Far too many small title companies are struggling or even going out of business with the downturn in the housing market. Obviously as the housing market goes so goes the title insurance market but until recently those who were struggling were the smaller title agencies. Part of the reason was because they are getting by on the smallest margins and their entire revenue stream was tied to the housing market. On top of that many were competing with the large underwriters and they relied on referrals from real estate and mortgage professionals. All of these issues came to a head and those small companies who did not diversify their revenue stream and potential customer base (by marketing directly to consumers) are either just getting by or closing their doors.
Now even some of the large underwriters are feeling the pinch. Recent news shows that Fitch Ratings has placed all First American Corp. ratings on Rating Watch Negative with the expectation of lowering the ratings by one notch following the company's fourth-quarter financial report. Fitch is expecting First American to see a fourth quarter loss of $50 million. While First American is fully diversified and currently operates in five segments: title insurance and services; specialty insurance; mortgage information; property information; and a risk-assessment division, the title insurance division is hurting their bottom line. This is probably the reason they decided to spin off the title and specialty insurance business into its own entity.
The real estate slowdown is hitting everyone hard and even the big dogs are not immune. Maybe they will wake up and realize that they need to put consumers first instead of playing the back room games that made them so much money before. When the market was booming the consumer was looked at like an ATM machine. As long as everyone got paid and they could hide the kickbacks and charges everyone was happy. Consumers are getting smarter and the with the market continuing to slide everyone needs to change the way they do business. The consumer is the ultimate client in any financial transaction and if they stop buying nobody gets paid. I hope the industry can change and get this mess straightened out before too many more small (and maybe even large) title insurance companies go out of business.
Saturday, January 19, 2008
Even the Big Dogs are Getting Whacked on the Head
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2 comments:
Few title companies are taking the necessary steps to make the transition from a business-to-business model to a business-to-consumer model.
Most of the large title agencies are still operating under the old rules. All of the innovation I've seen over the last few years is coming form the small, independent agencies.
The "big dogs" are too far removed to hear what the market is calling for. Large agencies don't innovate, they acquire.
In a very odd dynamic, the big title underwriters are moving to the consumer by acquiring the point of sale before the Realtor does. They are buying and creating the MLS platforms and consumer facing real estate sale sites. How this all plays out in the end will be very interesting. I find it disturbing that they just can't "sell" title insurance. They don't seem to know how and that's bizarre.
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