NU Online News Service, Nov. 30, 3:49 p.m. EST

Title insurers remain affected by the economy and housingstruggles, and there is no clear catalyst for change in the nearterm, according to a Fitch Ratings outlook on the title insuranceindustry.

Fitch said its outlook for title insurers remains negative, andadded it is unlikely to return the title sector to a stable rating"until market fundamentals improve and the risk of further propertyvalue declines diminish."

Fitch added, "The cost structure of the title industry remainsproblematic given that in a market downturn, insurers cannot cutexpenses fast enough and deep enough to get ahead of fallingrevenue."

The rating agency added that technology has not improved theindustry's fixed cost structure and efforts by larger titleinsurers to diversify have not been effective. Staff reductionsremain the primary method of reducing expenses, Fitch said.

Fitch explained that the sector will not return to a stableoutlook "until market fundamentals improve and the risk of furtherproperty value declines diminish. This will lead to a return ofsustainable profitability and improvement in [risk-adjustedcapital] levels through organic earnings retention."

Fitch noted that the recent controversy surrounding flawedforeclosure practices by some lenders is expected to have a minimalimpact on title insurers. "Fitch believes title insurance claimsassociated with these policies will not be significant.

"However, it could lead to an increase in the adjudication ofclaims, which would increase title insurers' loss adjustmentexpense."