Fidelity CEO says federal government’s title insurance proposals are ’misguided’

Despite persistently high interest rates, big four title firm Fidelity National Financial recorded a much stronger start to 2024 than it did a year ago.

In first-quarter 2024, Fidelity reported total revenue of $3.299 billion, up from $2.474 billion a year ago. Its net earnings were $248 million, compared to a $59 million net loss in Q1 2023. The firm attributed its stronger results to better performance from both its F&G segment and its title insurance segment.

The firm’s title segment reported $1.7 billion in revenue, up 7% year over year, and pretax earnings of $218 million, up from $157 million a year ago. These improvements came as the number of direct title orders opened in the quarter jumped from 308,000 in Q1 2023 to 315,000 in Q1 2024.

These increases came despite a 2% annual decline in the number of refinance orders opened per day and flat growth in the number of commercial orders opened per day. The number of purchase orders opened per day was up 5% on a yearly basis.

“In the first quarter, we saw normal seasonality in purchase opened orders with sequential improvement coming off the fourth quarter,” Fidelity CEO Mike Nolan told investors and analysts during the firm’s Q1 2024 earnings call on Thursday.

“In April, purchase open orders per day were up 4% over last year, but higher mortgage rates may temper purchase volumes going forward. Refis are holding steady at roughly 1,000 per day at the current floor. Commercial volumes continue to be resilient and consistent.”

Looking ahead, while Nolan believes that the housing market will rebound, he noted that the timing is “uncertain and largely dependent on lower mortgage rates.”

“In the scenario where more inventory comes into the market and rates come down, we are well positioned to capture upside to last year’s performance,” Nolan added. “Overall, higher volumes above current trough levels would help to drive stronger incremental margins and showcase the scale and efficiencies that our diversified national footprint provides, much like what we saw in 2019 through 2021.”

Faced with these challenges, Nolan said the firm remains focused on monitoring its headcount and footprint, as it looks to manage expenses.

In addition to sharing his thoughts on the housing market and macroeconomic landscape, Nolan also had some things to say about the recent title insurance proposals announced by the federal government. These include the use of attorney opinion letters in place of title insurance, changes to who pays for a lender’s title policy and waivers for title insurance on certain transactions, such as refinances.

Nolan noted that he and Fidelity “strongly support” the overall goal of making homeownership more affordable. But he added that the recent announcements and comments from the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) are “misguided and display a misunderstanding of the vital role in value that title insurance provides consumers and the broader economy, and the critical role it plays in helping to make the American dream of homeownership a reality.

“The title industry not only protects consumers’ property ownership rights but also the critical integrity of land records,” Nolan added. ” In addition, we are our first line of defense in helping protect buyers and sellers from real estate and wire fraud. Title insurance also insures a duty to defend them in the event of a covered claim, and title insurers have state-mandated reserves standing behind their policies, unlike attorney opinion letters or a GSE waiver.

“We welcome the opportunity to continue conversations with the FHFA and CFPB, and we’ll continue to actively engage with all stakeholders in discussing the fundamental value that title insurance and settlement services deliver to America’s homebuyers and sellers, lenders and other participants, in what for many is their most important real estate transaction.”