NU Online News Service April 15, 9:18 a.m. EDT
Weather events and new compliance rules will have a negative impact on title insurers' first quarter results, but that impact should not materially affect the industry, according to a Keefe, Bruyette & Woods analyst.
In a 2010 first quarter preview, KBW said the real estate market is in a more stable position now compared to the 2009 first quarter, leading to more rational origination expectations.
But the preview states that "the bias is slightly negative given weather issues and compliance with new RESPA [Real Estate Settlement Procedures Act] rules. This is in stark comparison to last year at this time, when low rates and increased refinance volumes fostered optimism."
KBW analyst Nathaniel Otis said in an interview that the first quarter of the year is always challenging for title insurers. "People just don't buy houses in the wintertime in the Northeast and in northern climate," he said.
Weather events this year exacerbated the problem, the preview notes, with multiple winter storms hitting the country, particularly in the Mid-Atlantic and Northeast.
Additionally, new RESPA regulations have lengthened the closing process, the preview said.
Mr. Otis said, though, that while KBW is reducing its 2010 first quarter industry estimates, the numbers have not materially changed. He said the first quarter factors are more of a "slight negative impact" rather than anything materially consequential.
For the four title insurers covered in the preview, KBW revised its first quarter earnings per share (EPS) estimates accordingly:
oFidelity National Financial from 16 cent to 11 cents.
oFirst American Corp. from 23 cents to 20 cents.
oInvestors Title Company from 34 cents to 21 cents.
oStewart Information Services from a loss of 13 cents to a loss of 45 cents.
Looking at the real estate market going forward, Mr. Otis said the view is certainly not optimistic, but he said there is more rational thought regarding originations than there was a year ago.
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