Good afternoon —
Although the first three major title insurers to report their first quarter 2022 earnings - Old Republic, Stewart and First American - acknowledged during earnings calls with investors the toll rising mortgage rates took on their refinance and, to a certain extent, purchase volumes, Doma and Fidelity, which reported Q1 earnings last week, were far less optimistic about the situation.
Despite a 40% year-over-year increase in market share to 1.4% during the first quarter of 2022, Doma's revenue was down 12% from $127.8 million in Q1 2021 to $112.2 million in Q1 2022. In addition, the firm recorded a GAAP net loss of just over $50 million, compared to a net loss of $11.8 million a year prior.
During the first quarter, Doma saw purchase order volume drop 13% year over year, while refinance order volume decreased by 20%. To tackle this shift in the market, CEO Max Simkoff said Doma is working to increase its purchase volume and will be focusing on expanding its available technology to assist with purchase transactions by expanding the Doma Intelligence platform.
The firm also told investors it laid off 310 employees - or roughly 15% of the firm's total work force - to cut costs in what executives view as a long-term market downturn.
"Based on the recent trend in rates it is likely we will see a continued negative impact on the overall mortgage market," Max Simkoff, Doma's CEO, said on the call. "While the market could always change for the better, we believe the challenges the mortgage market faces will continue at least through the rest of 2022."
Executives at Fidelity were also wary about the future of the housing market.
"We have seen steady levels of residential purchase origination demand, although given the current environment, we're not seeing the typical increase heading into the spring selling season," said Mike Nolan, CEO of Fidelity. "While current residential purchase demand is trailing last year, 2021 was a record year for the U.S. residential purchase market."
Nolan told investors the number of purchase orders in April 2022 was down 6% year over year, while refinance orders were down 63% and commercial volume was down 2%. Despite the drop in commercial order volume, the first quarter of 2022 marked the fourth month in a row with more than 1,000 commercial orders opened per day.
Fidelity's title sector saw the number of refinance orders opened per day during the first quarter of 2022 drop by 57% compared to Q1 2021. The number of purchase orders opened per day dropped 1% year over year, while the number of commercial orders opened per day rose 6% compared to a year prior.
Despite the drop in the number of title orders, Fidelity's title segment recorded $2.4 billion in revenue and $437 million in adjusted pre-tax earnings. This is only slightly lower than the $2.5 billion in revenue and $513 million in earnings recorded in Q1 last year.
The firm attributed the title sector's solid showing in the midst of a drastic decrease in refinance volume to strong residential purchase and commercial revenue, which have significantly higher fees per file than refinance orders. Fidelity recorded an average fee per file of $2,891 during the first quarter of 2022, a 49% year-over-year increase.
Looking ahead, there certainly is a lot of uncertainty about the housing market. But, I want to hear from you. How is your firm dealing with the drop in refinance volumes? Feel free to share your thoughts with me at brooklee@hwmedia.com.
Until next week,
Brooklee Han
Real Estate and Title Industry Reporter
brooklee@hwmedia.com
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