Title insurer First American Corp. reports a second-quarter loss of $66 million

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Uncategorized August 4th, 2007

The bad news in the housing market are not limited to Realtors, contruction, builders, and mortgage companies. Title insurers are also feeling the pain.

The Orange County Register reports:

A slowing housing market, a spike in loan defaults and mortgage fraud pushed Santa Ana-based title insurer First American Corp. into a second-quarter loss of $66 million, the company said Thursday.

The company’s earnings took a hit from a $387 million addition to reserves for expected losses on title insurance policies and other claims. A year ago, First American reported a profit of $25 million.

It said adverse housing market conditions this year are leading to a jump in loan defaults, foreclosures and reports of mortgage fraud. Loss claims are up and that will likely lead to greater losses than previously thought on policies written in 2001 and from 2004 to 2006, the final years of the housing boom, the company said.

Parker Kennedy, chief executive of First American, said in a statement that the company is cutting costs by centralizing administrative functions, “reducing headcount,” and consolidating title branch offices. He didn’t provide further details on job cuts.

First American is reviewing its insurance underwriting agreements with certain lenders and may cancel some deals.

Fitch Ratings quickly responded to the news by forecasting a negative outlook for the title insurer. That could affect future ratings on First American’s debt, costing the company money in higher interest payments.


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