expected profitability

Doma lost $84.1 million in the third quarter, more than the $58.7 million of net losses for the second quarter and $34.3 million in losses for the third quarter of 2021.

But those growing negative results have pushed management to move forward its goal of being profitable according to the non-GAAP metric of adjusted earnings before interest, taxes, depreciation and amortization.

We know how important reaching adjusted EBITDA profitability is, especially as we’re facing a set of circumstances that seem to be pointing the housing market toward recession," said Max Simkoff, CEO of Doma in a press release. “It is more important now than it ever has been to continue to deliver on our mission and to do so at scale, which is why we are committed to achieving adjusted EBITDA profitability sooner than the late 2023 timeline which we had previously communicated.”

Still in a move that it claimed would not affect the speeding up of its goal, Doma revised its guidance for the full year for its adjusted EBITDA to a loss of $135 million and $140 million, versus the loss of $100 million to $120 million it previously communicated.

For the quarter, Doma had 21,509 open orders and 15,302 closed orders, versus 25,231 and 18,799 in the second quarter and 52,867 and 35,300 for the third quarter in 2021.

Investors more profitable than First American

The smallest of the publicly traded title underwriters, Chapel Hill, North Carolina-based Investors Title reported third quarter net income of $7.9 million, or nearly $6 million more than First American reported.

This is an increase from the second quarter’s $2.3 million although lower than the $14.5 million for the prior year period.

Although premium revenue was down approximately 8% compared with the third quarter of 2021, escrow and other title related fees were up over 54% and revenue from non-title services was almost 58% higher.

“Although overall transaction volumes were lower than the prior year quarter, our recent successes in expanding our market footprint materially contributed to lessening the impact of the market slowdown on our operating performance,” J. Allen Fine, chairman, said in a press release.

“We believe the company is well-positioned as we transition to a different stage of the real estate cycle, and plan to continue to make targeted investments in our business to expand our geographic presence, improve our operating performance, and deliver value to our customers and business partners,” he said.

Brad Finkelstein

Originations Editor, National Mortgage News

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@donaldsonnp Thank you for sharing this article. Helpful info.

A steady stream of decreasing profits; i.e., $732M to $382M to $289M reveals a definitive trend & the strong negative influence on the quantity (or lack thereof) of Signing Orders.

:swan:

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Here’s some advice - take it or leave it.

Title companies are laying off people. The real estate industry (builders, suppliers, realty agencies, etc.) are all laying off people. Lenders are down to skeleton crews. Amazon is about to lay off thousands. META (Facebook) is cutting staff by thousands as is Twitter. Zillow had had large layoffs as has Peloton. Netflix is way down. Disney is laying off thousands - DISNEY! It goes on an on. The recession is just beginning. The laid off people will need to get jobs and competition will be fierce. Only the strong survive.

The advice? Well, notary is almost dead. So, if you need income, get a job NOW. By January, there won’t be many jobs available unless you have very specific, highly marketable skills. Notary can always be your side gig so don’t give it up. Let it be kinda dormant for a while unless you’ve got a nice steady stream of notary work that you can do (estates, hospitals, etc.).

It’s gonna get rough out there.

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Thanks, @Bobby-CA This is no dramatic understatement [see excerpt above].

In my direct experience, I’ve ridden out the zigs & zags of recession, the proverbial cleaning house (drastic staff reductions), budget cutbacks that cycles around back to the Mountain Top heralding recovery, upward spiral in expenditures, hiring, etc. and then back down again several years forward into the zigs & zags again of recession . . .

True words from Bobby about seeking a safe haven via employment in a J-O-B right now with insurance, holidays, benefits, etc.

I’ve live THROUGH those environments previously where thousands were laid off & ALL of them at ONE TIME were SCRAMBLING to support themselves/their family.

Make hay while the sun shines.

There may have been great weather for an extended period of time appearing to be all Sunshine & Lollipops, but it’s been several years since we’ve seen that . . . Many of us have personally seen how precipitously it can pivot & reverse. The storms are further brewing as Bobby has written above.

:swan:

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At the end of the day only the strong will survive

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Helpful and informative post. The reality is that this has been affecting NSAs for some time now. I would say for the entire year, maybe? At this point, I rarely ever make money off of loan signings. Maybe 1 or 2 a week. If not for the general notary and wedding officiant business I built (as a side income originally), I would have no income. What was started solely for extra income on top of loan signings has transformed into the bulk of my earnings and somehow grown to match what I made with loan signings… lol. But, it’s not something I really want to do full time. Steadily applying for jobs, but they aren’t as easy to get as people make it seem.

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I can relate. When I first started I was focused on Notary work and had a side hustle. Now my side hustle has turned into my main income source out performing notary work.

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Awesome. I guess there’s always a silver lining, huh? Congrats to you and I both. It really spooked me out when I realized how royally screwed I would have been if I had put all my eggs in the NSA refi basket.

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Well these last few responses are excellent advice. As some of you know…I went through this in 2008-2010. The banks were the culprit then as now. Because the price run up has been astronomical, we will see declines of 50%. in the 2023 year ahead. I know some will say .WHAT. Just watch! All the 1,000’s laid off will face foreclosure.

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In every market cycle there is money to be made…people just have to have an open mind and imagination to see other possibilities of generating income. There is always a winner and a loser at each cycle…. Diversification is the key to survive in any successful business

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America is going DOOOOWWWWWNNNN

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went to ups store and waited in a long line for customers waiting to get notary stamp/ signatures from very young boys who have no clue what or where to stamp…i guess only the strong will survive!

UPS is thriving it seems for in-house notaries work.; those workers looks like they hate it…

Yup. UPS only charges $10 per stamp. It’s really really cheap. So, if a document has 5 signers and only 1 stamp on it, the notary has to verify the ID of all 5 signers in their log, take all their signatures, and still only charges $10. Whether 1 signer or 20 signers, it would be $10, meaning signers don’t have to pay for the extra work if there’s no extra stamp… I, and many other notaries, charge based on the number of signatures. The same document (with 5 signatures and 1 stamp) for me would be $65 without travel…

Of course, the UPS notaries usually don’t fully know notary laws as it’s not their main task. They don’t get any extra pay for doing that work. But, the signers don’t know the laws either, lol. I’ve heard of people actually bringing their Real estate loan documents there for them to notarize… I thought the whole point of getting specific NSA certification was so that we would be able to do those. But, apparently, any notary can close on real estate loans?? I went in and asked them about it and the woman I spoke to said they do it all. In TN, for example, notaries can legally officiate weddings (1 of 6 states to allow it). They said they even sign peoples marriage licenses there. Imagine getting married in a UPS?

But it’s so cheap. I guess if money is all that matters, that’s where you go. Makes it hard for actual notaries to get work though as we can’t compete with $10 lol.

I’m glad someone said it… all the nsa certification is a waste …as any notary can do a loan signing …just the signing services tried to create a barrier to entry when in relailty the customer just need it done…also in FL they cant do marriage signings because a cereomony is required; however I do know they still do it because people here seem to not follow the law;(for example) some notary signed a loan(sellers ) with a green pen and it got rejected so I had to fix it. People get into notary for easy passive income; but these big huge brands like ups have made it worse for general notary or (LSA agents) to get clients because they are (NEW )the do it all place. Also google promotes ups several times in the alogorithm because they have so many locations for any notary search. When I go to ups and see snake line , I already know its a person doing a 100 page notary signing trying not to look at the customers angry waiting …SMH

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You were wise. A lot of new notaries fell for the upside and quit jobs. The seasoned notaries tried to warn them not to rely solely on this. I have done closing for 28 years and make good hustle on the side. I didn’t go out splurging on the good life. I put money back along with still working my regular job full time. Pray they will rebound

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I had a call from someone who lives in a very expensive neighborhood to notarize two wills and POAs. She said that she tried to go to a bank to get them notarized but they wouldn’t do it. I asked her if she had two witnesses. She said she didn’t, so I agreed to have a friend come along to her house to witness for her, and I would notarize. She would find another witness. I told her it would cost $55 to come to her house to notarize four documents. She balked at the price. She wanted to bring her husband, and her witness to my house so I could notarize it cheaper. I told her that I was a mobile notary and that I don’t have an office. So she decided that it was too expensive to have the privacy of a notary coming to her beautiful home, along with a witness to notarize very important documents. I live in Pennsylvania so I’m only allowed to charge $5 per notarization. I make my money off of my $35 service fee, plus $5 per stamp. It gets very discouraging at times when people don’t appreciate what we do. They are willing to pay high fees to get food delivered but not to have legal documents notarized. Sad.

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In Texas it’s $6 per notarization.

wow, she thought that was a high price?!?!
Where I am you can charge double or tripple that fee
and it’s normal.

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